How a consulting firm became a venture capitalist

The origin of the idea

Upon graduation from the University of Bamako, Moussa Keita was recruited by Ian Howard, one of the co-Founders of Adapted Consulting. At the time, Ian was the director for Geekcorp Mali, an NGO based in West Africa. Moussa worked and was trained by volunteers and other ex patriots who were in Mali to help bring internet and other technologies to rural areas. Through this experience he soon became an expert in wireless and open source technologies, after a bit more than a year. As the project's work gained notoriety, it was soon overwhelmed with requests for assistance by other NGOs and companies. It was then that Moussa was encouraged by Ian to open his own business. It was anticipated that Moussa would continue to support the project, but he could also serve these many potential customers commercially. His firm, Groupe Zirasun was thus created and incubated by Ian and his team. Zirasun was provided an office and shared tools and other resources. There was no shortage of work, so Moussa was kept busy.

(photo: workers build a new solar structure for a roof, under the management of Zirasun and with designs and engineering provided by Adapted Consulting)

Since, Group Zirasun has built an excellent reputation amongst its clientèle. Moussa has continued to expand his reputation as a quality provider of wireless and open source solutions. Despite the success of the firm, in terms of establishing its reputation and the stature of Moussa, it is not growing, nor profitable.


A cultural hurdle

A study by Ian and classmates at the Schulich School of Business in the Fall of 2006 concluded that Zirasun was suffering primarily by a lack of affordable financing and a lack of internal practices. Consequently, Ian brought the idea of buying into Zirasun to Adapted Consulting. He believed that it was an opportunity to both help Moussa's firm to grow and would also further strengthen the collaboration between the two firms, thereby allowing Adapted Consulting to further expand the African market.

As this idea progressed it became apparent to Adapted that Zirasun was perhaps not the only business, and Moussa was not the only entrepreneur, that could benefit from management consulting, training, capital and infrastructure.

Access to Credit: nearly impossible

There are many systems in place in North America, which protect lenders from losses due to default. For example, the World Bank’s 2006 Doing Business Report states that there is 0.0% private bureau coverage of individual credit histories in Mali. In comparison, in both Canada and the United States there is 100% coverage1. This coverage is important as small businesses often rely on the ability of the owner to borrower funds. With no way of determining the creditworthiness of borrowers, lenders must charge a high premium to compensate for risk, and consequently funds become less accessible. This is just one example of why Mali ranks in the 90th percentile with regards to ease of access to credit, as compared to the 6th percentile for both Canada and the United States2.

Access to Equity Financing: too little information

Companies in Mali also have more restricted access to equity financing compared to Canada and the United States. One major barrier in Mali is the lack of a formal equities exchange where shares of corporations can be traded. The existence of an equity market is a fundamental element to how companies can attain financing and how shareholders are protected, i.e., if the shareholder perceives too much risk verse a return (going forward), they can simply sell their stake in a company. In Mali no such mechanism exists. In addition, there are legal differences, which offer greater protection to shareholders in North America than to those in Mali. Two examples are less stringent disclosure requirements for material information, and less personal liability to CEO for actions contrary to shareholder interests. Again, legal protection to shareholders increases their willingness to invest as they perceive less risk and therefore require a lower return premium to justify investment.

First Conclusion: a new approach to entering this market is required

After identifying barriers to traditional investment into Africa I felt it was important review the current thinking of investment and then to adapt them to create a new set of rules that are appropriate for this very different market. Next we will begin to present our ideas of how to approach investing in small to medium sized firms in Mali, which will serve as an example of how it can be done in similar markets.



End Notes

1 Doing Business 2006 – World Bank, http://www.doingbusiness.org/ExploreTopics/GettingCredit/

2 Doing Business 2006 – World Bank, 90th percentile in this case denotes that it is easier to get credit in 90% of the 175 other countries involved in the report.