For impact investors like Goodwell Investments, the pursuit of social good is intrinsically linked to the eventual return of capital. After over two decades navigating the complexities of emerging markets, particularly in Africa, the Dutch firm has learned that the “happily ever after” in impact investing often looks different than in more mature economies. While traditional exits like acquisitions by strategic buyers or even initial public offerings (IPOs) remain aspirations, Goodwell ‘s experience, marked by 11 successful exits, reveals a clear trend: new funding rounds are currently the most common exit strategy for impact investors in Africa.
This revelation, shared by Goodwell as they prepare for a potential wave of exits from their uMunthu fund anticipated in 2025, highlights the unique dynamics of the African investment landscape. It also offers valuable lessons for investors seeking to make a difference while ensuring sustainable financial returns.
Impact investing, at its heart, is a dual mission: generating positive social or environmental impact alongside financial returns. Goodwell, with its roots tracing back to India and a significant footprint in Africa, has consistently aimed to achieve this balance. Their journey, marked by exits across both continents, provides a rich tapestry of experiences. While their Indian portfolio has seen a full fund exit and two more in progress, it is West Africa that has yielded the most exits to date.
Delving into the specifics of the African market, Goodwell identifies three primary exit routes: self-liquidation (a portfolio company buying out investors), acquisition by strategic buyers seeking operational synergies, and, crucially, new funding rounds. It is this latter category that currently reigns supreme.
“The need for capital drives further funding rounds, encouraging new investors to buy out existing ones,” explains Goodwell in their recent reflection. This prevalence of follow-on funding as an exit mechanism speaks volumes about the growth trajectory and capital needs of many impactful businesses in Africa. Often, these companies, while demonstrating strong potential and positive impact, may not yet be mature enough for a full acquisition or public listing. Instead, the arrival of new investors, attracted by their progress, provides an opportunity for early backers like Goodwell to realize their returns.
Els Boerhof, Managing Partner at Goodwell, emphasizes the collaborative nature of successful exits. “Successful exits aren’t something you embark on alone,” she states. “You need a combination of your own team, who knows the portfolio company inside out, as well as the guidance of a professional advisor — deal makers who can ensure that nothing is overlooked.” This highlights the importance of strategic partnerships and expert navigation in a sometimes-nascent exit environment.
Goodwell’s experiences have distilled into several key lessons, applicable not just to their own operations but to the broader impact investing community:
1. Exits Start Before You Invest: This seemingly paradoxical statement underscores the importance of forward-thinking. From the outset of their relationship with a portfolio company, Goodwell begins to envision its trajectory over the next five to eight years. This includes defining, monitoring, and reporting on impact indicators. A business that can convincingly demonstrate its positive impact becomes inherently more valuable, attracting potential future investors who increasingly recognize the value — and willingness to pay — for impact.
2. The Indispensable Role of Good Governance: Strong, clearly defined governance at the portfolio company level is paramount. It ensures the efficient management of a complex capital table and diverse investor interests, while safeguarding against excessive dilution of the founders’ equity. Furthermore, robust governance and leadership are crucial for maintaining mission alignment throughout the exit process, ensuring that both negotiations and the transition to new investors remain true to the company’s core values.
3. Funding Roadmaps for a Fragmented Landscape: This lesson is particularly pertinent to the African context. The prevalence of new funding rounds as an exit strategy necessitates a well-defined funding roadmap. Unlike the often-homogenous capital landscape of Silicon Valley, Africa presents a diverse and fragmented market. Recognizing and embracing this diversity, from consumer behavior to capital market function, is a strength. An effective funding roadmap respectfully navigates this landscape, providing a practical and essential tool for any African impact investment exit. Importantly, Goodwell notes that to attract investors in these follow-on rounds, companies in Africa typically need to be EBITA-positive and profitable, highlighting the focus on sustainable business models.
The completion of an exit, however, is not the end of the story. Goodwell’s experience reveals that the strength of the relationships built often dictates what happens next. In some cases, even after significantly reducing their stake, their expertise and input remain valued, with companies even inviting them to participate in IPO advisory committees. Occasionally, successful founders return with new ventures. This underscores Goodwell’s commitment to adding value beyond the initial investment and exit, fostering long-term relationships within the ecosystem.
Despite these successes, Goodwell acknowledges the current challenges in the exit market of Africa, which they describe as “slow — for now.” However, they see this as an opportune moment. Applying the adage “buy low, sell high,” they suggest that now is the time for smart secondary investments, anticipating a future market upswing driven by Africa’s growing population and burgeoning entrepreneurial spirit.
In a global economy facing uncertainty, Africa presents a compelling narrative of growth and innovation. For impact investors like Goodwell, the prevalence of new funding rounds as an exit strategy is not a sign of a less mature market, but rather an indication of the dynamic and evolving nature of investment in a continent brimming with potential. Their lessons learned offer a valuable guide for navigating this landscape, demonstrating that responsible exits are not just about financial returns, but about fostering sustainable growth and lasting impact for the long term.