Lauren Cochran, Managing Director at the Blue Haven Initiative, talks with Prosper Africa about how investors are adapting and identifying new opportunities in Africa in the wake of COVID-19.
Months into the COVID-19 pandemic, businesses around the world are adapting their operations to stay afloat, keep staff on the payroll, and serve the changing needs of their customers. Many of these pivots require new sources of capital, and investors that have cash on hand are finding opportunities in the changing landscape.
These investors can be lifesavers for small businesses, and they are well positioned to play an important part in economic recovery.
We spoke with Lauren Cochran, Managing Director of the Blue Haven Initiative, about how U.S. investors are adapting in response to the challenges of COVID-19, finding new opportunities for impactful investments in Africa, and utilizing U.S. Government tools to support their work.
The following interview has been edited for clarity and length.
Blue Haven recently invested in Field Intelligence, a Nigerian company whose Shelf Life service helps pharmacy owners manage their inventory and avoid stockouts and missed sales. It serves as a cheaper and more convenient source of alternative financing to these small pharmacies. Without a doubt, their work has become increasingly important because of COVID-19.
Lauren Cochran: Blue Haven, a family office in Cambridge, MA, has committed its large pool of capital exclusively to mission-aligned investing, including a $50 million carve-out for direct investing in sub-Saharan Africa.
We invested in Field Intelligence in March 2020–which now seems like a lifetime ago. It was our first investment in healthcare, and obviously the timing couldn’t have been better as Field has a role to play in the COVID-19 response.
Field has done a number of things to adapt to COVID. They have helped their pharmacy clients put up hand washing stations and posters about how to stop the spread. They have added new products that they can finance for pharmacies, like PPE [personal protective equipment], which they weren’t selling before.
Field’s clients tend to be individuals who each own a small pharmacy, so they usually lack pricing power or access to certain products, particularly in times of shortage. Field has been able to ensure a more direct line of communication with the major distributors and drug manufacturers because they have those relationships themselves, so they’ve been able to continue to provide access to drugs that would otherwise have been in short supply.
What kind of support do businesses need to be investable?
Cochran: Valuation is tough in every early-stage business, particularly in these environments that have a lot of uncertainty and very few comparable transactions. With funding from USAID, CrossBoundary helped the management team with valuation and sizing the market. The advisory services USAID provided in support of Prosper Africa really helped the company get ready for our investment, and we would have had to spend a lot of time on that otherwise.
*In support of Prosper Africa, USAID’s Southern Africa and East Africa Regional Missions provided transaction advisory support to Field Intelligence via USAID INVEST and CrossBoundary Advisory.
What other support does the investing ecosystem in Africa need?
Cochran: I think the biggest area that hinders the African funding system is the lack of growth capital. If we can find a way to encourage companies and investors that can write those $25 million checks, that would make a big difference because that is where the ecosystem really falls apart right now. For a lot of big companies, a $25 million check is not a huge chunk of their balance sheet, and it comes with benefits. Investments in African businesses give American companies a chance to learn and get a toehold in new markets. Growth capital can get African companies over the hump into long-term profitability where they become great acquisition targets.
What do you see as areas of opportunity for investors and firms in the U.S.?
Cochran: We’ve been lucky to be — with the areas we’ve chosen to focus in — we’ve been a few years ahead of the investor craze, so, with PAYGO solar we got in a little bit early and now we’re in that maturing phase of consolidation and some players going out of business and that sort of thing — fortunately not in our portfolio. Same with logistics, where we were really interested in logistics and now things have gotten really quite hot in that sector and I’m sure are even hotter now with the need for everybody getting everything at home.
So, I wish I could say I knew exactly what the next big thing was. I do think there will be an increasing focus, everywhere in the world, on how healthcare systems work; how they’re interacting with the lowest common denominator — the lowest income folks in different places. How do you make sure you have a healthcare system that is capable of serving at least some basic level of service to everyone?
We’ve been skeptical of a lot of innovations in healthcare, but we’re starting to see that because people are more and more comfortable with taking a lot of their healthcare online, there are opportunities that might have not existed before, and that there are also essential services that are very underinvested, which do have a real business model and don’t rely necessarily on doctors and nurses to be present. So, things like emergency response and financing of some of these different health clinics, vehicles, that sort of thing. I think there’s a big opportunity to parse the sector in a bit more of a nuanced way — to try and find these things that people are becoming increasingly comfortable with, and that even doctors, nurses, hospitals are relying on more and more; whether that’s electronic systems or other ways that they can interact with patients from afar.
For people who are investing in Africa for the first time, what kind of appetite do they need to have to actually do it successfully?
Cochran: If you are new to investing in Africa, don’t do it directly at first. It’s better to find a good fund manager, invest in the fund, understand the challenges, and then co-invest or go off and do it yourself. It’s really tough to do early-stage investing in Africa as a “side-hustle” without a team.
People absolutely should invest in Africa, but you have to be aware of what you’re getting into.
Everything takes a little longer than you expect, so you need a long-term mindset. And a lot of things go wrong — businesses make mistakes because taxes or import duties changed — and you have to be prepared for that. I think people often say, “Oh, it’s corruption,” and it’s actually not. It is just that people are still trying to sort out some of the basics.
Last year or the year before there was a particularly bad rainy season in West Africa, and one of the companies we invest in sent us a picture of a whole shipping container of their products floating down the street, away from the port, in a crazy flood. You just have to be prepared for things like that. But there is a ton of opportunity, and a lot of the investments are straightforward. People want their lights to work the same as they do in the U.S. They want their packages to show up on time. They want their pharmacies to have the drugs they need. As Americans investing in a foreign market, these are the types of services that we understand the most, and there’s a lot of opportunity. There are a billion people coming up through the ranks in Africa that nobody has tapped in a big way yet.
Read more about Blue Haven’s recent investment in Field Intelligence here.