Impact investing, at its core, is about changing the world. It’s about building a fairer future, pragmatically and optimistically. Goodwell exists to be a part of this solution: to make positive impact and reward those who participated in making that impact possible. This means executing responsible exits from our investments. The market is still challenging in Africa, yet we see the tides turning: over the next decade, the post-COVID investment boom will start materialising valuable exits. As we prepare for this positive shift, it’s an opportune moment to reflect on key exit lessons we have learned through our work.

Goodwell’s track record in India and Africa

Goodwell has enjoyed a consistent flow of exits across our years in business. We have 11 exit experiences under our belt so far, and five investor exits from funds. Our story began in India, and our exit journey started there too. One of our Indian funds is fully exited and two more in progress – one of which has already returned capital to investors. However, our most exited region to date is West Africa, where we have completed four exits. Looking ahead, with exits from our uMunthu fund anticipated in 2025, we aim to maintain a target of up to three exits per year in the coming period.  

Within African markets, we typically see three types of exits:  

• Self-liquidating – a portfolio company buying out its investors 

• Strategic buyers – buyers seeking synergies with their existing operations 

• New funding rounds – the need for capital drives further funding rounds, encouraging new investors to buy out existing ones. This is currently the most common exit strategy in Africa and is what Goodwell anticipates encountering most frequently in the future.  

Understanding the exit landscape allows us to prepare accordingly by assembling the right team, defining key milestones, crafting a compelling narrative, and identifying suitable investors. According to Els Boerhof, Managing Partner at Goodwell, “Successful exits aren’t something you embark on alone. 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.”

Lessons learned from 11 exits

Every exit process comes with its own challenges, achievements and timelines, but our experience has shown that successful exits share a few common characteristics. Here are a few of the most important lessons we have learned along the way.  

Exits start before you invest

An exit is the first step of an investment. While it may seem premature to discuss the divorce before the marriage, a well-structured investment plan requires it. From the very beginnings of a relationship with a portfolio company, Goodwell starts planning what the company will look like in five to eight years. This forward planning helps to ensure the entire business focusses on sustainably developing towards a shared vision. In impact investing, part of that planning is how impact indicators will be defined, monitored, and reported. When a business can solidly prove their impact metrics, it makes that business more valuable: because people are willing to pay for impact.

The importance of good governance

The importance of good, clearly defined governance at the portfolio company-level can’t be overstated. The governance structure must be capable of managing the many moving parts on a capital table and among investors, while preventing an over-dilution of the founders’ shares. In addition to this practical management side of things, strong governance and leadership ensures mission alignment through the exit process, both during negotiations and when transitioning to the day-to-day of working with new investors.

Funding roadmaps to guide the way

This lesson is particularly relevant when considering exits in Africa. As mentioned earlier, the most common exit we see is a company embarking on a new funding round to support growth and buy out existing investors. To attract potential investors to the round, African companies simply must be EBITA-positive and profitable. The continent is not a monolith like Silicon Valley: it is Africa, with all the diversity that brings, from consumers to capital market function. Acknowledging and embracing that “fragmentation” is a strength of impact investing on the continent right now. A funding roadmap that respectfully navigates this dynamic landscape is a practical and essential tool for any African impact investment exit.

What happens after the exit?

Assuming all these factors have been successfully managed and the exit is complete – what happens next? Our experience has shown that this hinges on the effectiveness of the connections Goodwell has built. In some instances, even if we significantly dilute our shares, our input is still valued and requested. Some companies may invite us to participate in their IPO advisory committee as they prepare to go public. Occasionally, the exited company’s founders start another business and come back to us with a new opportunity; other times, we fondly go our separate ways. It’s all down to having established successful working relationships; Goodwell works hard to add value to all our investments, even beyond exiting.

Opportunities in a challenging exit market

Of course, applying these lessons is tough when the African exit market is slow – for now. And those are the key words here: for now. Exits at an all-time low? Well, the old adage is still true: “buy low, sell high”. Now is the time to make smart moves into secondary investments before the pendulum of the markets swings the other way, a consideration particularly relevant for impact investment in Africa. The global economy currently faces an unstable and turbulent future, but Africa is rising: driven by the continent’s growing population and innovative entrepreneurship, investing in Africa, for Africans, has more profit and impact potential than ever.

Want to learn more about Goodwell’s approach to impact investing in the African market? Reach out to us at contact@goodwell.nl.