“Africa is now having a moment in the sun where many foreign institutional investors are taking notice. We want Africans to own Africa. So, local institutional investors should step up to the plate to ensure that Africans are funding Africa.” – Adesuwa Okunbo Rhodes, Founder and Managing Partner, Aruwa Capital Management.
While African startups raised roughly $4.3 billion in funding in 2021, an all-time high, single female founding teams in the continent raised a meagre one per cent of the lump sum. Still, it was considered an impressive year for female founders since it was better than previous years.
Several factors contributed to why funding was stiff for female founders in the region, including poor female representation in investor pitches and limited female-led/owned or female-focused Venture Capital (VC) and Private Equity (PE) firms. These realities spurred Adesuwa Okunbo Rhodes, a Nigerian-born investment banking professional, to establish Aruwa Capital Management to bridge the gender funding gap in West Africa and inspire the rise of more women-led VCs and PEs.
Rhodes is a Lagos-born investor who moved to London in her early teens for boarding and later graduated from the University of Bristol in England. She started her career as an investment banker about 13 years ago in London. First, with Lehman Brothers, then moved to TLG Capital, and later to JP Morgan Chase, where she completed nearly $5.6 billion in transactions in both developed and emerging markets, including Nigeria.
In 2011, when she worked with TLG Capital, a London-based fund focused on SMEs across sub-Saharan Africa, Rhodes and her team conducted several transactions in the Anglophone regions, including a very successful principal investment in Uganda. Following the rewarding deal in Uganda, she discovered her unique passion for investment in the continent. “I was able to see the huge social impact that we had in Uganda by providing genuine anti-malarial drugs and antiretroviral drugs that we can then export to other neighbouring East African countries that didn’t have access. So I always thought I would come back to Nigeria to do private equity. But, I didn’t know how yet,” she told Ventures Africa.
Later that year, she joined JP Morgan Chase, where she stayed until 2014, closing deals worth more than $5.6 billion. Rhodes was later selected to build the Africa business of a European private equity fund, Syntaxis Capital Africa, with a little below $300 million under management, for about five years. She returned to Nigeria as a managing partner and co-founder of the new African-focused private equity fund. She soon discovered that there were little or no female players in the VC-PE spaces, which increased the risk of funding biases. “Most of the funds deployed in Africa are by men. And an unconscious bias exists when a female investor is not in the room,” she said.
In a publication, Harvard Business Review found that the language used to describe male and female entrepreneurs are radically different, a colossal risk to gender equality in funding. “While the men are described as young and promising, female entrepreneurs are described as young and inexperienced,” Rhodes explained. According to the investment professional, these unconscious biases are inherent in the VC and PE spaces. “The only way to break such a systemic problem is by having more women as capital allocators and having more women in investment decision roles,” she said.
Breaking the bias
For Rhodes, starting a fund came with its struggles. “I was struggling to raise funds as a young African woman in a male-dominated private equity industry,” she said. There were very few well known female precedents in the country, but she dared to be the change she sought. The fact that few or no women had successfully raised and managed funds fueled Rhodes’ desire to start her PE fund.
After nearly five years of managing Syntaxis Capital Africa, she spun out to launch Aruwa Capital Management in July 2019, a daunting move for a 29-year-old back then. Rhodes believed that her ability to raise a fund would inspire other women interested in entering the African private equity sector.
“If you want to be a case study, you want to be an example of the magic that happens when women are empowered capital allocators,” she said. “I am now making the business case to invest in women. Institutional investors can no longer say, ‘Oh! There are no women.’ We are here. As we showcase that through our portfolio, we make the business case for others so that other women don’t struggle to raise capital.”
Aruwa Capital Management (ACM) is an early-stage private equity fund that focuses on businesses that provide essential goods and services to improve women’s lives, businesses founded or co-founded by women or businesses with gender-diverse teams. Only businesses with a proven business model and an existing market demand for their products or services can get Aruwa Capital Funding. More women are said to find the Rhodes-led PE more approachable for funding as against male-led private equity companies. This further helps it gain a natural competitive advantage to enhance returns. Through her network, Rhodes has successfully gained access to female entrepreneurs who she believes find her “more approachable” to speak with for their business than men.
“By being a woman allocating capital, there is a natural competitive advantage to enhance returns, because of the natural trickle down to women in our portfolio and that natural trickle-down effect to women across boards, either as consumers, founders or professionals in senior management,” Rhodes explained. The company recently invested in an agent network business with 35 per cent female agents.
Here is why Aruwa Capital exists
Aruwa Capital seeks to reduce unemployment in Nigeria, improve gender equality, empower women and give them a seat at the table. The PE also persists in its mission to empower women in Nigeria’s informal economy. For instance, the first business it invested in was a local manufacturer of a range of personal hygiene goods, which has 40 per cent of its distributors as women.
Furthermore, the PE has also invested in a company that exports hibiscus flowers and has 90 per cent of its workforce as women, including the female smallholder farmers in the sector. Although it does not directly provide financing to the female farmers, Rhodes noted that her company provides funding to the company that procures their harvest, ensuring income for the women every season. “We always make sure that we’re impacting women across the value chain, whether as distributors, female smallholder farmers, or agents deploying financial services,” she said.
The Lagos-based PE is effectively monitoring risks and maximising value for its investors. It is currently deploying capital from a $20 million fund. “Since our inception, we have made six investments across our target sectors, including health care, fintech, clean-tech, renewable energy, and essential consumer goods. Our portfolio already validates our investment strategy,” Rhodes stated. Agroeknor International, Koolboks, CrowdForce, Pngme, Lifestores Pharmacy, and Wemy Industries are some of the businesses in its portfolio.