Frontier Markets Focus
We reject traditional definitions of frontier markets based on metrics such as liquidity and GDP. Instead we look globally for regional markets where we identify the following:
We look for businesses with a significant addressable market and independent growth dynamics which insulate them from the natural volatility of frontier economies. In pursuit of this, there are two primary areas of focus:
- Frontier markets have seen a rapid development of their digital infrastructure (high smartphone penetration and widespread 3G/4G internet coverage) leading to a range of new business opportunities.
- There are many opportunities for tech-enabled and software businesses to rapidly grow market share as they solve business and consumer inefficiencies.
- Governments are actively encouraging both the public and private sector to adopt digitalisation, both for efficiency gains and the transparency.
- Very few people are funding these opportunities. In some markets, Sturgeon is the only international VC.
- Financial penetration is exceptionally low. In our markets only 50% of the population have a bank account and 5% have taken out a formal loan.
- To reduce the size of the informal economy, governments are increasingly requiring workers to have a bank account and digital identity.
- Whilst financial services are inherently cyclical, the catch-up that financial services will go through to get to a normalised level of financial integration/inclusion represents a significant secular trend.
- Very few institutions have the capacity and ability to fund these opportunities.
Frontier Markets Insights
In this edition of Sturgeon Insights, the team write about how the emergence of cheaper forms of technology and increased levels of connectivity have transformed the nature of investing in frontier markets.
In this edition of Sturgeon Insights, the team introduce their data-driven approach to impact investing. The central premise of the team’s rigorous impact framework is that investing in innovative, technology-enabled companies that create private-sector jobs can generate long-term sustainable social impact and superior financial returns for investors.
In this edition of Sturgeon Insights, the team draws on their 15 years of experience investing in frontier markets to summarise six components of their successful investment approach
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