Early Stage Capital Provider Network

about the escp network

The ESCP Network's approach is to share learnings, best practices, and work collectively to find innovative solutions to challenges faced by emerging capital providers. We currently have 100-plus members, primarily based in Africa, who focus on the capital needs of Small, Growing Businesses (SGBs). Our members focus on investments ranging from $20k to $500k.

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WHY IT MATTERS

ESCPs are investment vehicles that typically manage ≤$20M and invest with $50K–500K with an ‘equity mindset’ into early stage companies that have the ability to grow. Given these characteristics, ESCPs play a unique role in entrepreneurial and financing ecosystems – they take high risk to nurture companies to the point at which later stage investors can invest to scale. They fill an important gap in the capital value chain because the type of company in focus is often too large for microfinance and lacks the profile required for traditional venture capital. Because of ESCPs, early-stage businesses can access a source of value-added capital without a fully validated business model and a long track record.

However, ESCPs face challenging economic models when investing in SGBs. The cost to source, perform due diligence, and manage an investment is high relative to the ticket size and risk-adjusted returns. As a result, LPs and other investors tend to shy away from this segment of the market and ESCPs are undercapitalized in two ways: they lack experimental capital to test and refine the business and operating model required to serve SGBs, and they struggle to scale.

To address these issues, support is needed to help identify and validate the investment models that are most appropriate and financially scalable and to de-risk institutional investors who are not currently investing in ESCP vehicles.

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PROGRESS TO DATE

In January 2020, we brought together a group of 30 early stage capital providers in Nairobi, Kenya with the goals of fostering of peer-to-peer learnings and a network for collective action, as well as identifying priority initiatives for the Collaborative to take forward. Following the Nairobi convening, we launched five working groups for priority focus areas, a series of webinars on hot topics featuring subject matter experts, and a Slack platform for ongoing network collaboration.

In February 2021, we hosted a second annual convening virtually, bringing almost 50 members together in 4 consecutive sessions over 2 weeks, including a final session on ‘Demystifying frontier finance’ where we were joined by several investors/LPs for a dialogue on hot topics such as open ended vehicles, early stage equity, gender lens investing and angel investing / engaging local co-investors.

In June 2022, we held our Annual Convening in-person in Dar es Salaam, Tanzania. The event hosted 45 early stage capital providers from across SSA, MENA and South Asia managing a range of closed and open-ended investment vehicles. This group included members from CFF’s ESCP network, the LAUNCH Program cohort, the 2X Collaborative network and the Women in Africa Investments network and the I&P portfolio. At the event, we were also joined by 15 institutional capital holders and field builders, included the newly launched Nyala Venture, as well as participation from soon to be launched initiatives by 2X Collaborative and Mastercard/MEDA/I&P, representing an estimated $200 million in new fund of funds/warehousing facilities for 1st-time managers.

The network has now grown to over 100 members across 30 countries and five regions.