A few weeks ago, LinkedIn reminded me that I have been with Impacc for 5 years now and suggested a few congratulatory formulas (I turned them all down). I was a bit surprised because we only officially registered Impacc in December 2019. But LinkedIn was right: the actual birth was in fact in the summer of 2019, when my former colleague Jochen Moninger and I sat under an apple tree near Wittenberg and thought about how we thought development aid could be done better. Whether it really is better or not, I don’t know, but at least we have been trying to do things differently for five years – with all the trials, errors, changes, reinventions, but also with all the confirmations, successes and positive surprises. Jeff Bezos once said about Amazon: “We are stubborn on mission and flexible on the details.” It was similar for us, because one thing has never changed over time: our belief that a job is the best way out of poverty, and that we want to invest in African founders so that they can grow and create jobs on their own.
Our Path to Operational Venture Capital
The “how” has changed quite a bit, though, and we have learnt a lot: in the first year or two, we found projects through our development network that we thought had business potential. We then turned them into companies, sometimes as joint ventures with other partners, sometimes on our own, but always without strong founders. But that’s not how it works – a good idea without a great founder is just that: a good idea. So we changed our model and started to invest in companies that – founded by locals with local ideas for local markets – have been in business for at least two years and have already achieved initial success. At the same time, we learned that our companies need more operational support than we initially thought. This has resulted in our “operational venture capital” approach: half of our support now comes as direct cash investment, the other half as technical expertise either from our own team in East Africa or from a pool of dozens of experts that we have built up over time – from financial planning to logistics and brand building to business model development.
Speaking of the business model: our own model has also evolved. The basics are still the same: we are still (as far as I know) the only German aid organization that is officially allowed to turn donations into investments in start-ups – thanks to some amazing pro bono support from the Freshfields law firm. But our source of funding has changed: together with the Boston Consulting Group (also a pro bono project), we have developed offers for corporate donations, which – in addition to private donors, many of whom are reading this newsletter right now – ensure that we can actually invest money in African start-ups at all. In May of this year, for example, our partner platform was completed, which shows companies (and increasingly also entrepreneurs, corporate foundations, etc.) directly how many jobs and what impact has been created with their donation – with figures, facts and stories that can then be copied directly into corporate communications or, for example, into sustainability reports. To ensure that as many donations as possible can flow directly into investments, we cover our personnel costs (which also include operational support) almost entirely with so-called institutional funding. Our biggest donor so far has been the German Development Ministry, where we have just submitted another application to build up our portfolio in Ethiopia. But too many eggs in one basket is not good either, and I am pleased that we are now also receiving funding from other countries, most recently from Denmark. It also helps that we are no longer a purely German organization, but have subsidiaries in Kenya and soon in Ethiopia.
New Year – New Organizational Structure
And last but not least, our team has grown considerably. Jochen and I are still here, of course, as is a great team of volunteers from the very beginning, but apart from that, a lot has changed. We were too many old white men and all the decisions somehow depended on me. We now have a lead team that makes decisions together: with Shiela Birungi, Head of Ventures, and Marie Bartmann, Head of Operations, in Nairobi and Anette Kuhn, Head of Communications, in Hamburg with other volunteers and permanent employees in Germany, Kenya and soon also Ethiopia.
And the results so far? Over 500k€ invested, 9 companies supported, over 150 jobs and over 500 improved income opportunities created. There is another interesting quote, this time from Bill Gates (it’s the day of American digital entrepreneurs it seems): “You overestimate what you can achieve in one year, and underestimate what you can achieve in five years”. I have to be honest: I’m always a bit impatient and things move too slowly for me, but I do think the last five years have been good. And the next five will be even better.
