Warren Buffet is known for discovering and investing in great deals. One of such is an insurance company called Markel and, as always, financial analysts are aware of it.
Markel is a specialty insurance company, focusing primarily on reinsurance and specialty insurance products namely artworks and collectibles, wedding insurance, rental property insurance, etc. The company also owns a venture capital division, Markel Ventures, through which it has invested in a wide variety of businesses spanning different industries – agriculture, real estate, luxury handbags, market data, fire and safety equipment, and so on.
Impact Of The Venture Capital Arm
Markel Ventures has significantly impacted upon the profits of the company, and this has resulted in a bigger balance sheet. Fast-growing companies tend to generate more cash flow and serve as a hedge against inflation. Markel, through its venture capital arm, can perform better than its peers who invest only in common stock and bonds.
In Nigeria, insurance companies and pension funds tend toward safe government securities such as treasury bills. For years, investment analysts in insurance firms did little work since the yield was over 20%. It was a straightforward process – place as much funds as possible into treasury bills and relax. This was also beneficial to the Nigerian Government. For it had access to naira-denominated loans from all those buying treasury bills; and even if funds were scarce to repay, it could print more naira notes to offset the maturing ones.
Inflation, Inflation, Inflation…
Borrowing money to increase production capacity and growth is one route to success. However, governments around the world are not known for the efficient use of capital. With insurance and pension firms placing nearly all their resources into government bills and bonds, the government can borrow more without a corresponding increase in means of production, which leads to inflation, and a general rise in the cost of goods and services.
Investing In Startups
Startups have become Nigeria’s economic lifeline. And the time is now for insurance companies to help boost the economy. They can do this by creating venture capital units which allocate certain portions of funds for investments in Nigerian startup companies solving everyday problems. These investments can increase production and reduce inflation. Like Markel, such venture capital units will also affect the bottom line of the Nigerian insurance companies – increasing cash flow and value, and making them at par with global insurance firms.
GetFundedAfrica and The African Startup Scene
GetFundedAfrica is a venture service company helping companies across Africa solve the problems that hinder their growth; that includes everything from fundraising to business models; from learning and development to venture business services and more. It currently assists over 200 global venture capital firms to find African startups which fit their investment criteria.
For insurance companies looking to join the startup scene, GetFundedAfrica can aid in the process. To get started, click: https://forms.office.com/r/E00VWKpiEp