Founders in Focus:

Stephen Dawson explains the thinking behind Jacana

As some of you will already know, Jacana started with a conversation between Lord Joel Joffe and me about poverty reduction in sub-Saharan Africa, back in 2008. He was frustrated by the impact that he was having in the charity sector, and was wondering whether working with for-profit organizations would be more sustainable, having been encouraged by some investments he had made in small start-up venture capital funds in Africa.

The role of SMEs as engines of economic growth is already well established; they are really the most efficient way of delivering long-term employment, skills training, an increased tax base and several other very tangible economic benefits. Here at Jacana we are also of the belief that basically any small business that is run ethically will have a positive effect economically, whether it is a microfinance institution or a construction company. Where venture capital fits in is in providing a channel for funding and for building the capacity of such businesses, which are the building blocks of a healthy economy. So why has the venture capital market not been functioning properly in Sub-Saharan Africa until now and what can we, as relatively new players in the market, do about it?

From my own perspective the root causes of the lack of investment in African SMEs, or 'missing middle' as it is now known, look pretty similar to 30-odd years ago when I started in venture capital in the UK; no shortage of opportunity or talent, but a lack of funding, of management experience, of role models, and there aren't too many places where people can learn like business schools or big companies. SMEs need flexible risk capital to fuel growth and create new jobs.

In developing the Jacana model, we felt that rather than investing in individual businesses directly, if we could help a private equity manager to get established and build a successful track record, he or she would invest in five businesses a year, or perhaps 20 businesses over the life of a particular fund, which would have a greater impact on numbers of companies, and therefore on employment and prosperity. In private equity terminology, this is a highly leveraged model.

The Jacana approach is to combine the local knowledge, talent and deal flow of our partners with the international private equity experience and fund raising ability of the Jacana network. Venture capital is like technology; it's a worldwide phenomenon and , although you have to adapt it to a particular market, there are some very broad principles and some quite detailed ways of looking at things that are universal. Jacana is about tapping into the deep well of experience, expertise and goodwill that exists within the industry and harnessing it to put this technology to work. We are tremendously excited about what we can achieve with this model and we are hugely encouraged by what we are seeing from both InReturn and Fidelity. Overall we believe the future for Jacana is very exciting.

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