Supporting Economic Growth
in the Developing World

• Home
• Our Program
  • Underlying Causes
  • Economic Development
  • Missing Middle
  • Micro Venture Capital
  • Teach Fishing
  • Integrated Development
• Projects
  • Strategies
  • Projects in Development
• Take Action
  • Donate
  • Invest
  • Volunteer
  • Events
  • Contact Us
• Partners
  • Universities
  • Companies
  • Faith Organizations
  • Foundations
• About Us
  • Leadership
  • Values
  • Financial Information

Page Peel

 

• Partners
• Universities
• Companies
• Faith Organizations
• Foundations
•  
• Document Library
• Gallery
• News

Micro Venture Capital

Micro Finance: World Changing—Fast

In 2006, Mohammad Yunus won the Nobel Peace Prize for micro-finance. There are now around 200 million people who have received a micro loan, helping to lift perhaps one billion people out of the direst poverty. It has been world and life changing.
Not only that, repayment rates are around 98%; the poor are better loan risks than the wealthy. Even western banks have noticed and are trying to also support this model. They should: Yunus has successfully loaned about $4 billion to the poor of Bangladesh. His model has been successfully taken around the world. There is a lot of subtlety to microloan success including reducing administration costs, involving multiple borrowers in vetting and securitizing risks, and even some peer pressure. It really works.
However, the typical $30-$300 micro-loans are too small to start businesses that hire employees and have a broader community impact.

 

Venture Capital: Institutional Model for Financing Startups

On the other side of the Missing Middle is venture capital. It converts an 80% startup failure rate into an 80% success rate. It does that with three basic prinicipals:

1. Carefully vet the businesses and only finance the best of the best. Only 1 of 200 candidates receives financing.
2. Provide intensive guidance and mentoring. Studies show that good advisors are one of the key predictors of start-up success.
3. Take an equity stake that creates incentive for the money provider and a mechanism to redirect the business if it isn’t succeeding.

Venture capital is a great model. However, the problem for the developing world is that it’s so expensive. It requires so much expensive help that the investments need to be large to make them profitable. That’s why venture money kicks in between US $500,000 and $2,000,000 or higher.

 

Taking Microfinance Up (and Venture Capital Down)

For money to succeed, it has to come with guidance. The problem is that intensive business mentoring takes a lot of time by experienced people. It’s expensive.

We bring in local universities to fill the gap by providing student interns, cultural sensitivity, legal guidance and accounting audits. They become vested in the success by receiving a minority share of the business. Students are guided by professors and experienced business people who step in directly when necessary. Business plans are written and followed. Corruption is checked. Success is given a hand up – not a hand out.

 

Learn more? Go to Teach Fishing