Direct investor Equity-like debtPrivate debtPrivate equity
Gazelle Finance makes growth stage investments to bridge the funding gap facing underserved Small-to-Medium Enterprises (SMEs) in Europe and Asia. It finances “gazelles,” defined as businesses growing at or poised to grow by at least 20 percent per annum for four years or more when provided with access to sufficient capital on reasonable terms.
The mission of Gazelle Finance is to create a better financial future for capable entrepreneurs and the communities they serve. Its core principles include: 1) serve the underserved, 2) embrace entrepreneurship, 3) align interests, 4) invest actively, 5) enhance the community, and 6) deliver returns to investors.
The firm has established a Fund to provide growth-oriented risk capital to underserved, fast-growing SMEs along the Silk Road (including Georgia, Armenia, Moldova, and Kyrgyzstan). This fund has a double-bottom-line goal: commercial financial results and development impact on local economies through investee growth.
Gazelle Finance believes that its financing product sets its investment model apart from other providers of SME finance; it is similar in risk profile to mezzanine financing, but is self-liquidating through pre-agreed re-payment terms for the investee. Gazelle operates on the risk-reward curve between banks and private equity funds. Additionally, the firm typically offers a parallel technical assistance (TA) package to its investee companies that helps them address technical expertise gaps.
During its deal screening and due diligence processes, Gazelle Finance considers the development impact potential of its Fund’s portfolio investments, both quantitatively through IRIS and non-IRIS metrics (e.g., the portfolio company’s potential to grow employment) and qualitatively (e.g., the portfolio company’s potential to aggregate smallholder farmers and other micro-suppliers). The non-IRIS metrics that Gazelle tracks include: the average number of employees (calculated as the yearly average of monthly employee numbers from the monthly tax filing), the total gross wage bill from the tax filing, the number of new transactions executed in rural locations, and the number of investees in rural locations.
Gazelle Finance also provides incentives for enhancing impact, providing an annual bonus to its CIOs and other select management team members which are tied to the individual country-level portfolio performance. Gazelle blends financial return and development impact metrics for the purposes of calculating the annual performance bonus. These development impact metrics include information on revenues, employees, wages, and a qualitative assessment (assessing information such as employee and management skills development, promotion of women in business and employment of women, supply chain enhancement, and other).
Separately, Gazelle also considers indirect impacts such as taxes and payments to local suppliers.
All this development impact information is included in the Investment Memorandum for a given prospective portfolio company and is a formal area for consideration by the Investment Committee. Gazelle plans to include this information in its reports to shareholders. Its impact reporting includes information on the portfolio company level, country level, and aggregate portfolio level.
Last, the Gazelle Finance investment terms include covenants related to access to information, operational and financial reporting, anti-corruption and compliance with local laws and regulations, and application of Gazelle Finance’s IFC-based Environmental, Social and Governance (ESG) Policy.