In the following blog, the authors follow the case of easyHATCH, a poultry processing firm in Rwanda. Central to the success of easyHATCH has been its emerging relationship with its transaction advisor. Increasingly, transaction advisors have become an essential element of emerging entrepreneurial ecosystems as they play the role of bridging the disconnect between high potential firms and investment funds. Especially in immature entrepreneurial ecosystems, firms can struggle to understand and/or trust the intentions of impact, venture capital, angel, and private capital investors. Working closely with firms, transaction advisors support and prepare them for investment as they learn the cost-benefit of non-bank investment options. Central to effective transaction advisors is their ability to manage and support these firms as their own mindset shifts related to private capital - a limited view of private capital is often hinderance the emergence of more effective and dynamic entrepreneurial ecosystems.
In Rwanda, the business of poultry farming used to be laden with difficulties. With dependency on costly European imports and unpredictable supply chains, farmers had little opportunity to expand outside subsistence farming. Recognizing this market gap and need for domestic availability, easyHATCH became one of Rwanda’s first privately owned hatchery and poultry processors to provide local availability of day-old chicks and training on best practices for chicken rearing so farmers could move toward more viable and growth-oriented business models.
Themba Elias, easyHATCH’s owner, is a South African entrepreneur who was eager to launch his business idea in Rwanda. Having his market gap and target customers identified, Themba knew he must take full advantage of financing to maximize this opportunity. He used his own savings from South Africa to start the company and began operations in 2016. However, by 2019 he realized that the opportunities were far greater and needed to expand the business. He began applying for loans using guarantees from the Business Development Fund (BDF), a Rwandan government organization whose mission is to increase access to finance for entrepreneurs, especially those without access to collateral. But Themba soon learned that to qualify for funding from BDF, the proprietor must be Rwandan or have a Rwandan co-founder. Given his South African nationality, he could not fulfill these requirements and pursue expansion opportunities.
But then, in 2019, an introduction with USAID Rwanda Nguriza Nshore (RNN) shifted Themba’s fortunes. Through RNN’s support, Themba was connected with the transaction advisory firm BiD Capital and was assisted in preparing due diligence documents leading to a loan that enabled the localization of easyHATCH’s inputs in Rwanda. With BiD Capital, Themba increased his knowledge about opportunities related to private capital and began recognizing the value of a transaction advisory firm. Additionally, Themba wanted easyHATCH to make a positive social impact, but he knew that a transaction advisor might misrepresent and/or compromise his vision. It is worth noting that these concerns are not unique to Themba, but many entrepreneurs and start-up business owners share similar thought processes.
Moving past his hesitations, Themba embraced the prospect of continuing to work with BiD Capital as easyHATCH's transaction advisory firm and was further connected to RNN and BiD Capital's vast existing network of investors. Working closely with BiD Capital, the transaction advisory firm finds potential investors, initiates conversations. If there is a good fit/alignment between easyHATCH's vision and the potential investor, then Themba is brought into the conversation. Themba also notes that despite his fear that a transaction advisory firm could not adequately represent and articulate easyHATCH's vision to potential investors, he finds that BiD Capital has managed to do just that. Themba says, “Working with BiD Capital has changed the process of seeking investment. With a transaction advisory firm, I now have more time to focus on other aspects of the business and don’t need to participate in every aspect of searching for investments.”
Today, Themba reflects on the initial loan he received with RNN and BiD Capital’s support. Having the localized inputs and onsite hatchery is something that Themba greatly attributes to easyHATCH ability to withstand the shocks and stressors of the Covid-19 pandemic. Themba explains that before the pandemic, Rwanda's market for chicken was concentrated in the tourism and hospitality sector, with farmers supplying meat to restaurants and hotels. The lockdown in the spring of 2020 signaled a lack of market activity, leading to canceled orders and some farmers even losing their chickens. As things began to normalize around July of 2020, Themba noticed a curious thing: With international tourism still paused in Rwanda, he expected chicken sales to remain depressed, but, instead, he noticed an increase in sales, signaling that the domestic market for chicken consumption was growing, indicating a new end market customer segment.
Looking forward, Themba has big plans for easyHatch. In the next 2-3 years, Themba plans to expand in response to the growing demand in Rwanda and the region -- in fact, he’s already expanding into the Democratic Republic of Congo. Key to meeting increasing demand will be his efforts to improve his supply chain performance. In particular, Themba plans on increasing easyHATCH's veterinarian staff to support farmers as they raise and care for the chicks. In the hopes of making this service more accessible throughout the country, Themba plans on utilizing a decentralized model for access in each district.
With easyHATCH's partnership with RNN and BiD Capital, the prospects look good for Themba to achieve these goals and more. The story of easyHATCH seeking investment in Rwanda is a prime example of the value of working with a transaction advisory firm. Today, if you asked Themba what advice he would give to entrepreneurs, he says, "As long as there is alignment between the transaction advisory firm and the business, it is advisable to work with a transaction advisory firm as it enables the business owner to focus on the business side of things." Seeking investment is a process full of many requirements, and transaction advisory firms such as BiD Capital exist to support entrepreneurs and make this service more accessible.