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Some SMEs are Elephants

What sets elephants apart: they grow fast, grow to be large, and are always impactful.

Four years ago the Zebra’s Fix What Unicorns Break “manifesto” was published by four visionary, frustrated women entrepreneurs tired of all the attention given to the venture capital quest of hunting unicorns.

Unicorns are mythical animals and nearly all of the so-called unicorn startups have values (both financially and morally) based on myth if not the mythos of the founder. The definition of zebra:

  • To state the obvious: unlike unicorns, zebras are real.
  • Zebra companies are both black and white: they are profitable and improve society. They won’t sacrifice one for the other.
  • Zebras are also mutualistic: by banding together in groups, they protect and preserve one another. Their individual input results in stronger collective output.
  • Zebra companies are built with peerless stamina and capital efficiency, as long as conditions allow them to survive.

This is good, but this definition doesn’t talk about scale. In my work as an impact investor, I often hear other investors split the investment opportunities into two groups: startups and SMEs, more often than not with a negative connotation to SMEs as being too small to have any meaningful impact on the world.

Luni Libes on “California Capitalism” vs. Revenue-based Investment.   Watch the Full Program

I thus propose we add a new animal into this menagerie: elephants.

Elephants, too, are real, are good for society, care about each other, etc. But what sets elephants apart from zebras is that they grow fast, grow to be large, and are always impactful to their surroundings.

The African region has huge, unmet needs that small companies can address and, thus, grow fast. The same is true in India, Southeast Asia, and the rest of the emerging markets.

In the current nomenclature, baby elephant companies may be SMEs in that they sell physical products, sell only in a limited area, and don’t scale like software. But beyond the handful of giant tech companies in the Global 1000, the rest of those huge multinationals all were once SMEs too — manufacturing and/or distributing real products that millions of customers buy today.

Dropping out the hypothetical, let’s look at four examples of baby elephant companies.

East Africa Fruits Trucks

East Africa Fruits

East Africa Fruits launched in 2012 with $4,000 of savings from the founder. In year 1 it earned $100,000 and broke even. My Fledge accelerator invested $17,000 in 2014 and a handful of angels lent the company another $50,000. Three years later the company earned over $1 million in annual revenues, paid back the loan in full, and did all that with no other outside investment. Series A closed in 2020 and the company will earn over $5 million in 2021.

The founder of East Africa Fruits recommended that OBRI Tanzania apply to The Nature-Accelerator, powered by Fledge in 2018. OBRI had earned $200,000 by the middle of that year. Fledge invested €20,000 and OBRI’s friends and family added another $30,000. That was all that was needed for the company to grow past $1.1 million 18 months later. They are on track to earn $2 million this year. The only new investment so far to help with that growth has been $75,000 from Africa Eats.

OBRI Chart

Obri Tanzania

Last year, Rogathe Dairy applied to Fledge. They had earned $132,000 in 2019. Fledge invested $20,000. That bought a larger pasteurizer, putting the company on track to earn $600,000 for the year. In addition, two angels lent the company another $45,000 and that doubled the growth, with a total of $1.2 million for the year. With no new investment the company earned over $1 million in the first six months of 2021.

These may sound like extraordinary examples, unlikely to be replicated. But these are just three of dozens of baby elephant companies that Fledge located over the years. Most are, not coincidentally, located in Africa. The African region has huge, unmet needs that small companies can address and, thus, grow fast. The same is true in India, Southeast Asia, and the rest of the emerging markets.

Rogathe Dairy Chart

Rogathe Dairy

So the next time you hear investors deriding SMEs as small, village-scale or city-scale businesses, remember that Proctor and Gamble were, 150 years ago, two small SMEs, one making soap and one making candles. As an investor, imagine the gains from impact investing in either of those companies when they were new and small and young. Such opportunities still exist, and they look like baby elephants.


Luni Libes Describes the Fledge Accelerator.   Watch the Full Program

Luni Libes is a 29+ year serial entrepreneur and investor, most recently: Fledge, a global network of impact-oriented accelerators; Africa Eats, a pan-African holding company focused on feeding Africa; Realize Impact, a public charity making it easy for anyone to make an impact investment; and The Angel Accelerator, teaching early-stage ... Read more

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  1. Günter Schmittberger

    I like the new metaphor of elephants. And I like ‘Luni”s revenue based investment approach. ‘Luni’ offers so much great education that it is important to spread the word and get more and more entrepreneurs educated through https://www.fledge.co/ and impact investors study the concept of revenue based investment. African Eats is also an opportunity to start investing in Africa. The holding is invested in 27 baby elephants and with your help will nurture them to grow to full size of adult elefants.

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