Why entrepreneurs in the developing world need new funding models – Fiona Murray

MIT Sloan Associate Dean for Innovation Fiona Murray

MIT Sloan Associate Dean for Innovation Fiona Murray

From City A.M.

Increasingly, it is innovation-driven entrepreneurs who are providing effective and scalable solutions rather than aid agencies or governments.

Traditionally, the focus of entrepreneurship in the developing world has been on creating small- and medium-sized enterprises serving local markets. However, that emphasis must shift from small firms to what MIT calls innovation-driven enterprises: start-ups that can scale for significant impact.

Building an innovation-driven enterprise is full of challenges for any entrepreneurial team. They must find an appropriate beachhead market, prototype and pilot, and recruit and retain top talent. They also require specialised entrepreneurial finance at each stage.

For development entrepreneurs, access to appropriate types of capital is a significant constraint.

Their challenges are not just about the limited availability of institutionalised venture capital, but to the full range of “risk capital” options, from initial financing by friends and family and angel investors to VCs, private equity and commercial banking. The creation of a pipeline of financial instruments is a critical bottleneck.

Building a spectrum of financial instruments to support entrepreneurs in emerging economies requires engagement from all key stakeholders: government policymakers, aid agencies, investors, philanthropists and universities.

Rather than simply replicating instruments that support entrepreneurs in economies with robust institutions, financing entrepreneurship for developing world impact requires listening to entrepreneurs, understanding their needs, and designing accordingly.

Read the full post at City A.M.

Fiona Murray is the William Porter (1967) Distinguished Professor of Entrepreneurship, the Associate Dean for Innovation, Co-Director of the Innovation Initiative, Faculty Director of the Legatum Center, and recently appointed as a Member of the UK Prime Minister’s Council for Science and Technology (CST).

One thought on “Why entrepreneurs in the developing world need new funding models – Fiona Murray

  1. The financial crisis of 2008 deeply damaged the credibility of financial innovation in the general public’s mind. Hence entrepreneurs are in the in the process of developing world for that they are required new funding models.May be it is an important step in developing a new pipeline of funding models is to support young entrepreneurs.Apart from this initial financing, we need to expand access to different types of finance which have to move from aid-oriented financing to financing that supports entrepreneurs.By changing some policy and creating new funding models, we can greatly get a chances for success in solving problems in the developing world.

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