The business of successful investment

Cytonn Investments Management Ltd, a financial solutions provider, was recently valued at Sh1.1 billion after a private placement. We spoke to the firm’s managing partner, Mr Edwin Dande, on what this means for the company’s future prospects.

What are the details of your private placement? How did you go about selecting the investors?

We have commitments for Sh100 million for 10 per cent of the company, which is what gets us to the Sh1 billion valuation. The offer was placed to high net-worth investors who see the significant investment opportunities in this region.

Second, we are building a premier brand for real estate and private equity investment in the region, so the placement was not just about money; we wanted people who were going to add value to this aspiration. Thankfully, we got very good people.

The leadership team has over 45 years of financial services experience, both locally and abroad, which helped us tap investors internationally, especially the US.

Where are you investing the cash raised?

The funds raised are mainly going into building capacity. Cytonn started with just four team members. We financed the initial investment with our personal savings, and liquidated our investments and pension funds. But the business has grown rapidly. We are currently approaching 20 people, we have over Sh3 billion of real estate projects signed up and the deal pipeline is very healthy.

So we have to invest in technology for efficiency and in a distribution platform — we are building the very first products-focused distribution platform in this region. To sum it up, we plan to have the most capable alternative investment platform.

Are Kenyan businesses embracing private equity as a source of business financing?

Yes, but there is room for improvement. A lot of SMEs still do not know they can access private equity (PE) funding, and even those who know are not skilled on how to package themselves to access funding. PE financing finds good business ideas and drives them to perform to their potential. When businesses thrive, they create returns for investor, create jobs, grow the economy and improve the standards of living. We encourage SMEs to access PE capital, which is available in plenty.

Cytonn Investments recently ventured into real estate development. Why this segment? Do you plan to tap into the underserved low-end housing market?

We recently started our own development affiliate, Cytonn Real Estate. There is a gap between real estate development and real estate investment. Ideally, developers should take into consideration investor needs from day one, but this rarely happens. Our strategy is to consider the investment needs from project concept by having the investors in the room. So Cytonn Investments brings investors and Cytonn Real Estate develops the kind of products that will meet their demands.

We have a diversified focus, but are biased towards the mid to lower end of the market.

What are your projections on economic performance this year, on the back of terror attacks and a stronger dollar?

Kenya’s economic potential is nothing less than brilliant, what is in question is whether we will measure up to that potential.

We have a strategic location as a regional hub, we have a vibrant democratic system, Kenyans are smart, literate and numerate; our unmatched performance in marathons, our wildlife and the fact that the President of the US has his roots here, gives us instant brand recognition and admiration globally. We have all that it takes to attain rapid economic growth, but we will need to continually address key challenges, such as corruption, ease of doing business and insecurity.

What key sectors will drive growth?

The economy will do well despite the main issues that are facing the country, such as insecurity. The sectors that will support growth include the finance and insurance sectors as the level of penetration remains low and there are deliberate efforts to educate the public on financial matters affecting them. Real estate construction and infrastructure developments are set to be another big support sector given the Government’s huge allocations to them.

Agriculture, despite being the largest GDP contributor, might not do too well given the drought in the first quarter of the year, which affected harvests and commodity prices negatively.

Tell us about the Cytonn Young Leaders programme.

I wish this was the first question because we are crazy about training and developing young people. There is a book we like to read at Cytonn called What it Takes by Charles D Ellis. We have a book club every fortnight to discuss a chapter of the book. I recommend it to every leader building a professional services organisation.

One key tenet it talks about is recruiting, training and inspiring young graduates to become leaders. Recruiting the very best, giving them world-class training and emphasising leadership and problem solving gives us an unrivalled competitive advantage. Our talent must be the best for us to offer our investors the best returns. We are proud to be developing business leaders of tomorrow.