Unlocking Investment in Fragile Frontier Markets

Afghanistan, South Sudan and Mali all might sound like a list of places to avoid investing in – but not if you are Matt Tilleard, a Managing Partner at CrossBoundary, an investment advisory service that specializes in post-conflict, fragile, frontier markets.

“How do you unlock investment in the toughest places?” is the fundamental question that drives Tilleard, his business partners, Jake Cusack and Tom Flahive, and their team.

CrossBoundary was born out of their belief that the positive market forces of capitalism are key development tools that are often missing in the places where they are needed most.

Tilleard, a former Fulbright scholar with an MBA from Stanford, met Cusack while studying at Harvard’s Kennedy School of Government. They quickly realized that they shared the same worldview developed while Cusack served as a U.S. Marine in Iraq and Tilleard, a former management consultant at Boston Consulting Group, did aid work in indigenous Australia and Afghanistan.

They both believed that while foreign aid and security were necessary in fragile states – they weren’t sufficient to really drive development.

“We weren’t doing enough of the single best thing we could be doing: investing in people,” Tilleard said. “The relationship you have when you invest in someone is fundamentally more empowering. And we saw that was neglected.

“So that’s why we started CrossBoundary. It was our view that there was more to be done in unlocking investment and bringing capital from developed countries to underserved markets.”

With their advisory service, CrossBoundary aims to serve what Tilleard calls the “intermediary gap” that often prevents capital from reaching frontier markets where investors are often turned off at first blush.

For investors they help do market assessments, due diligence and investment structure; and for entrepreneurs they can help with strategy, transaction services and capital raising.

They see themselves as intermediaries “who can bring the parties in a transaction together, act as a translator across ideas and concepts. And do substantial work to make a mutually beneficial transaction occur,” Tilleard explained.

Essentially, they are there to do investment facilitation – they help entrepreneurs do financial modeling, gather financial records, advise them on term sheets – whatever it takes.

Tilleard was clear to make a distinction between their work and impact investing – which he holds in high regard, but is not their focus.

“We call ourselves ‘mission driven’ because we don’t ever want to imply that any of transactions we are doing – or the funds that we manage – are looking for anything less than commercial returns,” Tilleard said. “We are focused on getting commercial returns.”

They also recently launched CrossBoundary Energy, the first investment fund strictly dedicated to commercial and solar power in Africa.

For Tilleard, investing in frontier markets is all about what he calls “perception arbitrage.”

“What Mali is like, compared to what people imagine Mali is like, is a vast gap. The difference between perception and reality is massive,” said Tilleard. “So there are big opportunities because of that – but you have to know what you’re doing.”

Tilleard admits that a place like Mali has clearly had a lot of political problems in the last five years with Islamic militant attacks garnering headlines, but those issues have also obscured Mali’s potential.

“If we sit back and say, ‘OK well, Mali is too tough, we’re not going to invest there for five to ten years.’ Then the problem is only going to get worse,” Tilleard said.

“But if we find a way of saying, ‘Actually we can bring investment in here. There are sectors where it makes sense, there are ways to structure investments to remove some of the risk. Well, in fact, there might be better opportunities then you would find in a more developed African country.”

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Founded in 2014, OnFrontiers is a global advisory network and research firm that provides rapid access to targeted, high quality insights in hard to reach frontier markets.