CDC Group, the UK development finance institution, has developed a hearty appetite for emerging markets venture capital.
The organisation is gearing up to do more in this area, having appointed Nikunj Jinsi, former global head of VC at the International Finance Corporation, and Anne Glover, chief executive of Amadeus Capital Partners, to a newly formed VC investment committee earlier this month, according to a statement.
CDC will focus on VC funds and co-investments across key technology hubs in South Asia and Africa. It has committed about $140 million across 11 funds, including those managed by India’s Chiratae Ventures and Africa’s Novastar, and $10.5 million across four co-investments to date.
Private Equity International caught up with Tony Morgan, head of private equity and corporate debt at CDC, to discuss these plans in greater detail.
Why has CDC expanded its VC operations?
Early stage companies require relatively small amounts of capital but have an inherently higher risk profile than growth and late stage investments. Evaluating investments in this sector required a distinct set of skills and experiences so we felt it was prudent to create a dedicated team and investment committee made up of members with relevant backgrounds to oversee our VC investment programme.
Has the pandemic played any part in this decision?
What the pandemic has done is to really underline the vital importance of supporting technological innovation in building economies that are more resilient and more adaptable to sudden shocks as well as the growing consequences of climate change.
A number of investees from CDC-backed VC funds have shown resilience during the pandemic and in some cases accelerated due to wide-scale digital adoption. Also, we believe entrepreneurial ecosystems in our markets are now at a stage of development that requires a more focused and strategic lens.
Have you set deployment targets for VC?
VC will become an increasingly important area for us moving forward; we are looking to grow our commitment to VC funds and to make further co-investments. Over time, CDC could also look to make early-stage direct VC investments alongside partners. We don’t have a deployment target at this point in time but have a healthy pipeline across key technology hubs in our markets both from a funds and co-investment perspective.
Will you have defined allocations to South Asia and Africa individually?
We are flexible and we have the resources to capture opportunities as they emerge. India is a relatively more developed market, so we are more much more focused in terms of fund relationships with the primary goal of driving co-investments.
[Outside of India], across [South] Asia and Africa, our approach is more around supporting the broader VC ecosystem and that could potentially mean more relationships in terms of number of GPs.