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).