Early-stage growth equity fund Aruwa Capital, which was created by a woman, has announced the successful close of its first institutional fund, which surpassed its $20 million target.
Adesuwa Okunbo Rhodes, the company’s founder, is now the youngest solo general partner (GP) to successfully raise a $20 million fund in Nigeria at the age of 32. Among the top contributors to this fund are the Visa Foundation and the MasterCard Foundation Africa Growth Fund.
Rhodes created Aruwa Capital in 2019 after returning to Nigeria with the goal of closing the investment gap affecting women-owned businesses in Africa.
Despite accounting for 40% of small and medium-sized enterprises (SMEs), women-led businesses only receive roughly 1% of investment. According to research, the majority of investment firms are run or owned by men, which may explain the gender financing disparity.
According to Rhodes, the way for women to address this disparity in funding is to set up more women-led investment companies (including venture capital (VC) and private equity firms) that provide finance for women-led businesses (PE).
Aruwa Capital plans to invest anywhere from $500,000 to $2.5 million in companies run by and geared toward women in Ghana and Nigeria. It has so far made investments in six businesses: the healthcare firms Wemy Industries and Lifestores Healthcare; the fintech start-ups PngMe and Crowdforce; the cleantech firm Koolboks; and the fundamental consumer goods company Agroeknor.
The venture capital market is challenging for female managers, much like the startup scene. Since 2008, less than 20 female fund managers have closed their funds in Africa. When Tech Cabal questioned Rhodes about what she believed caused her fund to become oversubscribed, she responded that she thought investors were drawn to Aruwa Capital’s unique business model.
We serve as a link between venture capital and private equity, investing in sufficiently low-risk companies that have already demonstrated the viability of their business models but are too small for the majority of the larger local private equity firms.
However, these enterprises have been reduced in risk and are prepared to scale with an investment of between $1 and $2 million. Furthermore, we purposefully invest in the female economy as part of our gender lens approach, which encourages us to support female-led and -focused firms and close the gender gap for female entrepreneurs.
Rhodes emphasized the crucial role that local capital played in closing the investment round as he continued to discuss the requirements.
Since they started the fund right before COVID-19, Rhodes claims they had to focus on internal fundraising because international institutions were preoccupied with allocating capital in their own nations. “The mobilization of local capital as the key to sustainable venture capital and the private ecosystem in Africa is a major lesson for me. We are thrilled to have secured local institutional and private investors for 30% of our fund, according to Rhodes.
The fundraising for the first fund of Aruwa Capital has come to a conclusion with this final close, of which 45% have already been invested in six different projects.
When asked about the fund’s expansion intentions when it closes, Rhodes stated that the fund would continue to concentrate on the four verticals of healthcare, fintech, renewable energy, and essential consumer goods. Because these industries can be defended [against macroeconomic uncertainty], we think that concentrating on these necessities gives us a significant competitive edge.
Aruwa Capital’s operations won’t alter other than the employee additions it wants to make. According to the company, it will continue to operate as a regional investor in the “pre-private equity” sector. The most intriguing changes can be found here, and according to Rhodes, the risk-adjusted returns are the highest.
The company will give priority to providing its current portfolio companies with follow-on finance as well as access to its networks and relationships in response to the global market downturn.
Due to the excessive demand, it also anticipates being fully deployed in the fund in the first half of 2019. To continue assisting female-focused and female-led SMEs in Nigeria, Rhodes said, “We look forward to being on the road for Fund II again in the not-too-distant future.”