Why PE firm Alitheia is banking on women in Africa

African women-founders find it incredibly hard to raise capital from private markets, and even banks, a gap that “gender-lens” funds like Alitheia IDF exist to bridge.

Alitheia IDF was co-founded by Tokunboh Ishmael and Polo Leteka in 2015 as a private equity fund to back the often marginalized founders. Through the $100 million Alitheia IDF, currently the biggest “gender-lens” fund in Africa, it backs the often ignored women-led or women-focused businesses.

Ishmael, an active investor for over two decades, has previously invested in multiple sectors across Africa, but with a leaning to climate and fintech, through her private equity firm Alitheia Capital, which she founded in 2007 after a stint at another PE firm. Alitheia Capital, based out of Nigeria, and through other funds, has to date invested in a number of startups, including fintechs Lidya and Paga, and logistics startup Max.ng.

She told TechCrunch that full deployment of Alitheia IDF is expected next year, with plans for another fund to double down on “gender-lens” investing down the line.

Below are excerpts from an interview Ishmael had with TechCrunch, where she delves deeper into impact investing, banking on women-led and women-focused businesses, and doubling down on investments in Africa.

The interview has been edited for brevity and clarity.

TechCrunch: You are an early investor in Africa’s tech space, with Alitheia Capital being among the first institutional investors in the ecosystem. What inspired you to take this path?

Tokunboh Ishmael: I wanted to invest for impact, and also leverage technology as a key tool to drive transformation and access and, therefore, impact. At Alitheia we make investments not just to make financial returns, but for developmental impact. Particularly for us, that has meant driving inclusion in finance, energy, education and health.

Our first fund was a financial inclusion fund, which we co-managed with Goodwell investments, and was intentional about helping micro-finance banks transform to better serve low-income populations, and small and growing businesses. Our take with the fund was to use technology to enhance access. With our first investments over 17 years ago being in fintech, we were an early adopter of mobile money in driving financial inclusion.

One notable micro-finance we with worked with is Baobab. We helped create infrastructure that has enabled it to acquire a national license, and place it among the top two national micro-finance banks in the country, while growing its balance sheet over 10 times.

We have also had an energy inclusion fund, looking to make energy cleaner for the low-income households that majorly rely on firewood, which causes indoor air pollution and drives illnesses and infant mortality.

The energy fund sought to drive energy inclusion, and reduce deforestation, through clean energy options for cooking and lighting, which improved the lives of smallholder farming families, and particularly for girls, who were no longer required to spend hours sourcing firewood.

We later launched our second inclusion fund, which went beyond financial inclusion, to look at access to essential services, finance, health, education, housing. We’ve had a series of funds since that time around that theme, all underpinned by the use of technology in driving transformation and access.

Then came the launch of Alitheia IDF in 2015; what informed this decision?

Inclusion being a key part of what we do, we looked at the portfolio of assets that we had, their management and the teams behind them, and we saw that even within our own portfolio, there was a scarcity of female owners.

There was a poor representation of women in boardrooms, and in management, and we felt that we could do better to diversify capital and address the issue that less than 5% of capital went to female founders. We sought to address the imbalance in capital to founders, as well as the representation in senior boardroom positions and management, as well as within value chains — both production and consumption.

The dividends of diversity are better corporate governance, broader perspectives, enhanced innovation and entrenching many gender factors in decision-making, like broadening market access and reach to tap women, who control over $15 trillion of purchasing power.

So, we created a first-of-its-kind fund that uses the gender perspective to address the imbalance, and create a factor for alpha performance by companies. However, not all of the eight businesses supported by this fund (JetStream, ReelFruit, SweepSouth, Chikas, Skld, Psaltry, Wemy and Ivili Loboya) are by women founders; we have also backed male-dominant teams because the fund is also about businesses that have an impact on women. We are not just addressing the imbalance of funding to female founders, but also the imbalance of products and services to ensure that women can access them. We want them to scale, and help inject gender consciousness into the founding teams, the management teams, the boards and the companies.

How does Alitheia IDF invest, what are its sectors and regions of focus?

We invest in businesses that are at the point of scaling; businesses with a proven product and service, that have customer revenue, and are looking to grow their footprint, access new markets.

As fund managers, we partner with the management and founders to grow their companies. And, we rarely take a controlling stake — our typical sweet spot is a stake of 10% to 40% of a company; very rarely do we go past 20%. Typically, we are looking for growth companies with an absorptive capacity of $2 million to $8 million.

Our work is to provide financing, mentorship, strategic growth, access to markets and access to talent. We don’t go in and start wielding swords; it’s a partnership, and we seek to help them grow the businesses beyond their sights, through access to our networks for finance and talent.

We also help them think of how to push for the right types of products, and very importantly, governance — with the right governance, you can make the right decisions and you can grow properly.

We are also keen on sectors, where we can get the biggest bang for our buck in terms of job creation and inclusion from three perspectives: financial, essential services and gender. Thus, we invest in what we regard as essential sectors including health and finance, food security and manufacturing.

We do look at companies that have headquarters in the western and southern regions of Africa, but are expanding to other regions within Africa. We consider those with provenance in East or other parts of Africa and are growing into western or southern Africa.

We will probably back 10 to 12 businesses with this fund. The $100 million just scratches the surface of the paucity of funding for female founders and companies that serve women. We anticipate that there will be other funds that will come along to further address and increase funding to these types of companies.

What notable impact have you had since launching the fund?

It has been a very rewarding journey because we’ve helped address a key challenge for the recipients, which has been access to finance and the ability to tap into pools of capital, but also enabling them to raise their aspirations for scaling beyond what they may have already thought of. We do this by addressing the confidence gap that some may have had in terms of approaching equity investors, and by helping them become investor and scale ready.

What needs to change for an increase in funding opportunities for women-led companies in Africa?

Our fund is managed by a women-led team, and I think that has been instrumental in us being proactive about seeking out women founders. Thus, I think it is important to have diversity in fund management (we still have some way to go to having more women-led fund management, and partnerships) to commit to action on diversity.

Also, decision makers investing in funds need to recognize and address any unconscious biases that may have prevented them from intentionally seeking out female fund managers, female founders and companies that serve women.