Secha Capital — Re-Published Interview: 5 Minute GP with Dr. Dorothy Kelso

Secha Capital — Re-Published Interview: 5 Minute GP with Dr. Dorothy Kelso

Republished from:

Quick facts about Secha Capital:

Sector/thematic focus: Adolescent stage companies — agribusiness, manufacturing, business-enabling servicesInvestment stage: Growth (from “boring” VC to microcap PE)Geo focus: Southern AfricaYear established: 2016Location: Johannesburg (South Africa)AUM: $25mNumber of funds closed: 1 previous permanent capital vehicleCurrent fund size: $35m; first close of $16m reached in October 2023Current fund life: 10 yearsEquity size invested in companies: $350k — $2m; equity and convertible debt

Q: What is Secha Capital’s investment strategy?

A: We are deploying an Operator-Investor model to invest in misunderstood, analogue sectors making the tech-enabled, green economy transition in Southern Africa.

Q: How does your Operator-Investor model work in practice?

A: Our Operator-Investor model involves supplementing financial capital with human capital to create value. We second a Secha team member, the Operator-Investor, to join the portfolio company for a year as a CXO; most often, they assist in strategic planning, key hiring, tech-enablement and other operational projects to expedite growth and execution. This is a key USP for us — we purposefully designed our fund to be differentiated in this way to create financial and human capital arbitrage.

Q: How do you source these deals?

A: We are thesis-driven. We prefer to be outbound (versus inbound) and have a prepared mind, rather than being “pitched” by founders. We start with an industry deep dive to understand its taxonomy, evolution and dynamics, as well as precedents and comparables. We then speak with industry experts, operators and investors in other markets to develop a bottom-up view of growth opportunities, where to play, how to win, etc. This becomes our “what you have to believe” to invest in this sector; we sometimes call it our “request for company”. These theses are often evergreen and it could take ten plus companies and/or a couple years to find the right partner.

Q: How large is your pipeline?

A: Our cheque size, stage and sector focus, combined with our Operator-Investor model, means that we have a large pipeline of investable companies and a naturally occurring resource, human capital, to hire into said companies.

Our LPs and larger funds see us as a “discovery fund”. We can write cheque sizes and invest in companies at stages they cannot. If we can help grow these companies and ensure governance and data maturity, then they become a scarce asset for the larger funds and strategics.

Q: How do you see your business scaling?

A: We are not designed, nor do we aim, to scale. Secha Capital is replicable and modular. We founded Secha with first principles under the heuristic of biomimetic disruption. Unfortunately, our asset class has under-performed in both returns and impact; we contend it is due to design and implementation flaws. Hence, we needed to re-design the flows of financial and human capital in order to grow small businesses for financial and impact returns.

This also informs our portfolio construction and risk-adjusted returns: The narrative of our asset class is focused on “leapfrogs” and moonshots, when there is so much opportunity in the adjacent possible. We’d rather have a portfolio of 3–5x returns than one unicorn that returns the fund and where the other companies risked survival for growth at all costs.

Q: What advice would you like to share with our readers?

A: We are reluctant to offer unsolicited advice as we have a lot more to learn and to accomplish, so we asked a recent Secha Operator-Investor to offer advice based on her experience with us and the portfolio:

“Opportunities for impact are everywhere in our society, often hidden in plain sight. We are lucky to be in a moment where impact and profit-seeking are not mutually exclusive. Emerging markets, climate, gender-smart investing — our generation will be remembered by what we achieve here. It’s a burden, a privilege, and it’s an awe-inspiring journey, so stay passionate, positive and demand more and faster progress.”

Brendan Mullen Dr Nombuso Nkambule Rushil Vallabh Secha Capital