Saturday
February 28
2009

David Lehr

Agora Partnerships and Heroes of Development

As I learn more about entrepreneurship and job creation efforts I am increasingly convinced that we need a broader range of tools than either microcredit or social venture funding typically offer. Recently Agora Partnerships caught my eye when they and their founder Ben Powell were awarded a Draper Richards Fellowship. Agora Partnerships has an integrated approach that “provides strategy and leadership assistance, networks, and access to capital to socially responsible small businesses with the potential to improve their communities and protect the environment.”

Agora was founded in 2005 on the belief that economic development happens best when individuals are integrated into the formal economy and can avail themselves of the norms and protections that formalized laws and institutions provide; certainly a key factor in accessing capital. (My favorite book on this general topic is the Mystery of Capital by Hernando de Soto). Making this happen, however, is none too easy and nascent entrepreneurs often need a lot of help to enter and succeed in the formal economy.

According to Paul Davidson, Agora’s Operations Manager in Nicaragua, access to good advice is as important as access to capital. For example, there are lots of hidden costs – such as the sheer cost of electricity in resource scarce Nicaragua – that entrepreneurs often don’t pay enough attention to, masking the actual cost of certain products. In addition, many entrepreneurs there are afraid of outside investment and poorly understand the benefits that outside advisors can provide. Onerous regulations and high business set-up costs don’t make it any easier. Agora’s non-profit structure, coupled with a micro venture capital investment fund it sponsors, enables the organization to serve a broad range of small business entrepreneurs from those that need assistance with business basics to those that have more strategic or operational challenges that are also ready for growth capital.

Assistance can come from the Agora network of on the ground enterprise development managers, who charge relatively low or no fees, or it can come in giving an entrepreneur the financial consulting they need to make their case for a commercial investment, This non-profit / for-profit approach enables Agora to provide both strategy support and access to long term capital to companies too big for microfinance but too small to access traditional capital sources. This integration should also lower the risks for both the non-profit and for-profit sides.

Among Agora’s challenges are the difficulties of finding entrepreneurs that meet their criteria and the time and effort needed to build trust and openness with them. It also takes time to create awareness of venture capital and build mindsets that welcome non-family partners; interestingly being headquartered in the US is helpful to Agora in building local trust. The investment fund they manage enables Agora to put skin in the game but more importantly ties their success to the long-term successes of the businesses the fund invests in. The long-term plan is to sell the fund’s equity either back to the entrepreneur or to larger funds, and return any revenue to the non-profit to support their mission.

So far Agora has worked with 63 companies – with its fund investing in only a small portion of these – and promoted entrepreneurship to thousands of individuals in Nicaragua. And while many enterprise development organizations have a very narrow focus, Agora is addressing three key constraints – managerial talent, access to markets, and access to finance – faced by entrepreneurs around the world. Ultimately Ben and his team are thinking big – in addition to proving their model, expanding into other countries, and developing micro venture capital investments as an asset class, Agora also wants to change mindsets and increase public appreciation and celebration of entrepreneurs as heroes of development.

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