This blog is the first in a series of interviews focusing on last-mile innovation.
Mobile internet access is available to over two-thirds of the world via 3G coverage, yet significant populations within low- and middle-income countries still cannot connect to the internet because of availability and affordability issues. Ensuring equitable access in these frontier markets poses complex challenges but also a dynamic set of opportunities. A growing number of innovative enterprises and community networks are seizing these opportunities to meet the demand for access among rural and low-income urban consumers. They are employing novel business models and technologies to profitably and sustainably serve markets where mobile network operators and fixed-line internet service providers cannot make their traditional operating models work. The diversified models and ingenuity of these connectivity enterprises are causing investors to pay attention. With funding from USAID under the Last-Mile Connectivity Initiative, mSTAR recently completed a landscaping of over 50 last-mile connectivity enterprises offering services and 50 investors channeling capital into these solutions.
Jim Forster is one investor who has taken notice. Jim is a connectivity veteran who spent 20 years at Cisco, founded NetworktheWorld.org, and currently serves as Chairman of Mawingu and AirJaldi Networks. In response to the growing opportunity for investment, Jim recently launched INI Holdings with partner Ben Matranga to manage a portfolio of investments in affordable, reliable, and high-speed connectivity.
Hannah Skelly, mSTAR Technical Advisor, interviewed Jim in March 2018 to learn more about INI Holdings.
What new trends get you excited about the last-mile connectivity space?
JF: In 2018, much of the world is connected, but many people still don’t have connectivity. The first wave of extending communications technologies prioritized access, with the benchmark being number of total users. It is a binary measurement that rightfully prioritized expanding coverage to more people. We believe the next wave is beginning to prioritize consumption and providing communications at a price and quality that nearly all can afford. Our ultimate goal is not just for people to have communications tools in their hands, but be able to use them because the cost and quality is no longer a barrier.
What motivated you to start INI Holdings?
JF: I spent 20 years at Cisco Systems. It was fascinating to build products that are key parts of the internet as it grew so rapidly. The last several years at Cisco I spent time looking at how to spread the internet into more places, especially rural areas of Africa and Asia. I saw there was a need for financing of early stage companies. At Cisco I was a Senior Engineer but when I left in 2008 I became an angel investor, learning by doing. Recently I wanted to accelerate and do more, so I asked Ben to get involved. He’s got lots of great experience that complements mine, including working with entrepreneurs to rebuild infrastructure in Africa and Latin America. I knew his passion for restoring communities and supporting new ideas and experience in finance and infrastructure in remote areas would help push our investments forward.
The INI investment portfolio includes internet service providers (ISPs) that have developed operating models that can profitably provide service where none currently exists as well as offer service affordably to low-income consumers. What are the main characteristics of these companies’ approaches that enable them to operate profitably in areas that the traditional mobile network operators have passed over?
JF: Traditional mobile operators have a cost structure that requires certain corresponding revenue. While mobile networks are great, they are not the only structure that can deliver internet content and services. In particular, in the US, Europe and Eastern Asia there are very large and successful networks, such as the cable company networks, or the various DSL/FTTx/Fixed Wireless networks that everyone uses at home and in the office. Besides connecting desktop, laptops and over-the-top (OTT) video and music systems, these networks carry more data to mobile phones than the mobile operators carry. But in Africa and South and Central Asia, these networks almost don’t exist. By dropping the requirement that connectivity should work even while moving and have a phone number, it’s possible to use other technology that is faster and cheaper than the mobile infrastructure.
INI describes itself as a double-bottom line investor, both venture capitalists focused on financial returns and impact investors focused on socio-economic outcomes. What are the most important social returns you anticipate from your investments?
JF: We expect our portfolio of ISPs to focus on access at an affordable price. We know that communications is one of the primary discretionary expenses for our customers – if our companies can provide better quality at a lower price – that puts more money in our customers pockets. In South Africa for example, our customers currently spend up to 20 percent of their income on data from mobile telecommunication operators: we offer 20 times more bandwidth value. That’s more bandwidth at a lower cost.
In terms of geography, your investments span many interesting frontier markets —Mawingu in Kenya, Habari in Tanzania, AirJaldi in India and TooMuchWiFi in South Africa. What has your experience been in these markets – have you noticed any major similarities or differences?
JF: Each market has its own particular set of challenges. There are some clear similarities in hardware technology, building out revenue models, or sales strategy. We are hands-on investors that provide financial capital alongside technical and strategic expertise. But ultimately, it’s about finding great local entrepreneurs and building exceptional teams that know their communities far better than we do.
What do you anticipate your portfolio will look like in 3-5 years?
JF: INI is focused on building a portfolio of ISPs that serve millions of clients. That takes time, but we know great companies are built one happy customer at a time.
What advice would you give to other investors looking to enter this space?
JF: Find other investors who shares your values and complements your knowledge base. There are many investors who are happy to have new investors participate in deals. Always focus on the people – the customers, the entrepreneurs, the line managers – they are ultimately what you are investing in.
mSTAR is supporting the USAID Digital Inclusion team’s Last-Mile Connectivity Initiative to connect investors, such as Jim and Ben, with the growing number of connectivity enterprises. Stay tuned via the mSTAR blog and the Digital Inclusion website to hear more from investors who see huge commercial and social potential in the connectivity space and the enterprises developing and deploying solutions.