PROJECT OUTLINE

Prepared by: Young Innovator Working Group (Afrolynk gUG)

February 2020

ENTREPRENEUR ESTABLISHMENT PLATFORM (EEP)

Table of ContentsEEPlatform

The EEP – A snapshot 01

Executive Summary 02

Overview 03

The Project’s Main Goal 04

Introduction 06

EEP - A unique value proposition 08

Capacity Development 10

Eligibility and Selection Criteria 11

Mentorship 13

Training Programs 15

EEP Core Training Programs 17

FinancingBridging the financing gap 20

Building a Solid Investments Pipeline 22

Support Financing 23

Risk Capital Fund 25

Technology EEPlatform Tech 28

POC Country Identification 29

Road Map 30

Conclusion 31

Appendix 30

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The EEP – A snapshotMany organizations have identified the support of entrepreneurs and the provision of access to capital and training as key strategic areas to work towards the realization of the Sustainable Development Goals (SDGs) and the successful implementation of the High 5 framework.

The Entrepreneur Establishment Platform (EEP) makes a unique proposition by introducing a coherent and integrated approach combining innovative financing instruments and tailored capacity development to enable entrepreneurs to access much needed funding opportunities to successfully scale their businesses. The EEPlatform also referred to as EEP, leverages on innovative technologies and modern financial tools to create the necessary framework to bridge the financing gap and build a sustainable pipeline for risk capital investments.

Risk Capital Funding Capacity Development Support Financing

Training MentoringExpert pool

Peer to peer supportvia ESOs

Business tools and trainingPersonal development

Networking

Profit Sharing Loans paid back once the company is able to

make profit and attract larger investors (Series A)

Cascaded Loans via FESOUp to 500k eur

CAPEX and OPEX

FINANCIAL ACCELERATIONPERSONAL DEVELOPMENT

Low risk to InvestorsThrough access to a direct

pipeline of proven de-risked early stage businesses with

high potential growth.

SustainableRevolving fund in successful

enterprises can be reinvested into EEP

Focus on resultsLoan disbursements

based on financial and personal development

CustomizableNeeds based training

for entrepreneurs to fill skills gap

Builds a pool of mentors

There is a pay it forward approach where

program graduates are trained to become

mentors in the future

GROWTH CAPITAL

Direct investments of EUR 500.000 - 2 Mio.

Managed by Seasoned GPs with both experience on the

continent and beyond

Linkages to additional private LPs for follow-up

investments

Exit StrategyA clear path for follow up investment from

additional private LPs

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Executive SummaryGuided by two long term goals – the reduction of unemployment and

vulnerability of youth and the support of a strong and resilient economy in Africa - This project addresses the access to finance as one of the most pressing challenge for African startups, innovators and SMEs to

successfully scale their businesses.

Access to affordable and small ticket size financing is a huge challenge particularly for young businesses in Africa. This results in a major

restriction to the realization of the creative potential on the continent. Institutional funds and donors on the other hand often struggle to identify

investable businesses that meet their KPIs.

The EEP responds to these challenges by introducing an open platform, which creates access to both financial and non-financial support.

The EEPlatform is backed by cutting edge technology, which allows a transparent and secure infrastructure for providing access to capacity development and training for startups. At the same time it provides a

system to manage and monitor the disbursement of financial support for donors and investors.

Together with already established ecosystem players, intermediaries, local and international experts, the EEPlatform provides a holistic

approach to enable entrepreneurs working towards the social good to acquire the necessary skills to build investible and bankable businesses.

By derisking initial investments the EEP creates creates a reliable investment pipeline, which makes investment into African startups more

attractive.

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In June 2018, Afrolynk gUG and the German Corporation for International Cooperation (GIZ) on behalf of the Federal Ministry for Economic Cooperation and Development (BMZ) brought together a group of thirty African and German entrepreneurs, academics and thought leaders to meet President Adesina in Berlin. President Adesina tasked the participants of the event to develop an impactful solution to respond to the needs of innovative entrepreneurs in Africa and enable their businesses to thrive and promote development on the continent.

The Young Innovators Working Group (YIWG) was  established to respond to this request. In October 2018 the YIWG presented a concept note to the President who made a commitment to bring it to life. The concept note was presented at the G20 Compact for Africa that month and the President reiterated his commitment seeing through the EEP at the Africa Investment Forum in November 2018.

Since then, there have been discussions between the YIWG, GIZ, AfDB, BMZ to define a way forward. It is critical that the various parties now come together and move the EEP to the next phase.

The Young Innovators Network (YIN) is a network of entrepreneurs, innovators, and African International Sector Experts based across the globe with a shared vision of supporting vibrant and prosperous businesses on the African continent that solve challenges and are financially viable. The Young Innovator Working Group (YIWG) are members within the YIN who have committed to bringing the EEP to life. The YIWG is currently working as an extension of Afrolynk gUG from Germany.

OverviewThe making of the EEP

The Young Innovators Network

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AGAINST THE BACKDROP OF THE SDGS – SPECIFICALLY, SDG NO. 8 HIGHLIGHTING THE NEED TO PROMOTE INCLUSIVE AND

SUSTAINABLE ECONOMIC GROWTH, EMPLOYMENT AND DECENT WORK FOR ALL – AND THE HIGH 5 PRIORITY AREAS

IDENTIFIED BY THE AFRICAN DEVELOPMENT BANK (AFDB) - THE EEP HAS BEEN DRAFTED TO CORRESPOND TO THE URGENT

DEMAND FOR EMPLOYMENT AND IMPROVED ACCESS TO FINANCE, TARGETING THE FOLLOWING GOALS:

✔ To address the existing financing gap, which businesses face in their early growth phase and present an instrument that makes finance more accessible and affordable.

✔ To provide a coordinated access to both small ticket financing and training to build a solid investment pipeline that prepares businesses to meet the requirements for later investment.

✔ To connect entrepreneurs and stakeholders from the start-up support ecosystem through a single platform - creating access to information and training support, and providing a mechanism to monitor the progress of supported businesses.

✔ To introduce a platform that builds on an innovative technology and a blockchain solution which creates a transparent and secure infrastructure for providing financial support to entrepreneurs.

✔ To integrate existing initiatives and established intermediaries to create synergies and leverage on successful programs for better and faster scalability.

✔ To create a support infrastructure that benefits startups and SME's at large with a special focus on supporting female entrepreneurs with the knowledge and skills they need to grow their businesses.

✔ To support the creation of jobs and more secure employment to contribute to sustainable economic growth on the African continent.

The AfDB’s high five priority objectives are: (1) Light up and power Africa; (2) Feed Africa, (3) Industrialize Africa, (4) Integrate Africa and (5) Improve the quality of life for the African people.

The Project’s Main Goal

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ENTREPRENEUR ESTABLISHMENT PLATFORM (EEP)

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Young Africans with innovative ideas, who want to establish their own business or businesses who want to scale often fail to succeed due to a lack of financing options, resources, skills and support to become sustainable ventures.

More than 40% of entrepreneurs across the African continent cite access to finance as the major factor limiting their growth, according to the World Bank Enterprise Survey.

In response the EEP proposes a set of innovative solutions that tackle these challenges by coupling capacity development, and financing opportunities of different ticket sizes to accelerate the growth of African businesses.

The EEP support financing scheme is designed to provide access to finance through grants and small ticket investments in a form of pre-seed, seed capital and growth stage profit sharing loans to unleash full growth potential within the African startup ecosystem and build a pipeline for more advanced investments. The platform is designed to effectively tackle the financing gap by leveraging on existing networks and infrastructures, cutting-edge technology and financial tools.

Introduction

EEP ecosystem

Established businesses increase visibility of

start-ups and MSMEs, serves as mentors and

experts

Local venture capital fundsreliable partners in managing capital and disbursing fundsImpact Asset Manager

experienced and reliable partners in managing

funds

Accelerators and hubslocal contact point for

participants, provision of training and skills

development, management of capital

Private investorsshare their vision with EEP, provide capital for

the fundPublic donors

share their vision with EEP, provide capital for

the fund

DIFs and IFIsshare their vision with EEP, provide capital for

the fund

SMEsestablished entrepreneurs

who want to learn and develop to grow their

business

Start-upsjunior entrepreneurs who want to learn and develop

to grow their business

Innovatorsindividuals who want to

grow their idea into a successful business

Partnersproviding access to their existing platforms and

infrastructures

Policy advisorsproviding guidance and

political backing

EEP teamorganisation and

management of platform, partners and stakeholders

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THE EEP DIGITALINNOVATION PLATFORM

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BRIDGING THE GAP

The EEPlatform enables bridging the financing gap for businesses where micro financing becomes insufficient and businesses are not yet qualified to access larger ticket sizes. That way the EEP makes a unique value proposition by introducing a needs based system of cascading funding options

Institutional Funds

Risk Capital Fund

(Micro)Finance Institutions

Hubs & Incubators

Mentors

Community Building/ Workshops

Finance Capacity Development

Support Financing

Training Courses

Fund Management Tool

Mentorship Portal

Online Learning Portal

ERP System

Coaching < 50 K < 250 K

< 500 K

BUILDING A PLATFORM

In response to la ack of funding and resources for entrepreneurs, the EEPlatform has been designed to provide a coordinated approach to create better access to training and finance opportunities under a single roof. The platform builds on the principles of collaboration, cooperation and open source technology to create a better outreach and allow the integration of existing initiatives and support programmes.

EEP - A unique value proposition

CREATING A PIPELINE

The EEPlatform enables startups to gain traction and combines the provision of capacity development and access to support finance to create a solid pipeline for start-ups and entrepreneurs to mature into becoming investable businesses with the opportunity to access more advanced funding opportunities.

Microfinance Institutions

Seed/Growth Stage PE fundsfocussed on higher ticket size

Multilateral Institutions

EEPSupport Financing via FESOs

Pu

blic

Fu

nd

ing

Priv

ate

Fun

din

g

50k 1 Mil 10 Mil 20 Mil 3O Mil

Direct Investme

nt

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OnlineCommunity

DEVELOPMENTONE

.

CAPACITY

Bringing value add to existing ecosystems

Mentoring & CoachingTraining & Knowledge Management

Business Development & Networking

Pipeline Development

Capacity DevelopmentCREATING A SUPPORT STRUCTURE UNDER A SINGLE ROOF

The EEPlatform is structured to coordinate the activities of mentors and enterprise support organizations (ESOs) and finance enterprise support organisations (FESOs). The ESOs constitutes of accredited startup hubs, incubators, tertiary education institutions, whereas (micro)finance organizations and impact investment funds are referred to as FESOs. Both the ESOs and FESOs assist and support entrepreneurs in their venture building and capacity development through:

1. The provision of training and coaching - facilitated through mentors and local hubs and incubators on the basis of online training resources.

2. Access to financial support, coordination and supervision - facilitated through financial intermediaries and support organisations (FESOs).

Finance Support Organisations Hubs & IncubatorsMentors

The platform provides access to tailor made training and coaching opportunities to assist startups develop and scale their businesses through a coordinated and needs-based approach.

The mentorship portal is an online community that allows startups and mentors to interact, schedule meetings and track their progress.

Online Learning

The online learning portal gives access to essential course materials. The portal also support content development, customization and localization of contents.

Mentorship

Bringing these various components under one platform allows the various actors to align their efforts in order to provide the best possible support structure . The successful realization of the project requires all stakeholders to be equipped with prerequisite knowledge to support the entrepreneurs and exercise their dedicated tasks.

Fund Management

The fund management tool integrated with the ERP system is an important vehicle that allows donors/ investors to monitor and track the absorption of funds to guarantee a best possible usage in accordance with previously determined KPIs. Whereas the ERP (Enterprise-Resource-Planning) System enables entrepreneurs to manage and monitor their businesses.

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ESOs and FESOs will go through the onboarding capacity training through the

EEplatform prior to joining the project

Eligibility and Selection Criteria

For ESOs Registered ESOs, which are older than 3 years and still operating.

Organisations with extensive experience and a good track record in running startup support programs.

Organisations with a good understanding of international cooperation and a solid experience of reporting and documentation of projects.

For EntrepreneursAfrican startups that are registered in one of the selected EEP implementation countries.

Startups with a minimum viable product with good growth prospects, which are ready to scale their business.

African startups that work towards the social good and contribute to the realization of at least one of the SDGs and the High 5 Priority Areas.

For FESOs (Finance Enterprise Support Organisation)

(Micro-)Finance institutions registered with the supervisory bank in the host country.

In operation for not less than five years, with a very solid track record of financial activity.

Financial institutions, with a solid experience working with SMEs and startups and the institutional capacity to disburse and monitor funds.

Organisations that can present reliable capacities and experience in conducting first level assessment (due diligence) and further financial assessment of a startup.

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AfDB BMZ

KfW

Africa Grow

latform Capacity Building

Risk Capital Fund

Support Financing

Boost Africa

YEI

DEG

PYAG

Innovation Lab

Afrolynk gUG

YIWG

GIZ

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COLLABORATIVE DEVELOPMENTThe EEP builds on the collaboration with partners and existing stakeholders

from the startup support ecosystem

MENTORSHIP

Many entrepreneurs face a series of knowledge gaps as they develop their businesses. Some of these gaps require expert know-how. Mentoring has become an essential factor not only in establishing business success, but also in shaping an entrepreneurial mindset and supporting investment readiness of startups and entrepreneurs.

Qualified mentors can assist start-ups with sector specific expertise and business knowledge to successfully scale their ventures. They can provide strategic advice and create access to valuable networks and partners. The mentoring scheme helps entrepreneurs to overcome setbacks in the early stages and assists to define and meet KPIs and set the long term trajectory to become a successful business and attract future investment.

Most mentorship programs face the difficulty of identifying an adequate system to facilitate and record the mentoring process. As a result it causes many important learnings to be lost along the way.

A DIGITAL SCHEME PROVIDING A NETWORK OF COACHING AND MENTORSHIP OPPORTUNITIES TO ENTREPRENEURS

MENTORSHIP

• BUILDING A MENTORSHIP PORTAL• HOW IT WORKS

BUILDING A MENTORSHIP PORTAL

In response the EEPlatform offers a unique online portal that provides an integrated set of support resources for mentors, experts, and entrepreneurs to successfully align their workflows.

HOW IT WORKS

The mentorship portal is designed to enable users to matchmake and schedule appointments with a suitable mentor, to easily interact and exchange knowledge and to track progress and provide feedback.

The mentorship portal is a secured system within the EEPlatform that is equipped to create an online community with various communication channels. Registered entrepreneurs are matched with their mentors through a needs based system. The platform features an integrated chat and video conferencing application for direct communication. In the private "diary" section the entrepreneurs can record their progress and remaining challenges, which can later be made available to their mentor for review and feedback.  

MENTORSHIP

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North South Mentorship

South South MentorshipThe S2S mentorship component brings together mentors and mentees from the global South to create a strong network for locally embedded coaching. The approach leverages on the mentors business experience and profound knowledge of the local economic system and culture, which helps the mentee to tackle context specific challenges and receive guiding advise.

“The best way to gain knowledge is by sharing”

The North South mentorship component builds upon the experience of professionals in the African diaspora and international experts to assist entrepreneurs on their journey to become successful businesses. Mentors residing in the global North are partnered with the entrepreneurs to share their learnings and provide valuable insights for a successful business venture through the EEPlatform.

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Peer to Peer Online LearningThe EEPlatform features an online community for both expert and peer to peer communication. It enables entrepreneurs to exchange insights and learnings with each other, which are key to business growth, thereby creating a vibrant virtual learning environment.

CONTINUATION After a successful participation in the EEP training program, advanced startups can qualify to become mentors to a new generation of entrepreneurs, thereby enabling the program to be sustainable on the long run.

COOPERATIONThe EEP aims to partner with other mentorship organisations to broaden the pool of mentors and guarantee the best possible support for the entrepreneurs.

TRAINING PROGRAMS

Over the recent years a variety of online training resources have been produced to educate young entrepreneurs in various fields for their business venture. Many are very good, but might lack a clear pathway to equip startups with the necessary skills to access investment. Through a thorough research various training programs have been assessed to identify relevant gaps and synergies. On this basis, the program was set out to develop a curriculum that would complement the financial component of the EEP and equip the entrepreneurs with the necessary skills and knowledge to be fit for investment.

The EEP ONLINE LEARNING PORTAL

The EEP learning portal is designed as a go-to place for startups to gain access to verified training materials. The platform hosts a number of in-house courses, but also enables the integration of existing training resources and programs. Rather than to duplicate, the platform aims at an integration and harmonization of available resources and initiatives.

BRINGING VALUE ADDITION TO EXISTING ECOSYSTEM - THE PROGRAM WILL SOURCE

HIGHLIGHTS• TRAINING PROGRAMS• ONLINE LEARNING PORTAL • EEP TRAINING PROGRAMS

• ENTREPRENEURS• ENTERPRISE SUPPORT ORGANIZATIONS

On the basis of the identified gaps, complimentary training content was developed to equip both startups and startup support organisations with the necessary knowledge to bridge the financing gap.

TRAINING OF ENTREPRENEURS

1. Entrepreneurial Mindset2. Customer Readiness3. Launching a business venture4. Viable Business Development 5. Investment Readiness

TRAINING OF ESOs & FESOs

With the aim of building a strong knowledge transfer culture, all ESOs & FESOs will initially undergo the startup trainings via a train-the-trainer approach. The following additional courses will prepare the support organisations to improve internal capacities:

1. Investment Readiness for ESOs2. Due Diligence and Assessment of

Startups

CONTENT CREATION + CUSTOMIZATION

To respond to the specific needs of African entrepreneurs and youth, and enable the development of new learning resources, the platform features an online studio, that enables the customization and localization of content in an easy and fast manner.

TRAINING PROGRAMS

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EEP TRAINING PROGRAMS

After rigorous indepth research on the needs of entrepreneurs and which programs (internally and externally) can support entrepreneurs to be investor ready. The training programs were divided into two(2) and with the support of ESOs assisting in the facilitation of trainings and events, support with scouting of Start-ups, and assist in the monitoring and evaluation of capacity Development.

Existing Programs and Inititatives

Accelerators

Incubators

Mentoring &

Coaching

Training & Skills Development

Entrepreneurship

Support

Programs

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The entrepreneurial mindset is a key element in the entrepreneurial journey. The kind of mindset that the entrepreneur possesses will greatly impact the outcome of his or her entrepreneurial endeavour. In this course the African entrepreneur is oriented to appreciate the resources that are at their disposal and how best to maximise the use of these resources. Building the right mindset in the resource sacre environment will encourage the entrepreneurs to go

The Viable Business Development course looks at the process that the entrepreneur consider in building the idea into a business. There are several steps to consider when creating a new venture - when these steps are diligently assessed, the entrepreneurs will be able to create a viable business. The business model scorecard is introduced to entrepreneurs and they are taught how to use it at the various stages of the business development.

Customer readiness focuses on the relation between startup and customer. The ability of the entrepreneur to identify their customers and their customers needs are salient to the growth of the business. In choosing a product offering, the market segment will have to be properly defined to achieve the expected goal. Entrepreneurs will be supported to identify their market segment and the best approaches to use when addressing the needs of the segment.

With the right entrepreneurial mindset, entrepreneurs will be able to come up with good business ideas or innovation for existing businesses. The consideration of the right market segment and how to serve it will be at the core of what they will do. With these strong business skills they will be able to build viable businesses that will be eligible to access multiple funding instruments at all levels.

the extra mile in the midst of all the challenges that they encounter. The course will be for both startups and existing businesses as they prepare themselves to access the funds available to them.

EEP Core Training Programs

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In the Launching a business venture course entrepreneurs are introduced to valuable tools used in launching a viable business. The dynamics of the market are real and the ability of entrepreneurs to properly work around them to achieve the anticipated objective is key. The taste of customers change with time, so entrepreneurs will have to learn how to respond to these contingencies when launching a new business venture or launching a product for an already existing business.

The Due diligence for Startups course orients the Finance Enterprise Support Organisations (FESOs) on how to assist, and assess entrepreneurs and startups in Africa. The training is a prep training to understand the needs of the startups and understand the viability of their businesses for possible support financing or funding. Upon completion of the training, they are tasked to conduct due diligence and assessment for the entrepreneurs and startup applicants.

The Investment Readiness course is designed for entrepreneurs to equip them with the necessary knowledge and tools to successfully enter the investment dialogue. The entrepreneurs are introduced to methods and procedures that many investors use to verify businesses when making investments. With the requisite knowledge, entrepreneurs are able to engage with investors confidently.

When the entrepreneurs and the ESOs are adequately equipped with the necessary skills and tools, they become well positioned to churn out viable businesses that are investor ready and more importantly able to create more jobs of the youth.

Job creation is at the heart of the EEP and achieving this goal paramount to all stakeholders within the EEP vision framework.

Through a training of trainers (ToT) approach, this course is also given an onboarding training for all ESOs and FESOs (Hubs/Incubators & Finance Support Organisation) to better equip them in facilitating the learning process for the entrepreneurs and startups in coherent and convincing way.

EEP Core Training Programs

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FinancingTWO

FINANCING INSTRUMENTS, FUNDRAISING TOOLS AND METHODS,

FUND MANAGEMENT AND REPORTING,

Ticket size < 50K

Ticket size 50K - 500K

Ticket size < 500K

Disbursements > 500K managed by certified FESOs under the

Support Financing

Disbursements < 500K managed by Risk Capital Fund

Risk Capital Funding Support Financing

In the early beginnings of a business from pre-seed to seed stage, start-ups usually rely on private savings, the contribution of family and friends and angel investors, which are normally hard to find. Once these resources are depleted, start-ups face the difficulty of identifying follow-up financing, as traditional venture capital firms are usually reluctant to invest in early businesses with small ticket sizes, due to high administrative cost and an absence of a clear exit strategy.

This lack of solid financing infrastructures in the post-seed stage is particularly relevant on the African continent where social security and financial support systems are generally weaker and more difficult to access. But the shortage of financing in the market is not limited to early businesses, but spans from pre-seed to early-venture capital stage.

Whereas the valley of death phenomenon presents a universal challenge for entrepreneurs, the capital that is required to successfully grow a startup businesses in a majority of African countries, is disproportionately lower than what is required in other parts of the world. The social impact return on investment is therefore particularly high in an African context.

With recent growing enthusiasm about the African start-up sector and a multitude of support programmes, a coordinated approach to address the funding gap and provide a long term support finance vehicle for start-ups and entrepreneurs becomes increasingly important.

The valley of death

African start-ups and innovative young SMEs are often facing the classic ‘valley of death’. The term describes the period in a business, in which the entrepreneur’s own funding resources have been depleted and the company is not yet financially viable to attract later stage investment or generate sufficient revenue to sustain and grow.

Bridging the financing gap

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The EEPLATFORM - Single Access Approach

Finance Capacity Development

Risk

Capital Fund

< 50 K

< 250 K

< 500 K

Financial Management

Due Diligence Fund ManagementFund Monitoring & Evaluation

Training & Knowledge Management

Scouting of Start-upsFacilitation of Trainings and Events Monitoring and Evaluation of Capacity Development

FESOsMicrofinance Institutions

ESOs: Hubs & IncubatorsMentors

Training Courses

Entrepreneurial MindsetCustomer ReadinessLaunching a business ventureInvestment Readiness

Fund Management Tool

Mentorship Portal

Online Learning Portal

ERP System

Mentoring

Match Making Time Scheduling Communication Progress Reporting & Tracking Feedback &Evaluation

Info

rmat

ion

Evalu

ation

Coaching Business DevelopmentFinancing Legal TechnologyMarketing ControllingHR

Entrepreneurs

Nor

th-S

outh

Sou

th-S

outh

Support financing

OnlineCommunity

Building a Solid Investments Pipeline

BUILDING ON A MOMENTUM

While access to affordable financing remains a key challenge for African entrepreneurs, there has been a remarkable increase of investments over the last years. The tech sector has been at the forefront of this new interest of investors in the African market. In 2019 VC funding raised by African tech start-ups reached a peak of US$ 2.02 Billion as compared to a total of US$ 1.163 Billion in 2018 (Partech, 2020).

While these developments show positive developments and a great enthusiasm about opportunities on the African market, efforts remain scattered and do not correspond to the high overall demand for financing on a broader scale.

With the African market still being perceived as a risky territory, much of the investor attention has focussed on larger companies in just a few countries – with a strong focus on Nigeria and Kenya.

CREATING A WINDOW OF OPPORTUNITY

To overcome the challenges for successful investment the EEPlatform is designed to build a solid support structure that caters the needs of entrepreneurs for support funding, while also helping to put a system in place that assists investors to build the necessary trust and confidence to invest in African startups.

By creating a coherent approach of access to finance with a clear alignment of KPIs and reporting structures, the EEP contributes towards a sustainable investment pipeline from a seed to growth capital stage.

Data: Weetracker

African Venture Capital Investments in 2019 by Country

The EEP sets out to bridge the funding gap and build the fundament for a sustainable and reliable investment channel for risk capital funding.

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SUPPORT FINANCING STRUCTURE

Many funds have an allocation for technical assistance (TA). The goal of the SFI is to leverage on the technical assistance allocation, which is mostly between 10- 25%.

The SFI offers pre-seed and seed financing. It is set to be build on a clear exit strategy. The strategy is to ensure a reliable deal flow and that the disbursement of support finance are aligned to the KPIs, and the investment criteria of risk capital fund(s).

SUPPORT FINANCING INSTRUMENT (SFI)

The financing mechanism proposed as part of the EEP in response to the funding demands of African Startups, is hereafter referred to as the Support Financing Instrument (SFI).

The SFI presents a financing mechanism in the form of grants and profit sharing loans. The provision of initial funding opportunities as part of the EEP enables growth and the delay in company valuation, to allow sufficient time for the establishment of the worth of company, which protects entrepreneurs from under selling their shares.

THE KEY SUCCESS INDICATOR FOR THE EEP IS TO BRIDGE THE FINANCING GAP AND ENABLE YOUNG ENTREPRENEURS TO DEVELOP THEIR BUSINESSES AND CREATE SUSTAINABLE EMPLOYMENT.

HIGHLIGHTS

• SUPPORT FINANCING INSTRUMENT (SFI)• SUPPORT FINANCING STRUCTURE• GRANT + PROFIT SHARING LOAN• FUND MANAGEMENT TOOL• HOW IT WORKS• SFI + FUND MANAGEMENT TOOL

Support Financing

GRANTS + PROFIT SHARING LOANS

The profit sharing loan is disbursed in 4 levels with maximum 2-3 yrs loan term.

FINANCE ENTERPRISE SUPPORT ORGANIZATIONS (FESOs)

All FESOs who successfully complete the ESOs training , will be mandated to conduct first level assessment (due diligence) and grant financial support to approved startups and entrepreneurs who meet all the support financing criteria.

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Level 1 : Up to 50,000 Level 2 : Up to EUR 100,000 Type of financing: Grants with clear KPIs

Requirement for Entrepreneur/ Startup: In alignment the SDGs and meets the investment criteria

Level 3 : From 100,000 to EUR 250,000Type of financing: Loans with clear requirements

Requirement for Entrepreneur/ Startup: The total share of working capital is limited to 30,000.

Requirement for FESO: 20% of the credit risk, whereas the SFI bears 80%. This mechanism is to makes it easier for the FESO to decide on the loan - provided, the business idea holds the prospect of sustainable economic success.

Level 4 : From 250,000 to 500,000Type of financing: Loans with clear requirementsRequirement for Entrepreneur/ Startup: Including the above, the borrower must have a minimum amount of equity. Up to 40%, The subordinated loan strengthens the equity base and paves the way for debt capital, which is also needed for the financing of start-up or equity base investments.

Requirement for FESO: 20% of the credit risk, whereas the SFI bears 80%. This mechanism is to makes it easier for the FESO to decide on the loan - provided, the business idea holds the prospect of sustainable economic success.

FUND MANAGEMENT TOOL

Transparency of the transactional data, security and accountability are imperative for the reliable disbursement of funds. The integration of appropriate technologies, such blockchain technology, mobile technology, cloud computing and artificial intelligence (AI) play a vital role to enhance efficient disbursement of funds.

The Fund management tool enables easy and faster analytic reporting of transactions. It is accessible and able to reach the end beneficiaries in time (mobile technologies). It prevents tampering of data (block chain) and has a holistic integrated system based on the cloud (cloud solutions) that is accessible by all key stakeholders irrespective of their location. It enables all stakeholders to access relevant untampered records and become validators.All key stakeholders will be able to trace the disbursement of funds and further give them the leverage to make target/ sector investment within the fund.

This creates an accurate, unchangeable record for verification, lowers fiduciary risks and impact analysis of all transactions. It further eliminates high transaction costs of fund harmonization and reporting. This management portal is based on the KfW developed TruBudget (Trusted Budget Expenditure) open source software.

HOW IT WORKS

The Fund management tool allows the donor to record/ enter the total allocated fund for disbursement. Assigned FESOs and other financial intermediaries are able to sub allocate the funds, monitor the funds and also see real time matrix of the fund disbursement. The tools makes it possible to trace all work and approval steps and all participants can view all processes and changes in real time.

Additionals functions includes, drafting contracts, tendering and disbursement processes.

SFI + FUND MANAGEMENT TOOL

It is obvious that the is a strong need to have the support financing instrument and right the fund management tool. This is because it is usually tedious and not investment-attractive to disburse small amounts and monitor efficiently the distribution and impact.

Thus the implementation of the the SFI and utilization of the fund management tool:

✔ Simplifies and secures the complex manual processes that are applied to ensure that funds are used correctly.

✔ The SFI approach eases the direct burden on the entrepreneur’s cash flow, by delaying the time for repayments during the period of the business’ development.

✔ The SFI approach creates an opportunity for fair valuation of the company’s equity before the shares are distributed, which enables entrepreneurs to get better value for their equity

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FUNDING INSTRUMENT

Tailoring a specific funding instrument to address specific cause is vital to achieving the goal and vision of the EEP. Following extensive research it is strongly recommended to setup a blended finance instrument referred to as the Risk capital fund that focuses on post seed, series A and growth stage financing.

WHAT IS RISK CAPITAL FUND

The Risk capital fund is an innovative funding instrument that builds on a blended finance approach, i.e. funds are raised from the public, development financial institutions / banks, investment banks, corporate institutions, and a wide pool of investors ranging from institutional, private, and philanthropic investors.

"Lets expose capital to risk!! Soft landing investment capital that propels business to focus on growth and scaling"… President Dr. Adesina - African Development BAnk

HIGHLIGHTS• FUNDING INSTRUMENT• WHAT IS RISK CAPITAL FUND• FUND STRUCTURE• POC COUNTRIES• KEY STAKEHOLDER STRUCTURE

Risk Capital Fund

FUND STRUCTURE

The risk capital fund's core is built with different share tranches that reflect different risk-return profiles:

• Public donors investing in C shares/ Junior shares,  i.e. first loss piece.

• Development finance institutions and international financial institutions investing in B/ Mezzanine shares or A/ Senior shares; and

• Private investors investing in fixed-income notes (after proof of concept).

The junior tranche of donor-funded “C” shares serves as a risk cushion for senior shares and notes. Such tiered risk-sharing allows private investors in notes to receive profits first while being the last to take any loss. A system that also maximizes the leveraging of public funds.

25

POC Countries & KEY STAKEHOLDER STRUCTURE

Countries such as Côte d’Ivoire Ghana, Nigeria, Egypt, Ethiopia, Kenya, Rwanda have been identified as the first set of countries for proof of concept. Based on the key stakeholders engagement on the African continent.

Follow up Investme

nts

Non Finance Finance

Learning Management

System

Pro

gram

sTe

chn

olo

gies

&

Too

ls

Trainings & Workshops

Online Community

Mentorship & Network

Funding

Support Financing

Risk Capital Fund

<50k

<250

>500k500k

750k

1m

2m

1st Loss Donor

DFIs Private Equity

Fund Monitoring

IC

LPs

Fund Management/Structures

80%20%

General Partners

Venture Partners

INVESTMENT FOCUS

The Risk Capital Fund is set to invest between US$500,000 and US$5 million per company, which allow us to lead early stage rounds, contribute significantly to growth rounds or join to late stage rounds / follow-up investments. The preferred scenario is to invest an average ticket size of around US$1-2 million into a cash generating company (even if not profitable).

INVESTMENT CRITERIA / TARGETS

★ Businesses that creates systemic social good/change through scaling and replication.

★ Businesses that are return oriented and meets a need that is either over-served (because the existing solution is more complex than many people require) or not served at all.

★ Businesses that offer products and services that are simpler and less costly than existing alternatives and may be perceived as having a lower level of performance, but users consider them to be good enough.

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TechnologyTHREE

APPROPRIATE TECH

EEPLATFORM

The goal of the use of appropriate technology such the blockchain technology, mobile technology, cloud computing, artificial intelligence (AI) for the entire EEPlatform is to enhance efficient delivery of services and value.

Mentorship - Online community Portal

An online community portal integrated with multiform voice and video conferencing and instant messaging. This open portal was develop with Nginx, React, HTML5, MySQL, jQuery UI, PostreSQL.

Online Learning PortalUtilizing a free and open-source content management system (CMS) for a learning management written and run on a PHP framework, Jave (Backbone.js, Marionette.js, Underscore.js, jQuery, jQuery Migrate, jQuery UI. The system also works with with various plugins incorporated and pre-built themes and consolidated on a MySQL database.

APPROPRIATE OPEN TECHNOLOGIES DRIVEN BY ONGROUND LOCAL ENTREPRENEURIAL DATA, ARTIFICIAL INTELLIGENCE (AI), TRANSPARENT AND TRACEABLE DATA THAT BRING AN ESSENTIAL VALUE ADD SERVICE TO EXISTING PROGRAMS AND SOLUTIONS

HIGHLIGHTS• EEPLATFORM TECH GOAL• MENTORSHIP PORTAL• ONLINE LEARNING PORTAL• FUND MANAGEMENT TOOL (ERP)• REPORTING AND METRICS

FUND MANAGEMENT TOOL INTEGRATED

WITH ERP

The fund management tool leverages on blockchain works as data layer which establishes trust between the different partners as data is hosted in a decentralised manner and secured against subsequent alteration. The platform is pre-build and transpiled to an ES5 Version of Javascript al formats. The platform is integrated with an open ERP system

LATFROM - TECH

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Risk Capital Fund

Fund Management Tool

Mentorship Portal

Online Learning Portal

ERP System

OnlineCommunity

MONITORING AND EVALUATION

Success and impact indicators are crucial in any project or program. Through the EEPlatform, stakeholders are able to perform a combined qualitative and quantitative evaluation that is real time and assist in identifying the most realistic mitigation options, along with their potential for implementation and projected co-benefits. The ultimate goal of this evaluation is to apply a transparent process to the evaluation. It also provides feedback that may improve knowledge around projects and program implementations and reduce uncertainties. This transparency will enhance the quality of the evaluation and contribute to stakeholders’ ownership and buy-in of the prioritized actions.

Proof of Concept (POC)

POC Country Identification

Stakeholders/ Country of Operation

BMZ/GIZ CwA

MakeIT Boost Africa

YEI Africa Network (wirtschaftsnetzwerk-afrika.de )

Innovation Lab

Benin X x  

Burkina Faso X X  

Côte d’Ivoire X X   x

Egypt X X   x

Ethiopia X X x

Ghana X x X x x x

Guinea x          

Kenya x x x X

Morocco X X x

Mali X x  

Nigeria x X x   X

Namibia X  

Rwanda X x X  

Senegal X X  

South Africa X   x

Togo X X X  

Tunisia x X  

Zimbabwe X x  

Road map Five Phases : Develop - Access and Operationalize

4 - 6 months

1Concept &

Research

2

Planning &

Design

3Set-up &

POC

4Validation &

Improvement

5

Scale

5-12 months ~Up to 6- 18 months 12 months ongoing• Detailed design and

planning of the EEP

• Identification of basic

infrastructure and tools

• Identification of POC

countries

• Preparation and

program setup

• Secure implementation

partners

• Testing, feedback, and

validation

• Concept note

• Commitment from

AfDB

• Research and

recommendations

for program design

• Funding proposal

•• Selection of POC

countries ( 1 -5)

• Secure funding and

Launching of POC

• Testing of all

platforms, tools,

templates and

protocols needed to

launch pilot

• Provide necessary

training for

implementation

team

• Validation and

adaptation

• Monitor,

evaluate and

learn

• Refine program

• Secure funding

for scaling

• Launch in addition

sectors and

countries

• Implement

• Ongoing monitoring,

evaluation and

learning

• Refine

• Repeat

Implementation DesignDevelopment of implementation protocol, partnership agreements, fund development.

Q4 2019

Identification of POC and preparationCountry selection, in country preparation, with local hubs, networks, and entrepreneurs.

Q1-2 2020

POC review, scaleA review of lessons learned, review of implementation and planning for project scale.

Q1 2021

POC implementationLaunch, recruitment of first cohort, continuous evaluation and iteration

Q3-4 2020

TIMELINE

TEAM MEMBERS AND SUPPORTERS

Moses Acquah Kwabena O. Yeboah Sophia zu Lynar

Mali M Baum Ingo SchneiderOsei

Sakyi-Mensah

Bruno Meireles de Sousa

Peter Grouev

Douglas Quaye

Markus Grundmann

Alhaji Allie Bangura

Mélanie Keita

Ben Kouakou

Kumbirai Chipadza

Tendai Pasipanodya

Yaa Owusu Ansah

Frederick Fiifi Owusu

Melanie Ritter Wadzanai Motsi-Khatai

Tafadzwa Chiganga