The “Missing Middle” of Capital


The “Missing Middle” is the funding gap for startups between their initial idea and their first few million dollars of revenues. Imagine the challenge of getting to $1 million in annual revenues without any outside investment. Now imagine that in Africa or LatAm or Southeast Asia. Hundreds of thousands of great companies in those regions, hundreds that get any funding in any given year.

Fledge helps a bit to bridge this gap. Africa Eats was created to fill it for a few dozen impactful food/ag companies in Africa. In its first two years, Africa Eats has managed to help quite a few companies grow from $100,000 to over $1 million in annual revenues.

One particular was able to do that in just two years, and will double revenues or nearly so this year. And yet here is what one well-known institutional funder wrote when we pointed them to that story of growth:

We have received your request. We prefer to provide growth capital with minimum tickets of USD $1 million which represents approximately 30% of sales.

From the communication we received ________ is currently doing about USD $1.5 million.

It’s understandable that 2020-2021 were difficult years following the adverse effects of Covid.

Its my proposal we review this year’s (2022) financial and operational performance and make an informed decision from early 2023

2020-2021 were difficult years? Yes, for most companies, but this company grew 15x since 2020. In a working financial market, that is a sign of a big winner, one that should pop to the top of the potential investee list.

$1 million as 30% of sales? I interpret that to mean neither $1 million nor $2 million is big enough. Come back when the company is already earning $3 million.

This reply is even more disappointing when you know that the capital provided to this institution is mostly philanthropic. The capital providers are not seeking maximum returns, but maximum impact.

If those institutions can’t fill in the missing middle, then who can?

My orgs can, but not only a fraction of a fraction of 1% of what is needed. Back to Fledge, this year at The Land Accelerator Africa along received 1,440 applications, all of which are stuck in the missing middle. Distribute that $1 million across the 100 most promising of that dealflow and the result in 2-3 years would be $10 million of new revenues, plenty of profits to continue growing, and impact of thousands of jobs, millions of trees planted, and lower levels of poverty and hunger.

Keep the bar set at $3 million in annual revenues before any capital is distributed, and maybe 1 of those 1,440 will reach that scale in 2-3 years.

That is why the missing middle persists.

By "Luni"


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