News Roundup: Good Capital and The $2000 Car
An assortment of BOP-related news stories came out over the weekend (or over the last week or so).? Some are longer than others – particularly well-written are the two Forbes stories on Good Capital and Tata Motors.
First, my friend Kevin Jones was profiled in Forbes late last week.? Kevin, who blogged from the Skoll World Forum for NextBillion, is a principal in Good Capital, a pioneering social venture capital firm based in San Francisco.? Unlike other VCs (Acumen Fund, Aaviskaar), Good Capital is structured as a private equity fund.? So far, they’ve raised the first $10 million of a $30 million fund.? From the article:
Good Capital is structured much like your typical private equity fund. It requires a minimum capital commitment, in this case $250,000. The life of the fund is seven years; small distributions will likely begin in the fifth year. Fees are rich: 2.85% annually and 20% of any profits. The justification, per Jones, is that Good Capital has to analyze social benefits as well as business prospects. Like some venture capitalists, it will do lots of hand-holding for the businesses in which it invests…”This is patient capital,” says Jones. Risky capital, too. Good Capital won’t have any claim on assets if its investments go awry. “If we blow up, we really blow up,” he admits…For-profit investment candidates include firms that employ troubled youth and fair trade vendors, which are commodity producers that profess to pay good wages in the developing world (for example, to cattle ranchers and coffee growers). These portfolio companies need to spend a sizable chunk of their energy on doing good. “Because we’re the first to try this, we’re picking from the best,” argues Jones.
The other Forbes piece is a cover story on Tata Motors’ much-ballyhooed 1-lakh car, The Next People’s Car.? Since we profiled the idea here on NextBillion last year, it has been one of our most-viewed stories; people are clearly interested.? Forbes’ Robyn Meredith describes how Tata management fought has cut costs and engineered solutions in search of the 1-lakh goal (1 lakh is about $2500 USD).? From the article:
“I kept asking the question. Why? Why? Why do you want a four-wheeler?” Wagh remembered. Finally, he got the real answer. It turned out it wasn’t really a problem of chickens or eggs. “If I had a four-wheeler, I would have better marriage prospects in my village,” the young man said. Drivers of three-wheelers are looked down upon in India. Wagh realized that four wheels had emotional, not just practical, appeal…”People want to move from two-wheelers to four-wheelers,” he says. “Today they can’t afford it.”
More and more can, but Indian car buyers today represent a tiny slice of a potentially giant market–India has just seven cars per 1,000 people. India’s auto industry has grown an average of 12% for the past decade, but just 1.3 million passenger vehicles were sold in India in the fiscal year ending March 2006. That means a billion Indians buy about the same number of cars in a year as 300 million Americans buy in a month…If four wheels cost as little as two wheels, that could change fast. About 7 million scooters and motorcycles were sold in India last year, typically for prices between 30,000 rupees and 70,000 rupees, about $675 to $1,600. Tata is targeting a price of 100,000 rupees–one lakh, in Indian terms of measurement–or about $2,500 at current exchange rates, for its small car. That sounds impossibly cheap in the West but remains three times higher than India’s annual per capita income. The average pay for factory workers at Tata Motors is just $5,500 a year.
C.K. Prahalad delivers his Distinguished University Professor lecture at the University of Michigan, entitled “Democratizing Commerce: The Challenge for the 21st Century”
Philips partners with Manipal University to teach base of the pyramid strategy in India.
Only half of Venezuela’s poor can afford “the most basic things” according to market research published in El Universal.
China Mobile’s subscriber base is now over 300 million – or greater than the total population of the United States.