NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Amidst the panels, deals and offline conversations of SoCap09, an interesting stat emerged: the 800+ participants represent some 32 countries, an increase from last year’s international participation. The assumption (or at least my inference) is that the language of entrepreneurship is universal, extending to social entrepreneurship as well.

Well, I would be wrong. Ray Cheung of the World Resources Institute both led and participated in a conversation entitled “Creating Ecosystems of Social Entrepreneurship Around the World,” and together with panelists Rodrigo Villar (New Ventures Mexico) and Alonso Bustamente Guerra (IGNIA Partners) disabused us all of this notion. Focusing on the activities of WRI’s New Ventures project, which connects socially responsible businesses in emerging markets to capital resources, the panel members discussed business development, incubation and investment activities in Mexico and China and the challenges they faced.

One of the more difficult tasks laid out before Villar, he said, was to identify ten solid companies for New Ventures’ initial expansion into Mexico. Universities didn’t provide the same R&D opportunities to launch prospective entrepreneurs and businesses and the few idea leaders with real potential talked about how they felt “really alone” navigating the business world.

Bustamante Guerra agreed with the suggestion that the networks – at least in Mexico – just weren’t there. When his firm IGNIA, a venture capital body also focusing on BoP-facing endeavors, launched in 2007 the idea was to replicate the success of microfinance institution Compartamos (infamous because of the great fanfare around its IPO, eliciting questions about the “social” aspect of the bank) in other industries like health, education and housing.

IGNIA has made it a goal to invest not just in Mexico but across Latin America. Despite success collaborating with Villar’s group and international TA and business accelerators like Ashoka, Endeavor and Technoserve, what’s key is to find the right local partners and co-investors in each country. This may have slowed IGNIA’s expansion, but ultimately Social Entrepreneurship only succeeds if the right collaborations are in place.

Cheung spoke a bit about the challenges he has faced in China, accelerating social businesses and connecting them to capital. A lack of angel investors in the culture means that rural Chinese coal miners suddenly made rich have become the new investor class. Without any formal channels to nurture the players along the way, the path from idea to incubation to venture capital to launch to IPO is unreachable to these emerging markets entrepreneurs and consequently, for their BoP stakeholders.

The commonalities in the speakers’ experiences – and in the audiences’ as well, bringing up work in MENA (Middle East and North Africa) and South Africa – shows that it’s not as simple as plopping a business incubator into a new country and injecting capital into the market. Particularly when dealing with social businesses, building relationships is of prime importance. How else to navigate through all of the nuance and, as Villar said, to mitigate the wariness in the relationship: “you don’t trust the entrepreneur… but they don’t trust you either.”

Bustamante Guerra said that in a country where Madoff-types abound, he aims to correct the common perception in Latin America that “if you’re involved in social entrepreneurship you won’t be financially successful.” With New Ventures Mexico and IGNIA working together to stagger support of and investment in these prospective businesses (Villar estimates they nurture 70 per year), both panelists agreed that although the ecosystem is young, it existsand urged collaboration and partnership whenever possible.

In countries where the population at top of the pyramid is both tiny and rarely interacts with those at the bottom, it’s fascinating to think about the situations in which they do connect – and how motivated and inspiring those connectors may be. The panelists talked about how they’d prefer to work with businessmen than “idea guys,” given that the latter group has no concept of investors and advisors, instead fearing they might be losing control of their company. But they also talked about change and the potential to make an impact in these communities. With the six countries in New Ventures’ portfolio representing 80% of the globe’s biodiversity, these social entrepreneurs have their work cut out for them. The networks among them may be nascent, but they present great opportunity for everyone involved.