26 - Behind the scenes with an impact fund startup investing in African SMEs

For decades, Sub-Saharan Africa has been a hotspot for foreign investment and international aid. It has also been subject to the kind of philanthropy that is often more destructive than helpful. As an impact investor, it’s imperative to understand what that type of philanthropy looks like and how to avoid it.

Africa has also been facing funding challenges in recent years. Even before the pandemic, the continent was seeing a decline in FDI. In fact, investment flows were expected to drop 25% by the end of 2020. Today, the majority of the available funding is streamlined to large corporations or small microenterprises, leaving a major gap for the companies in between.

So what does it mean to start an impact fund that makes a real impact for African communities? To find out, we sat down with David Harlley, Jonathan Wilson, and Kwabena Owusu-Adjei - the minds behind Third Way Capital. Launched in 2020, Third Way Capital is an early-stage impact fund investing in African small and medium-sized enterprises (SMEs). Their strategy is to invest in financial structures that make lasting change, alleviating some of the funding challenges that African SMEs and entrepreneurs face.

During this episode, we discuss what goes into starting an impact fund. Since David, Jonathan, and Kwabena have all lived or grown up in Africa, we talk about the importance of truly knowing the environment you’re investing in. Plus, how impact investors can identify opportunities and gaps, validate their impact with outcome-oriented measurements, and break the mould of traditional fund structures. And be sure to stay tuned to the very end where we discuss the specific kinds of companies Third Way Capital is looking to invest in.

Resources from this episode:

• Third Way Capital’s website
• Contact Third Way Capital by email: info@thirdwaycapital.co
• Our episode on Employee Ownership with Jon Shell