Rob Katz

Micro Venture Capital: Nicaragua’s Agora

Agora LogoWe’ve already profiled Aavishkaar, the Indian micro venture capital fund that works with entrepreneurs whose capital needs are between $50,000 and $500,000–too much for traditional microfinance but too small for commercial VCs. Now Aavishkaar has a counterpart in Nicaragua–Agora Partnerships, an initiative of Columbia University MBA students. BusinessWeek mentioned the group in a good article on the group last year; the MicroCapital blog reminded me of them again last month.

At the risk of repeating myself, I want to emphasize why I think Aavishkaar and Agora are great projects. First, they address a key bottleneck–entrepreneurs need more than the few thousand dollars that microfinance offers in order to effectively scale up, but often don?t have the collateral to secure a commercial loan (mesofinance). Second, both models are firmly rooted in profitable business practices–Aavishkaar is run by experienced VCs, while Agora’s consultants are graduates of a top-25 MBA program. Finally, these models aren?t charity–they generate profits for investors.These funds support a range of entrepreneurs: in India, Aavishkaar has funded the inventor of an irrigation rain gun and a dairy cooperative; Nicaragua’s Agora is working with everyone from a plastics recycler to a cigar manufacturer. Not all of the entrepreneurs these funds support are explicitly environmentally-friendly or socially responsible. Should this give investors pause? Should it give me pause?

I?m not sure. To run a profitable venture capital fund, you have to work with the best entrepreneurs. Sometimes that means working with a metal casting business–but isn?t a locally-owned business that puts its profits back into the community better for the economy as a whole? There aren?t a lot of data to support this, but it’s my hunch–and the salve to my conscience. What do you think–should we be discussing BOP venture capital if the enterprises funded aren?t socially responsible or environmentally friendly?