Comments on: Where are development’s venture capitalists?

By: Christopher Douglas

Christopher Douglas — Mon, 09 Jul 2012 07:05:04 +0000

I run a small not-for-profit that is involved with precisely such intersecting interests in the Republic of South Sudan. We are attempting to partner with local entrepreneurs, women’s associations and farmers cooperatives to help them start and run businesses, by facilitating access to investment, vocational training, equipment, etc.

I know that your post was addressing this with regard to aid organizations, but it applies to the private-sector side as well.

From my own experiences, I know that there is a great deal of potential for investors and local entrepreneurs interested in filling the niche between what communities want, on the one side, and what relief humanitarian aid groups can provide, on the other.

Your comments about risk aversion are certainly true. Even for those willing to think in terms of long-term profit rather than quick short-term gain and obligation to provide for community partners, it is hard for interested groups to see where the opportunities are, where there are opportunities are, how to understand them, and the context, risk and costs. To fill this gap, there have to be organizations that know the country well and establish trusted relationships with the involved communities – this knowledge and these relationships are worthwhile in any case, but it does add to the cost of doing business.

The risks for investors are not just the eternally headlined war and famine. Investment in developing areas often means entering into a contract and moral obligation with communities. Even when investor intentions are good, if those community rights/interests are misrepresented by government officials or local businessmen, the VCs don’t just lose money – they also risk public labeling as exploitative vultures, greedy capitalists, imperialists, etc. It is important that malicious or careless organizations be deterred by the threat of exposure and loss of capital, but the same deterrents can affect legitimate actors.

A thought provoking post, to be sure. Many thanks.

PS. should mention that the South Sudan Law Society has put out a handbook for potential investors that deals with precisely these pitfalls of “uninformed companies and disorganized communities” (http://www.southsudannewsagency.com/news/press-releases/south-sudan-law-society-launches-a-new-handbook-on-community-engagement-for-land-deals-in-south-sudan). I think South Sudan is going to be a proving ground for a (hopefully) new and better way of doing business right in Africa.

By: Andy

Andy — Thu, 05 Jul 2012 19:52:39 +0000

The recent report from Monitor/Acumen in the US makes a similar case. They argue that Foundations and philanthropists could play a more risk-taking role, by funding a portfolio of ideas with a view to taking the best through to scale (and support from larger, more risk-averse players).

http://www.mim.monitor.com/blueprinttoscale.html

By: Timothy

Timothy — Wed, 04 Jul 2012 17:25:44 +0000

Are you really wondering why no VCs are in development? All you have to do is look to people established in the development field, and I write this being in the field for several years. Maybe if we were not so stubborn and ‘clique-ish’ we would let somebody new, with a new idea, a new method in to the field to do new things. No VC wants to fund an old, tired idea (clearly what development folks have been doing for the past 40 years has helped millions survive, but we haven’t helped them thrive), but they also don’t want to fund a new, innovate idea – no matter how wonderful – unless it has a buy-in from and cooperation of practitioners in the field. Maybe those in the development field need to realize that not just academics, who i do greatly respect, and trust fund babies who could afford to give years of their life to unpaid work have some sort of ridiculous, manufactured monopoly on helping the poor. Those who know how to make money can and WANT to help too, not just governments. VCs see that cloister effect and don’t want to throw their money away and I don’t blame them. Yes, ’success’ in this field is not the same as success in funding a first-world business venture, but that’s not actually the ONLY reason why VCs haven’t gotten involved. The development field as a whole may want to take a good look at ourselves instead of placing blame solely on ‘corporate evils’ Idealism is wonderful, but when was the last time you could pay a national debt, open a manufacturing plant, or support an infant industry with a payment/checque of idealism?

By: Søren

Søren — Wed, 04 Jul 2012 11:04:03 +0000

Probably as a first Western NGOs, how about reading out Matthew 25:14-30 (Parable of the talents)to DFID? Perhaps ask Samuel L Jackson if he would volunteer to do the reading?

It sounds like a wonderful programme.