Note: A version of this post was originally published on the Ennovent blog.
It is no secret that governments and large corporations often fail to adequately address the product and service needs of those living on less than $5/day at the ‘base of the economic pyramid’ (the BoP). Recognizing this clear market opportunity, many enterprises have taken on the challenge of bringing innovative and affordable products and services to BoP communities. While these enterprises are often branded as ‘social’, the reality is that despite their clear social contributions, they are just businesses responding to a high potential, yet fragmented, market.
Not unaware of the BoP market potential, this emerging network of triple bottom line-focused enterprises have attracted attention from angel investors and venture capitalists (VCs). Yet, despite the social and economic potential of these business, investors are following a fairly risk averse approach. Entrepreneurs often hear variations of the same line: “A solid idea, but it’s too soon for investment.” Fact is, despite their unquestionable social value proposition and strong financial potential, many early-stage enterprises responding to BoP markets have yet to demonstrate ironclad proof of concept – which leaves many investors uneasy.
This is the classic chicken-and-egg situation. Entrepreneurs need capital to build prototypes, acquire customers and reach a critical mass in the market; yet, investors will rarely support these businesses before the product and the business model is proven. Despite the global estimated BoP market demand of $5 trillion, many enterprises with truly innovative ‘game changing’ products and services fail to prosper – often because of lack of financial backing at the critical first phases. In addition to quickly flattening economic opportunity, this reality leaves low-income communities without the products and services they need to improve their lives.
Early-stage enterprises call for early-stage investors
In response to the clear demand for investment dollars tailored to the realities of enterprises working at the BoP, a recent surge of investors has emerged – willing to take higher, albeit calculated, risks. These ‘early-stage investors’ are more likely to take the market, technology and business model risks which are often necessary when supporting an enterprise in it’s infancy.
Recognizing the importance of these early-stage investors, in Spring 2012 Ennovent launched the Impact Circle
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