“The business model we invest in is pretty simple. Pick a crop, find a few hundred farmers who grow it, buy from them, do something with the crop, and sell to retailers. That’s the model.” – Luni Libes
It sounds almost obvious, yet the portfolio’s performance is astonishing: Africa Eats portfolio companies have grown revenues by a staggering 55% CAGR in 11 years.
No blue-ocean strategy here. No crazy differentiator. As Luni puts it: “I’ve probably seen 10,000 business plans like that.” So what makes this basic business model work and net returns?
Two elements stand out:
- Capital – incremental, timely, flexible.
- Learning community – a network that shares knowledge and support.
Capital: what you need, when you need it 💸
If you’re a company in the Africa Eats or Kuzana portfolio, your relationship with them didn’t begin with a big check. It began with training, business support, and community: a batch-style accelerator program.
This is where founders and investors get to know each other and see who they click with. “It’s early enough to fix the fundamentals and get the accounting right,” says Kyle. If money comes in at that stage, it’s modest – as little as $20,000 for a small single-digit equity stake.
One reason is that the businesses they invest in don’t need to chase explosive, market-grabbing growth like a startup. They need to grow steadily and profitably, maintaining margins at each growth step and de-risking the fragmented supply chain piece by piece: buying from 100 new farmers, renting a larger warehouse, adding a few trucks etc…Each milestone proves the founders can scale operations and solve challenges as they arise.
Time itself de-risks the investment – as the business shows it can scale sustainably, trust grows and new capital is deployed. Beyond incrementalism, two other elements matter:
- Timeliness. Funds can land in a matter of a week. Traditional DDs can take up to two years. But if a supermarket pays you in 45 days, and you need cash now, what do you do? “When” you need the funds matter as much as “how much”. This is why the second aspect is
- Flexibility. They don’t always write an equity check. Sometimes it’s invoice factoring, sometimes a working-capital loan. Needs vary, and capital can be tailored and repeated as required.
This approach breaks with the classic “funding round” model of raising a large lump sum to cover a 3- to 5-year plan. It’s replaced by a philosophy of “only what you need, when you need it – debt or equity alike.”
Read the whole article at https://databitesafrica.substack.com/p/the-golden-age-of-boring-businesses
“This progressive way of deploying capital over several years lets us de-risk before we write the really big checks” – Luni Libes.
A concrete example is GoldenPot, a Tanzanian breakfast cereal seller.
Africa Eats first met the company in 2020, when annual revenue was just $24,000. “I don’t know anyone who would invest in a company that small,” Luni admits.
Over five years they made nine separate investments totaling $400,000: they were all small add-ons + a “big” check of $100,000 to build a processing facility.
Today the company’s revenues are $2.2M.
Learning community: “we don’t screw over” 🤝🏽
“What country has a better sense of community, Kenya or the U.S.?” Kyle Schutter throws me a provocation.
“Of course, Kenya,” I answer.
But isn’t it also the place where people tell you not to trust anyone?
“It’s low trust in the general sense, but high trust in the specific case” – Kyle Schutter
What seems to work very well in interpersonal relationships is artificially recreating a tight-knit community, a space where people simply won’t dare to screw each other over.
While I was in Nairobi, I got to witness a Kuzana workshop live. It was a small class of 10-15 entrepreneurs. What struck me was how openly everyone shared their challenges. Participation was high, respect was evident, and you could feel a real sense of belonging.
“If you’re an agro-SME in Africa, there are only 100 or 200 things that can go wrong. If you’re in Africa Eats, when you hit one of these challenges, you can ask other founders how they solved it – because very likely someone in the network has already faced it. They either come to us at HQ or post it in our WhatsApp group, and they get an answer… maybe five answers, maybe ten.” – Luni Libes
Read the whole article at databitesafrica.substack.com/p/the-golden-age-of-boring-businesses
