Eric Vincent Guichard: How I brought gravitas to African finance
By
James McKeigue Aug 09, 2011
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Eric Vincent Guichard, founder of Gravitas
For Eric Vincent Guichard, one of the hardest things about starting his new job was leaving his old one. He was working for the World Bank, advising central banks in developing countries on government bond auctions and helping them manage their investment portfolios. “For a young guy it was a great job, with good pay, security and prospects.”
Nevertheless, in 1995, after nine years at the Bank, he had plans to leave. Uganda was gradually recovering from decades of misrule and war and the government was keen to improve its central bank and finance ministry. Guichard was asked to work as an adviser. He wavered – “I had a wife and kids so I didn’t want to take too many risks” – before deciding to leave the World Bank and set up Gravitas Capital.
He based himself in Washington and won early contracts through his contacts in east Africa and the Caribbean. With low start-up capital he kept costs down by renting a virtual office. “It meant I could have a great address without paying the full price.” He hired specialist consultants for specific projects, but was the only full-time senior staff member for the first three years. “The beauty of the business model was that it was very scalable. I only incurred extra costs when I was sure I had the revenue to cover them.” By 1997 he was generating sales of around $1m. So the next year Gravitas was ready to set its sights higher.
The firm began offering to manage governments’ investment portfolios. “It was a very competitive space and put us up against the big investment banks.” Guichard, who grew up in Africa, felt he could outmanoeuvre his larger rivals. “Sometimes these banks don’t give developing-market clients the respect or the resources that the size of the account deserves – we could be fully focused.” He also undercut rivals by offering a more competitive fee structure that meant that most of Gravitas’s charges only kicked in if the firm was hitting its targets. The new business pushed sales to $4m, more staff were recruited – it was all going well.
Then, in 2001, the World Bank decided to begin offering portfolio management advice to developing countries. Guichard’s former employer was a formidable opponent and, after a few years, Gravitas’s sales fell back to $1m. Not to be outdone, Guichard reacted by widening his net and approaching the part-nationalised commercial banks that operate in many Commonwealth countries. He also began selling ‘do it yourself’ models. These computer programs allowed central banks and financial institutions to manage risk themselves and appealed to many developing-market financial institutions. The changes pushed sales back up to $4m by 2007.
So what next for Guichard? “I had seen how well some African countries were doing but… investing directly in Africa can be risky.” His idea was to offer African expat investors access to private equity groups. He would group together enough small investors to make their capital acceptable to an African-focused private equity firm. The project was put on ice during the financial crisis, but “Homestrings” officially launched last month.
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