Secha Portfolio Update 3Q21: J-Curve, Lindy Effect and Job Creation

After the tumult of COVID, lockdown and the recent political mobilisations that affected business, we remain cautious but also believers in two often cliche industry terms: The J-Curve and the Lindy Effect.

In an overly simplistic PE point-of-view, the J-Curve represents the tendency of businesses and thus funds to post increasing returns in later years as they mature and the Lindy Effect is the idea that the longer something is around, the longer it will exist in the future.

The verticals in which we invest, beauty, food, basics energy (within the sectors of FMCG, agribusiness, manufacturing) embody these two phenomena as they are defensive and resilient. In the last four years — and especially in the last 18 months — we’ve seen many start-ups disappear and many competitors go bankrupt. Our portfolio is still standing and thus able to persevere and grow where others could not.

We also believe that the impact of these portfolio companies follows the J-Curve trendline: As Anesu and Yusuf write in a recent piece entitled, “Southern Africa: We need to grow our own Domino’s rather than create the next Google”, Secha’s sector focus and value-add model creates not only SME growth, but also jobs. We see job creation in the initial years, but it compounds as businesses mature.