Adesuwa Okunbo Rhodes, changing the narrative for women, small businesses across Africa
Adesuwa Okunbo Rhodes is the Founder and Managing Partner of Aruwa Capital Management, one of the few women owned and led private equity funds in Africa investing into untapped investment opportunities in West Africa in the small to lower mid-market. Adesuwa launched Aruwa Capital Management with her own money in Lagos in July 2019, and left the comforts of a six figure salary, in order to make an impact in society with her skills and track record, to change the narrative for women and small businesses across Africa. Adesuwa is an entrepreneur, CEO, mother, investor and women’s empowerment advocate.
She is one of the youngest female private equity fund managers in Africa launching Aruwa Capital at 29 years old. Adesuwa is a big believer that investing in women is not only the moral thing to do given the role women play in society and the multiplier it can have in terms of poverty alleviation for families, but also because investing in women and for women has been proven to deliver outsized and superior returns. Adesuwa is focused on using Aruwa Capital Management’s investments as a case study to make the business case to invest in women as fund managers, entrepreneurs, consumers and stakeholders in society.
Aruwa Capital Management is a Lagos based, early-stage growth equity and gender lens $20 million fund, that invests between $500,000 and $2.0 million in equity and equity linked instruments, into established and rapidly growing businesses in Nigeria and Ghana that are currently overlooked by other private equity funds and financial institutions. Aruwa invests in businesses that either provides goods or services that cater to the untapped $15 trillion female economy and improve women’s lives or businesses that are founded or led by women or employ women in their workforce or value chain, due to the increased profitability of gender diverse teams.
Due to its focus on the early-stage growth segment that is free of competition and its focus on showcasing the increased returns that can be generated when investing in women as consumers and entrepreneurs, Aruwa can successfully combine outsized financial returns with long lasting positive socio-economic development and women empowerment outcomes in Nigeria. Aruwa invests across rapidly growing and essential sectors such as healthcare, fintech, renewable energy, essential consumer goods and tech enabled B2B services. Aruwa Capital has successfully made four investments across multiple sectors since its inception and is one of the pioneers of early stage growth and gender lens investing in Nigeria.
Adesuwa has over 12 years of investment banking and private equity experience from top global institutions. Prior to founding Aruwa Capital Management, she spent five years as Managing Partner of Syntaxis Capital Africa, a provider of growth capital to SMEs in Nigeria and across Sub Saharan Africa. Syntaxis Africa was part of Syntaxis Capital, a private equity fund active in other emerging markets with $300 million in AUM from global institutional investors. At Syntaxis Africa, she led transactions totalling more than $200 million across SSA. Prior to co-founding Syntaxis Africa in 2014, Adesuwa was in the Leveraged Finance and M&A teams at J.P. Morgan in London, where she was involved in $5.6 billion worth of transactions across emerging markets including Nigeria.
Formative years till date, how has it been?
I was born in Lagos, went to Chrisland primary school in Opebi, and did one year of secondary school in Atlantic Hall before being sent to a boarding school in England, at the age of eleven. Being away from home at a young age taught me how to be independent very quickly. Also growing up with my father who was always working and would sometimes miss family holidays due to work, taught me at a young age about hard work, sacrifice and focus. I learnt early that to attain anything you want in life, you have to work hard for it. So I have always had that foundation of hard work, focus and independence from a young age.
I have always also known that I wanted to be in the world of finance, from a young age I found Economics interesting and it gave me a good foundation for the investment banking world that followed university. I studied Economics at the University of Bristol, through much persuasion of the HR department following one of their spring weeks for undergraduates, I got an investment banking job at Lehman Brothers during my first year in university, which was very rare at the time and a unique privilege to be selected in my first year when I just turned 18. I believe I was the youngest person at the investment bank at the time and it was a great experience to learn from within, the different aspects of investment banking and really hone in on the areas that were of interest to me.
After graduating University, I landed a job in investment banking with J.P. Morgan and also in private equity with TLG Capital. During my time at TLG Capital, I made an investment in a Ugandan drugs manufacturer, which was a very attractive investment but also very significant to the country’s self-sufficiency in producing genuine medicines, a huge social impact. After this experience, my interest was cemented into impact investing and private equity in Africa and the rest as they say, is history.
Having spent the last 11 years in investment banking and private equity at firms such as J.P. Morgan, TLG Capital & Syntaxis Capital Africa, I launched Aruwa Capital Management with my savings in July 2019. Aruwa Capital is one of the few African women founded and led growth equity and gender lens funds on the African continent and the decision to launch Aruwa Capital was really one that was taken due to frustration at the status quo for women raising capital. The system is currently rigged against women and especially women of colour so I had to do something about it, I could no longer be a bystander.
Setting up Aruwa
By way of some background, I was headhunted from J.P. Morgan and became a co-founding partner at Syntaxis Capital Africa in 2014, where I spent five years as the Managing Partner executing transactions and fundraising for a $100 million fund. Syntaxis Capital Africa was part of Syntaxis Capital Limited, a private equity fund operating in other emerging markets with $300 million in assets under management from global institutional investors. At Syntaxis Africa, I led and worked on transactions worth more than $200 million across Sub Saharan Africa, but we struggled to fundraise for the fund for over four and half years. I looked around in the private equity industry in Africa at the time and realised there were less than 10 private equity funds owned and run by women in Africa that had successfully raised capital. A continent of 1.3 billion people where women make up 50% of the population. Africa also has the highest percentage of female entrepreneurs in the world, where 1 in 4 women are running a business, 4 times more than Europe. However, according to the African Development Bank, there is a $42 billion funding gap between male and female entrepreneurs on the continent. In addition at the time, women only raised 2% of capital and women of colour less than 0.7% of capital. Therefore, it was important for me to step out and launch something on my own, because if I can’t see more examples of women allocating capital, it will continue to be very challenging for women to get funded looking at the statistics.
I wanted to make sure that through launching a fund of my own, I would be able to provide viable female entrepreneurs with access to capital where they otherwise traditionally wouldn’t have access due to the structural barriers that exist for women raising capital. I also wanted to change the narrative for other female fund managers who may have struggled to raise capital despite their track record and expertise, by using our success stories at Aruwa to motivate and inspire others and also showcase the business case to investors for investing in women. The data supports that investing in women and for women is good business and we see it as an immense, untapped opportunity that will enhance our fund returns, providing us with a competitive edge due to the limited competition.
As a black African woman raising a growth equity fund in Africa, I myself have struggled to fundraise from institutional investors, it took me five years to successfully launch my fund. So our mission is to showcase the business case and success stories through Aruwa Capital, so that other women don’t have the same challenges in raising capital that I had.
Leaving the comfort of a six figure salary to make an impact in society
I decided to launch Aruwa at the age of 29 years old, a lot of people thought I was crazy at the time, why leave the comforts of a well paid job to risk everything at a young age? The people that were worried were the people that didn’t really know me. Thankfully, I had the support of my loving husband and family who knew that once I put my mind to something, I will see it through to fruition. I was very intentional to show that we need to have more women as decision makers, more successful women in businesses influencing decisions of companies, and as such, we will be able to empower women at all levels of society from a position of influence.
How are you managing being an entrepreneur, CEO, mother, investor and women’s empowerment advocate all together?
I believe as women, we are natural multitaskers, but it is definitely challenging wearing so many hats every day. It is never perfectly balanced between all roles all the time every day, some days one role is prioritised over the other and over time it balances out. There are some days I can’t pick up my son from school because I have meetings to attend to, but there are other days I make sure I block out my calendar to spend quality time with him. By the grace of God, I have learnt to prioritise over the years, and I think what keeps me going is that, I hope my story will influence other people to take risks and bet on themselves to make an impact, so I won’t stop until my company is a success story, which others can take inspiration and motivation from.
Why do women find it challenging to get loans despite being proven in reports to be trust worthy in refunds?
Women entrepreneurs face a number of systemic issues that prevent them from raising capital and scaling their businesses. Research has found that there is deep seated unconscious bias within the banking and finance, and venture capital and private equity industry. The language used to describe male and female entrepreneurs is significantly different and these differences have immense consequences when women are seeking capital and also for society in general. For example, research from the Harvard Business Review showed that a male entrepreneur can be described as “young and promising” but a female entrepreneur is described as “young and inexperienced”. London Business School also showed that female founders were far more likely to be asked “preventative” questions about their businesses that emphasised risk and downside. The men, on the other hand, were asked more “promotion” questions focusing on the “upsides and potential gains” of their businesses, a line of questioning that resulted in six times as much funding on average for men versus for women.
In 2018, Boston Consulting Group (“BCG”) also found a clear gender gap in business funding, finding that investments in businesses founded or co-founded by women averaged $935,000, less than half of the average of $2.1 million received by men. These unconscious biases in society that deem women as more risky are a fundamental cause of the gender gaps we see in male versus female entrepreneurship despite the fact that as you say, women always repay. We are on a mission to change this narrative at Aruwa Capital Management and seek out the best businesses by women and for women.
Share on being an early-stage growth equity and gender lens $20 million fund that invests between $500,000 and $2.0 million in equity
Aruwa Capital Management is investing in untapped opportunities currently overlooked by other private equity funds and financial institutions because¸ we don’t have many women owned private equity funds, and most funds in the market are targeting much larger transaction sizes in the growth segment.
There are numerous businesses in Nigeria who have had at least 2-3 years of operations, have already generated revenues, are growing rapidly, have a proven business model, have existing demand for their product or service, an established route to their markets, but just lack that incremental capital to scale up. Our investment sweet spot in Aruwa Capital is between $1-2 million of growth capital for these companies and we see so many viable opportunities in this segment. Over the last 6 years, we have seen over $500 million of growth capital demand in Nigeria alone. The companies that approach us tell us that the other funds in the market tell them they are too small and the banks are only providing expensive and short term loans that are not suited to their growth plans. So, we are willing to roll up our sleeves and do the diligence and institutionalisation required to invest successfully in this underserved segment as we are on the ground in Nigeria and have the proximity to these smaller businesses that is required to effectively monitor and manage risks.
How can these funds be accessed?
If you are a business that is providing essential goods or services that cater to women, or you are a business that is founded, co-founded or led by women with a proven business model that has been in operations for at least 2 years, whereby you are already generating revenue, have demand for your products and services with most of your revenue generated in Nigeria, please send us an email with your investor presentation at email@example.com, we would be happy to speak with you.
Practically speaking, how are you reaching out to help the untapped $15 trillion female economy and improving women’s lives or businesses that are founded or led by women?
As we are one of the few 100% African women owned and women run private equity funds in Africa, we can easily identify products and services that we will use as women, identify the best businesses that are producing solutions to problems I understand as women. Boston Consulting Group estimates this market is a $15 trillion market and guess who are making 80% of consumer spending decisions globally? Women! So, it’s such a huge and untapped market that I can tap into as a woman allocating capital. In addition, as female investors, we can easily access the best and brightest female entrepreneurs due to our mostly female networks, so we find amazing businesses that are founded or led by women. Women entrepreneurs or female CEOs feel more comfortable approaching me and my female-led investment team because we are all women and understand the struggles of being a female entrepreneur. So by being women allocating capital, we have a very strong natural competitive advantage in finding and deploying capital to businesses by women and for women.
Why the decision to focus on the early-stage growth segment?
Our focus on the early-stage growth segment is very intentional because that segment is currently overlooked and mostly free from competition. There is a robust demand for patient growth capital among SMEs with limited supply from local banks and other sources of private capital. Most small to mid-sized companies in Nigeria and across West Africa have limited access to longer term debt and/or private equity capital to finance their business plans and sustain growth.
According to the African Development Bank, over 70% of SMEs in Africa, which account for a third of GDP and just under half of total employment, lack access to longer-term finance. Using World Bank data, Aruwa Capital estimate that there is a $70 billion of growth capital demand from SMEs in Nigeria and Ghana today, with this figure growing to $153 billion in 4 years. The early-stage growth equity segment remains overlooked and underserved as the majority of commercial credit and private equity funds target much larger businesses. Aruwa Capital intends to create significantly greater value by providing growth capital to established and proven businesses in this untapped early stage growth SME segment¸ in a manner that captures significant equity upside with sufficient capital preservation and de-risking.
We are strategically placed in this missing middle and when you combine this with our intentionality around gender and social impact, it makes our proposition stand out from others in Nigeria and across Africa.
How do you intend to successfully combine outsized financial returns with long lasting positive socio-economic development and women empowerment outcomes in Nigeria?
We strongly believe that there is such a seamless intersection between profit and purpose through Aruwa Capital’s gender lens investment strategy into early stage growth businesses. Although women make up half of the population, we are not receiving the proportionate amount of funding. This imbalance in access to capital for women on the continent is having detrimental effects on socio-economic development. The disparities for women have also been worsened by the COVID-19 pandemic. However, when women are empowered in society, are financially independent and have income, they are typically re-investing 90 per cent of their income into healthcare and education for their children and family compared to only 30-40% by men according to Global Citizen. Investing in women creates long-term social and economic benefits for all individuals, their communities, and the world as a whole, it can be a huge driver for job creation, poverty alleviation and women’s empowerment.
We not only see our gender lens investment strategy as the moral thing to do given the role women play in society and the multiplier it can have, but also because investing in women and for women has been proven to deliver outsized and superior financial returns. The data shows that gender balance within organisations improves profitability, reduces risks, brings diversity of thought and decision making.
McKinsey estimates that if the gender gap is bridged, there could be an additional $28 trillion in global GDP¸ and also shows gender diverse executive teams were 21 per cent more likely to experience above-average profitability. Boston Consulting Group found that for every dollar of funding invested, start-ups founded and co-founded by women generated 2.5 times more than male-founded start-ups.
International Finance Corporation found that gender balanced senior investment teams generated 20% higher return than teams that didn’t have gender balance. First round capital found that across 300 companies, teams with at least one female founder did 63% better than the all-male founder teams. So the data is out there and it has been proven that investing in women and in gender diverse teams delivers superior performance.
We are intentional in using our influence as investors to ensure that in all of our portfolio companies, there is gender diversity in the management team, board room, ownership structure and supply chain. We see this as such an untapped opportunity to deliver superior returns and long lasting social impact in our communities.
What sectors do you invest in and why?
Africa is a continent with 1.3 billion people with predominantly young demographic and increasing disposable incomes. Africa will account for over half of global population growth by 2050, household consumption will be at $2.1 trillion by 2025 and an additional 200 million Africans will live in cities over the next decade, with more than 20 cities the size of London or New York. We focus on sectors that will tap into this growth in urbanisation and the population. We invest in essential goods and services that this rapidly urbanising and rapidly growing and mostly young population will always need over the next 50 years. Essential sectors such as access to healthcare, financial technology, essential consumer goods and renewable energy. Regardless of political regime or the macroeconomic situation, people will always need healthcare, financial services, power, essential and basic goods, so we are intentional about investing in necessities and sectors that are not heavily regulated or cyclical.
Share on the 4 investments that Aruwa Capital has successfully made
We have invested across healthcare, fintech and essential consumer goods. Our first investment was in a local manufacturer of daily disposable and affordable personal hygiene goods for women and girls in Nigeria. The Company manufactures sanitary pads, baby diapers, baby wipes, adult diapers, net maternity pads, underlay pads and more recently facemasks with at least 40% of their distributors being women. The Company has seen strong growth since our investment in 2019 and we are very excited about the company’s prospects due to the import substitution strategy. We saw first-hand the importance of local production as a result of the pandemic and we are proud to be the first institutional equity investor in the business.
Our second investment was in a retail pharmacy chain in Lagos that also has a technology enabled marketplace that connects community pharmacies directly to suppliers in Nigeria, and through group purchasing can offer a 15% discount on pharmaceutical products. They have over 200 pharmacies on their tech-enabled marketplace, helping them purchase genuine medicines, run their day-to-day operations and sell online effectively. In line with our gender lens strategy, approximately 50% of the pharmacies on their platform are women owned, 45% of the company’s workforces are women and 40% of the board members are women. Their proposition is very scalable across Africa and we are excited about the growth prospects of the business.
Our third investment was in a fintech company co-founded by a woman that is providing infrastructure that allows banks, financial institutions and fintechs to collect and aggregate financial data at scale. The Company’s data infrastructure allows them to collect alternative financial user permissioned data at scale, and unify it with other data sources to create a holistic picture of an individual’s financial behaviour. From that data, they are able to predict credit worthiness, segment customers, and provide computations such as debt-to-income ratio as part of their insights library to their enterprise clients, which differentiates them from other data aggregators. Their technology is ensuring that those men and women in rural areas that are typically credit invisible to large financial institutions are finally visible and their offering ensures an inclusive credit system across the continent.
Our fourth investment was recently just announced which is into a consumer wellness brand that exports the super food hibiscus to the USA from Nigeria. In line with Aruwa’s gender lens investing strategy, the company has trained over 3,000 women in hibiscus post-harvest best practices, which in turn, empowered these women to provide for their respective families in Northern Nigeria. Additionally, since 2017, almost 70% of the 1,600 small holder farmers trained on post-harvest operations and safety were women. All the employees directly involved in the company’s processing facility in Kano State are women. We are so excited about the women’s economic empowerment that will occur as a result of the planned expansion and look forward to working with the team and contributing to their continued success.
What are you looking forward to achieving?
In five years, I am hoping to have successfully exited some of our investments at Aruwa Capital and proven that an impact and gender lens fund run by an African woman can deliver strong financial returns for investors. We are also hoping to demonstrate that you can deliver these superior returns whilst also having a positive socio-economic impact, in particular for women. We believe that we will steadily be clearly showing the thousands of jobs that we have created for women across different sectors, and having tangible evidence to showcase the untapped opportunities that women represent.
I am looking forward to achieving this and using Aruwa as a case study to change attitudes in society that currently see women as riskier propositions than our male counterparts.
What does success mean to you?
Success to me is the impact that I am able to create through my work at Aruwa Capital Management for other women to succeed as entrepreneurs. By showcasing Aruwa Capital as a success story and the magic that can happen when women are capital allocators, the trickle down effects to women in our portfolios and the enhanced return and social impact that is derived from that. Women starting their own businesses, launching their own funds, being intentional in supporting other women to scale and referencing what we have achieved at Aruwa Capital as their inspiration, that is the definition of success to me. We aim to empower a million women through our investments over the next 10 years directly and indirectly.
Advice to every young woman out there
My advice would be to never stop believing in yourself, don’t be discouraged by the disappointment or the setbacks. You will only thrive through dogged determination, a thick skin, tenacity, persistence, grit and making sure your “why” and purpose is a mission bigger you and will impact other people’s lives positively. If your why is only centred around your own ambition, you won’t last very long. You have to be intentional about impact because that’s what will keep you going on the difficult days, because there will most definitely be difficult days.
The gender gaps we see today in society are directly correlated to the fact that we don’t have enough women as capital allocators and decision makers. People say women need more seats at the table, we don’t need more seats, we need more tables. More women creating their own tables, succeeding as capital allocators means more women getting funded, more mentors, more torch-bearers, more examples to follow. Investing in or with funds like Aruwa Capital Management is a practical way to narrow the gender funding gap and we would love to talk to your readers about doing just this.