Ignite Fund Liberia is a Pico-Cap investment fund making quasi-equity investments in small and growing businesses in post-conflict Liberia. Small Liberian businesses struggle to gain access to financing from traditional financial institutions because they lack collateral, operating history, and positive cash flow. In many emerging markets, impact investment funds are present to make investments in
companies that are too risky for commercial banks. However, in Liberia there is a mismatch between the investments entrepreneurs need and the investments most impact funds are willing to make. Many funds have descended into Liberia hoping to make investments in the $250,000 to $3 million range only to find a lack of suitable opportunities. At the same time, Liberian entrepreneurs are looking for $20,000 - $100,000 investments and are unable to find them. Ignite Fund Liberia solves this problem by making up to $50,000 investments (on average) in Pico-Cap companies. Pico-cap companies are companies with a market capitalization between $50,000 and $100,000. These companies are generally small, local businesses with the potential of first-year annual free cash flow between $10,000 and $20,000. Our investments are quasi-equity investments, meaning they are intended to be a hybrid of an equity and debt structure. Each investment will generally be structured with a low interest loan contract and coupled with a revenue share agreement. The revenue sharing mechanism will be based upon the portfolio company's annual revenue of the company's fiscal year. In addition to the financial investment, Ignite will invest technical assistance, particularly in coaching and mentoring of the portfolio companies, and finance and accounting through a centralized bookkeeping system. Ignite Fund Liberia is also piloting an innovative investment process. Many impact investing funds operating in Africa do more harm than good. Funds often keep entrepreneurs involved in lengthy due diligence processes, sometimes to stall as the fund raises its own capital. Liberian entrepreneurs so desperately need capital that they divert much-needed attention from operating their business to fundraising, resulting in poor business performance. Often no transaction takes place, leaving the business in worse shape because of their participation in the fund’s investment process. Ignite Fund’s structure and due diligence process allows for swift decisions through local investment committee and speedy deal ex*****on since the fund is domiciled locally without compromising extremely high risk management standards.
