Village Capital

Village Capital is a nonprofit organization that develops business acceleration programs for start-up ventures across the world and manages a fund that invests in graduates of their programs. The programs employ a unique peer-selection model in which the entrepreneurs themselves choose the companies in the program who receive the pre-committed investments of around $50,000. Village Capital has executed over 20 programs worldwide, in the US, UK, Kenya, the Netherlands, China, Brazil, and India. It has invested over $2 million in 30 for-profit businesses that have impact objectives beyond financial returns (sectors include healthcare, clean energy, tech, financial inclusion, education, and civic engagement).

History

Executive director Ross Baird and board member Bob Pattillo developed the Village Capital concept in 2009 as an initiative of First Light Ventures, a seed fund of impact investment firm Gray Ghost Ventures. 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.

Businessweek described the first Village Capital program experiments, held through pilots in San Francisco, Mumbai, Boulder, and New Orleans in 2009 as "if Microfinance and Angel Investing had a baby." The first groups consisted of from six to 24 enterprises.

In 2010, Village Capital 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. As of July 2013, Village Capital had introduced and executed 20 programs across the world, worked with over 350 enterprises, and invested over $2 million in 30 peer-selected ventures.

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. Examples include the three most recently announced 2013 programs, one focused for "edupreneurs" reducing the education gap in India, another centered around entrepreneurs solving problems in Nairobi through web, mobile, and information and communications technology, and the third geared toward reducing greenhouse gas emissions through clean technology in energy and agriculture in the agricultural region of Louisville, Kentucky.

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. The programs are typically in operation with local partners who have sector or geographic expertise.

Results

As of July 2013, Village Capital has invested $2 million in 30 companies across 20 programs and 350 graduate enterprises. Alumni have raised in excess of $40 million, created over 5,000 jobs, and served 4 million customers. 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. 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 for funding than male-only companies, which translates to a 300% greater likelihood that women entrepreneurs will receive funding through this program than through traditional venture capital.

Village Capital won the Harvard Business Review/Mckinsey M-Prize for Management Innovation in 2013. Among the well-known investors who have invested in Village Capital companies in later stages is the Asian Development Bank