Village Capital

Village Capital is a nonprofit organization that finds, trains, and funds early-stage ventures solving major global problems in agriculture, education, energy, financial inclusion, and health. VilCap Investments, LLC is its affiliated, managed for-profit investment fund that invests in the top peer-ranked company of each program.^[1] The programs employ a peer-selection model, in which the entrepreneurs themselves choose the companies in the program who receive the pre-committed investments of around $50,000.^[2] As of April 2015, there have been over 35 programs in nine countries, and its 450+ graduates have raised over $110 million in follow-on capital and created 7,000 jobs.^[3][4][5]

History

Executive director Ross Baird and board member Bob Pattillo developed the concept in 2009 as an initiative of First Light Ventures, a seed fund of impact investment firm Gray Ghost Ventures.^[6][7] The concept drew inspiration from the "village bank" concept in microfinance, where peer groups of women in developing countries would enable small loans through a peer-review structure.^[4]Businessweek described their first programs in the US and India as "if Microfinance and Angel Investing had a baby."^[8] These first groups consisted of from six to 24 enterprises.^[7] In 2010, the organization added four more programs.

In 2011, it launched as an independent organization with founding support from foundations active in impact investing: the DOEN Foundation, the Rockefeller Foundation, Halloran Philanthropies, the Monterey Institute of International Studies, Sanghata Global, and Potencia Ventures.^[7]

Program

The organization's business acceleration programs are what the founders call "problem-based", focusing on a specific social problem, and recruiting businesses targeted to solve this problem. For example, the 2013 programs include one for "edupreneurs" reducing the education gap in India, another for web, mobile, and information and communications technology entrepreneurs in Nairobi, and the third on reducing greenhouse gas emissions through clean technology in energy and agriculture in the region of Louisville, Kentucky.^[9]

Their programs generally consist of three four-day workshops over a three-month period. In the intensive sessions, ventures develop their business models, learn to create and manage a team, interact with potential customers, and connect with investors, all while participating in peer-mentoring with an eye toward the ultimate peer-rank and investment. The program lets entrepreneurs see enterprises through the lens of the investor, simultaneously allowing them to choose the most deserving and making them understand how investors look at their own companies.^[10] The programs are typically in operation with local partners with sector or geographic expertise.^{[3][4][9][10][11]}

Results

As of July 2013, the organization has invested $2 million in 30 companies across 20 programs and 350 graduate enterprises.^[4][9] Alumni have raised in excess of $40 million, created over 5,000 jobs, and served 4 million customers.^[4][9] The peer-selected companies typically experience 200% growth in revenue in the 12 months following the program and they fail at a rate of only 9.7% compared to 24.6% of all participating non-peer selected companies.^[4] 60 percent of graduates provide basic services to customers living in poverty, 30 percent generate livelihood opportunities to individuals living in poverty, and 10 percent address energy and environmental sustainability.

The peer-selection model has resulted in increased access capital for female entrepreneurs. Companies with female co-founders are 78% more likely to be selected than male-only companies, three times the likelihood that women entrepreneurs will receive funding through this program than through traditional venture capital.^[3]

Village Capital won the Harvard Business Review/Mckinsey M-Prize for Management Innovation in 2013.^[12]

References