West Coast Village Capital in San Francisco have an unusual pitch for a venture capital firm:
"If you have a business idea to help improve the world, we're interested."
But then, they operate in the realm of social entrepreneurship, specifically through Village Capital, launched late last year by First Light Ventures and Gray Ghost Ventures which together have invested $100 million in market-driven social enterprises in low-income emerging markets over the last decade, with the aim of improving the livelihoods of the working poor.
Inspired by the village banking, microfinance model, Village Capital has four pilot projects slated for 2010, three of them in the US: the Hub Bay Area in SF, the Idea Village in New Orleans, Unreasonable Institute in Boulder and DASRA in Mumbai.
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Here's WCVC's appeal to potential recipients:
West Coast Village Capital is seeking social entrepreneurs with bright ideas and sustainable business models. Inspired by the village bank model used in microfinance, Village Capital is an innovative investment model built on the hypothesis that entrepreneurs, working intimately together and providing peer support to one another, will be able to efficiently and wisely allocate investment to one another’s companies. West Coast Village Capital (WCVC) is a 12-week program in which social entrepreneurs will work together to strengthen their businesses and identify those most ready for seed investments of $25,000 and $75,000 from First Light Ventures. WCVC will be hosted at the Hub – Bay Area and will run January – April 2010.
A report by the Monitor Group titled Emerging Markets, Emerging Models: Market-based Solutions to the Challenges of Global Poverty explains the concept this way:
NEARLY HALF OF THE WORLD lives on less than $2 a day. What most
readers make of this fact is difficult to say, but for each of the 2.6 billion individuals living at or below that income level, it points to subsistence or, at best, bare adequacy. And for just under a billion of these, those at the very base of the global income pyramid, “living” means “only just” as part of the world’s food-insecure, who literally do not know where their next meals will come from.
This report is about “market-based solutions” as a means of helping low-income people to better lives and livelihoods. These can be alternatives or supplements to the traditional approaches of domestic and foreign assistance programs, philanthropic foundations, and other non-governmental organizations. Although traditional aid has provided, and continues to provide, relief to millions, global poverty remains a massive social challenge.
We have no wish to denigrate traditional aid, but we also believe it possible to claim market-based solutions have significant advantages in addressing certain aspects of global poverty. The full argument might occupy a monograph substantially longer than the present report. We simply ask that the reader consider recent history in thinking about what succeeds in actually helping poor people to better lives and livelihoods, as opposed to providing them immediate but often temporary relief from the symptoms of poverty. It is scarcely a coincidence that, from 1990 to 2004 — when global GDP grew annually by 2.8 percent — the global percentage of
developing-country inhabitants in absolute poverty declined from 29 percent to 18 percent.4 The market-driven economic growth of developing-country GDPs and the coincident decline in global poverty is perhaps the greatest economic success story of the modern era.
Below we offer evidence that substantiates the promise of market-based solutions. For example, several business models help participating suppliers to realize positive income effects of 10 to 30 percent per year — income that is not a result of redistribution but real and sustainable wealth creation.
We view the promise of market-based solutions as twofold: they actually drive sustained improvements in people’s lives and livelihoods, because individuals are making their own choices and taking responsibility for their lives rather than becoming dependent on aid providers; and this outcome is attained on a more cost-efficient basis. The solutions promise to be self-sustaining, and the up-front funding is thus true “capital” rather than an annual outlay for benefit programs.
Ross Baird of First Light Ventures answered some questions about Village Capital via Skype:
Interviewing the Investors Behind Village Capital from Teju Ravilochan on Vimeo.
An innovative aspect of this market-driven model, as Baird points out, is that peer groups, based their own trust networks and sense of need, will play a large part in directing the distribution of funds.
It should be interesting to see how these pilot projects work out in 2010!