Networking for Money

Money can’t buy you love, but it can help you hatch your entrepreneurial schemes, which would propel your fellow countrymen and women to prosperity, which would, surely, engender warm sentiments, which could mature into love. We can all agree on the merits of reverse innovation—rather, the question is “how do we deliver the $$$ of investors to the brilliant ideas of developing world entrepreneurs?”

According to Nathaniel Whittemore, financial intermediaries, which he prefers to call “routers,” are the answer. Routers are “intermediary agents who make the system move more efficiently by knowing everyone and playing the role of both vetter and connector.”

Fortunately, investors and intermediaries are beginning to consider the Base of the Pyramid; however, Erik Hersman at iHub argues that the amount of available seed funding is dwarfed by the demand of developing world entrepreneurs and their ideas. Hersman and Whittemore both describe new intermediaries and routers that aim to mitigate this dearth of venture capital.

Crowdfunding, based in South Africa, seeks to spread the risk of seed funding over 1,000 investors, who would invest small amounts of money in 10 to 20 enterprises. They would also provide startups with legal, business and technical assistance. VC4Africa, which describes itself as “Kiva on steroids,” invests larger sums of money in startups that entail greater risk and returns.

Additionally, there are intermediaries whose main objective is to root out investment-grade entrepreneurs. For example, Limbe Labs in Cameroon, Appfrica Labs in Uganda, iHub and NAiLAB in Kenya are technology incubators that essentially conduct due diligence on behalf of the investors.

Whittemore concludes that these intermediary networks will ensure that brilliant ideas are matched with seed capital and strengthened by technological assistance. We hope that these “router” organizations will level the playing field so that cases of reverse innovation lose their newsworthiness due their prevalence.

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