U.S. VC invests in Rwanda

Private equity attorney Rob Fogler and Rwandan-born entrepreneur Antoine Bigirimana have made their first investment in Rwanda.

The two Denver-based financiers raised $500,000 for Thousand Hills Venture Fund in 2005. Last week, they announced their first investment in a company called Rocket 2020, which provides rural business owners access to FedEx-like services in the African nation. The startup will use the $300,000 investment from Thousand Hills to build stores that will act as retailers for other merchants, hubs for computer and communications services and as a distribution channel for small businesses.

Rocket 2020 CEO Moses Turyazooka worked for the Rwanda Investment and Export Promotion Agency before taking his new role. Turyazooka has had experience as an entrepreneur before, launching a chain of three restaurants in Kigali, Rwanda’s capital. Turyazooka plans to open the first Rocket 2020 stores this summer and expand to as many as 20 stores over the next two years.

But reactions to the fund are mixed. “There are some people that say, ‘That’s the craziest thing I’ve ever heard,” Fogler says. “Others say, ‘Wow! I get it!’ immediately.”

The startup’s name stems from Rwanda President Paul Kagame, who has outlined plans to modernize Rwanda in a project called “Vision 2020.” Rwanda has undergone government reform and privatization over the last decade and is growing its gross domestic product at an estimated 5.5% according to the CIA World Factbook. Some 60% of the population is still below the poverty line however.

Fogler, managing director of the firm, looks at his investment vehicle as an opportunity to help Rwandans develop their economy. He says his fund “encourages innovation and growth in developing countries without dependency on charity and aid.” Fogler is quick to point out that he expects venture-style returns first and developmental gains second. But he sees the successful small companies and economic development as intertwined and inseparable. “Entrepreneurs have the right incentives to make it sustainable and valuable to their customers,” he says. “People assume that foreign aid and charity are the only ways to engage. In fact, they’re not even the best way. They may even be the worst way.”

The firm raised its fund last year from 25 individual investors and Fogler expects to increase the fund size as needed based on the availability of deals. No institutional limited partners participated in the fund. Fogler says that pension funds, university endowments and other large investment vehicles often have a tough time making small investments in funds such as his. “It takes a lot of knocking on doors and phone calls, but there is pent up demand for investing in developing economies like this,” Fogler says.

Rwanda has changed a lot in the last decade, Fogler says. He points to expansion of communications infrastructure, reductions in government bureaucracy and tax incentives for foreign investors. Fogler says that he can call up one of the executives in Rocket 2020 and review spreadsheets together over the phone—something no one would have been able to do in Rwanda as few as five years ago.

The biggest problem in raising and running the fund has been getting people to disassociate the actual risk from the perceived risk, Fogler says. “All the cameras follow George Clooney and Angelina Jolie into war-torn countries—they don’t go to where people are making money in business.” —Alexander Haislip