Roberta AnnanBy Roberta Annan|June 9, 2022|12 Minutes|In Billionaire Tomorrow

Billionaire Tomorrow

Why take a chance on a creative?

They can raise our spirits and feed our soul  but who would invest in a creative ? Entrepreneur Roberta Annan is going to find out this year  with an investment fund  expected to top 100 million Euros  that she has spent many months raising. Billionaire Tomorrow editor Chris Bishop interviewed Annan in Accra, Ghana, in February.  

Chris Bishop: I’m interested in the investment fund in particular because it’s quite odd because there’s not that many for creative people, but creative people, you could argue a shunned from the investment world, isn’t there?

Robert Annan: This is the first of its kind. So, basically, they’re kind of regional funds or smaller debt funds that are targeting creatives or even foundations like mine. I have had a foundation for the past decade called the African Fashion Foundation that supported creators through grants, capacity building, education, fellowship, mentorship, scholarships. So I’ve been doing that for a decade. But the impact fund for African Creatives is actually building upon the work that I’ve done in the Foundation for ten years and also identifying the challenges that we find in the sector. And obviously access to capital is one key issue because creatives don’t have the opportunity to get loans from banks or funding because of, first of all, the fragmented nature of the asset class and the fact that a lot of them, the founders themselves, don’t even have the business acumen to kind of match with the creativity. So there’s the creativity, but the business aspects of creativity are always lacking. So we’ve incubated creators through the foundation for ten years.”

Chris Bishop: Who’s putting up the money first?

Roberta Annan: We have an investor; we are starting small. We are looking to get to 100 million (Euros). That is our target, final close, but we haven’t reached final close yet. We are going to be doing our first closing towards the end of the year. But we started making investments on balance sheets because it’s important with us to kind of build on the track record of the foundation and expanding from just incubation to acceleration and to actual VC investment. Because the issue we have is investors really and getting them to put money into creativity as an asset class that can actually yield a return on investment. It’s really a difficult sell. So the only way we could do it is to kind of build track record by investing. And so we have a portfolio of three businesses currently that we’ve invested in and we have five businesses currently in our incubator. And we’re hoping that by the end of the year we’ll have ten in the incubator, ten in the accelerator and five in the actual portfolio. And we are doing this with the anchor investor that we have. They kind of agreed with us that okay, we need to there’s a long-term relationship with them. So they agreed for us to basically start and then one kind of race at the back end of that because it’s going to be difficult to sit down and say I’m raising a whole 100 million and then I’m going to start investing in creatives. It’s impossible.

Chris Bishop: Okay, now to strip it all down, what you’re saying to people is like, I’ve got a brilliant poet, designer or musician do you want to invest?

Roberta Annan: So the biggest thing here is and this is our operating model and our IP or Ethos. We go through three stages with the creatives to build value within the businesses. Because the issue with creativity is it’s hard to quantify. You’re selling your entire business on intellectual property, which is not properly protected, especially in this region. So the first thing we do is we incubate. And remember, we’ve been incubating for the past decade. So we do understand the business of incubating creative businesses and creative entrepreneurs and building infrastructure around them to make them. So basically from ideation or a talent to actual building something which can be protected. Right, quantified. So that is the first stage and it takes nine to twelve months to do this. Then once the creative business leaves that incubation, then they are put into an acceleration process, which is normally 15 months. So the acceleration is where let’s say businesses would have obviously like initial infrastructure. They’ll have a team, they will have the IPS protected and with the legal documentation and everything, and they would also be making some return on investment, let’s say their sales or revenue from whatever it is you’re selling. So what we do is we help them scale at that point by giving them more capital and also supporting sitting on the board and managing these businesses and building have the correct value creation model and then by the end of the acceleration, they have a value. So you can say this business is worth two million. So if I put X amount, this is the percentage that I can take. And that is where the VC fund comes in. So think about Fact as having three models. There’s the fund, which actually injects the capital, and then there’s the incubation stage and the acceleration. And you have to have this whole holistic approach to working with creators because it’s a safety. Think about it. Like a few years ago, tech businesses on the continent were struggling as well, right, to get capital, but through accelerator and incubation project programs. Now we are having unicorns that are coming out of the continent and we feel that we’ve also recruited some of the team members that have worked on early-stage kind of venture and support for tech businesses. We’ve recruited them into our accelerator to ensure that we’re building the same model. And it’s when you actually have a success story of a creative that has gone through our program, and we have one such right who is doing really well and is in a portfolio for equity. And he’s like a number one in fashion space. And we’re trying to also help this business scale, build more infrastructure, build a property, build a proper accounting system so that we can also realize that the return on investment at the end of, let’s say, five to seven years. So that is the model for a fact. It’s holistic, it’s blended. And I believe that is the way creative businesses can drive.

Chris Bishop: You mentioned a fashion designer. Can you tell me a little bit more about this person and just what stages they will go through in the three stage you mentioned?

Roberta Annan:   So this designer has already gone through our incubation stage and acceleration stage, and we’ve invested equity into their business. He’s the number one kind of Nigerian, Kenneth Ize. He opened Fashion Week last year. He’s opening again for the ultimate winter season as well. He has people like Naomi Campbell walking in his shoe. I mean, Naomi Campbell works with Valentino and all of these big brands. And from a brand equity standpoint, he’s on the radar of a lot of and also a trendsetter. And what I like about this brand is also has a social impact story.

Chris Bishop: What kind of creative are you looking at? Obviously, fashion. But are you looking at musicians?

Roberta Annan:  “Yes. So we’re looking at the entire gambit for creativity. And the UN Convention for Trade and Development on Tap have actually defined creative and culture industries to have 16 subsectors. And the 16 subsectors include fashion, film, Music, E-publishing, Literature, architecture, interior, culinary arts, just to mention a few. So they are really about 16 sub sectors currently in the portfolio.

Chris Bishop: In terms of your investors, how much do you still have into battle with this idea that it’s a sort of philanthropy business?

Roberta Annan: But I think because we’re basically working with a bank development bank that is spearheading our fundraiser, they’ve kind of validated our platform to investors. But the kind of investors that we are targeting are not your typical institutional investors that would put money into things that are tangible. We are targeting impact investors, those who want to make a return on investment, but at the same time also do good. Right. So not philanthropists who are just going to give freely. We are actually targeting social impact investors because I feel venture philanthropy and impact investment are very distinct asset classes. And the reason why I prefer impact investors, is because they want to also make money.