Lavanya Anand is senior investment manager at AfricInvest, one of the most established private equity and venture capital investors on the continent.
Born in India, she moved to the US when she was six years old. Her early career was in public accounting and corporate finance in the US.
“I worked in that space for about five years in the US. But I felt like I always wanted something that was a bit more mission-driven, and ideally emerging market focused, given my background. And so decided to go to business school, as one does who is maybe confused about their career at the time,” Anand told episode 16 of Disrupt Africa’s “The month in VC” podcast series, released in partnership with Atlantica Ventures and Goodwell Investments.
“I really got interested in the world of impact investing, and this was an area that I really wanted to go into post post graduation.”
After a few internships, in 2018 she joined VestedWorld, an Africa-focused early-stage VC fund. They were raising their first fund at the time, and Lavanya moved to Kenya to set up their office on the ground. After five years in which she invested in 20-odd ventures across East and West Africa, she took a six month career break before joining AfricInvest last year.
“AfricInvest is a larger investment group that’s actually been around for 30 years, so it’s one of the oldest investors in Africa. Back in 1994, it started off primarily as a private equity firm, initially focused on Tunisia, and then the Maghreb region, and then over time it gradually expanded to all of Africa,” Anand said. “Over the last 30 years, we’ve managed over US$2 billion dollars in assets.”
It is only in the five years, however, that the firm has started implementing more innovation-oriented strategies. In 2019, it partnered with Cathay Innovation to launch the Cathay AfricInvest Innovation Fund (CAIF), is a joint pan-African VC fund investing in Africa’s most promising early to growth-stage startups. In 2022, it closed that fund at EUR110 million (US$120 million). This is where Anand works.
“We are focused on pan-African startups at the Series A and B stage. Cathay Innovation brought the VC and global experience, and then AfricInvest brought the Africa-specific experience,” she said.
The fund is now in the final year of its investment period, in which it plans to add three or four more startups to its portfolio, which currently has 12 companies.
“I’d say a couple of our standout companies are PalmPay in Nigeria, and AURA based out of South Africa. PalmPay is a payments and credit business, primarily in Nigeria and now expanding to other markets as well. They are perceived as one of the largest fintechs across Africa as of today,” Anand said. “And then AURA is a security platform, almost like an Uber for security. It’s a double-sided platform that allows individuals to access a security vehicle if they need specific support.”
The fund is sector-agnostic, but Anand said it sees a lot of pipeline in the financial services and broader e-commerce enablement space. It wants to invest in companies where it can add value.
“That’s where the broader platform comes in, because the group itself has 200 companies across the region, and we have eight offices across Africa as well. So we like to find companies where we can use that network to provide support,” she said.
What type of KPIs does AfricInvest look for?
“Generally for a Series A stage company, that means maybe an ARR of US$2 million to US$3 million. They don’t need to be profitable yet, but, especially in the current times, if you are profitable, or if there’s a near-term path to profitability, that’s always something that we look for. Usually that comes with decent unit economics and margins,” Anand said.
“We also want to see strong revenue growth, in an ideal world two-to-three X year-over-year revenue growth is something that we would want to see in the years prior to when we are investing. Obviously there needs to be some kind of a tech or tech-enabled component that enables scalability for the business.”
In an ideal world, startups would already be operating in additional markets, or at least have found product-market fit in one market and have started to expand into a second market.
“Then that’s an area where we can now provide support to help them scale up that second and third market,” she said.
The fund takes an involved role post-investment, especially when it comes to governance. It prefers to lead or co-lead rounds, and takes a board seat.
“What that means for us, in addition to your quarterly board meetings and any advisory that we might provide, is that we like to add value, especially when it comes to market expansion and business development. We have eight offices across Africa, and we have teams across the private equity and other funds within AfricInvest who sit in those different offices, and they are all very well networked in those spaces,” Anand said.
“So, for example, if we have a Kenyan company that is looking to expand to Nigeria, we can rely on our Nigeria office to provide support, whether that’s guidance on regulation or introductions to potential customers, or just navigating the macroeconomic or currency challenges that might be unique to Nigeria that are not prevalent in Kenya. So that’s just one example.”
The majority of the fund’s LPs are Europe-based DFIs, plus a few corporates, family offices and high net worth individuals. With its investment period almost over, Anand and her team will soon switch their focus to generating returns for those LPs, and indeed future funds.
“As we finish the deployment, we will now transition into portfolio support and value addition, and ideally moving towards exits. So that’s the second half of what fund one will look like – really thinking about how we can return capital to our LPs,” she said.
“And then we’re also in the early stages of exploring what fund two will look like, and towards the end of the year we’ll start to think about that fundraise.”
