When you think about the way we do entrepreneurship in the West ( and around the world) you begin to realise that this a game where the dice are loaded in favour of the investors. This is not the simplistic ' the house always wins " you see at gambling casinos. It is far for sophisticated and the consequences are profound .
The business model is relatively simple. There is a market where are many more entrepreneurs seeking investment than there are funds or investors. So it is the many chasing the few. The objective of the few is make the maximum return on their investment. This reflects the risk and the nature of the market. The many , therefore, write business plans, do pitches and spend endless hours networking to get the introductions they need to the investors
Investors read ten of thousands of business plans each year. There are now sophisticated screening techniques and battalions of analysts who review them. " Only the best get real attention " said one investor. For these lucky people the game is to get the maximum amount of investment whilst giving away as little of the company equity as possible . For the investor it s just the opposite - get as much of the equity as possible for the least amount of investment . Once the game is played the hard work of building and running the business begins. The investors provide varying levels of support and oversight . The entrepreneurs believe they need to work 100 hours a week and do nothing else but work on the business .
Over time the results begin to come in . There are many studies which show the success rates of this process, Suffice it to say around 30-40% fail completely, another 20 % ( or so ) fail to provide returns which cover the cost of money and risk. Then there are the big successes. These are the jackpots whose payouts cover all the costs of the investors, gives high risk adjusted rates of return and create billionaires . Those who do not get over all the hurdles are told to start over again
The model is to start with as many entrepreneurs as possible, narrow it down at the intake stage, let the majority of those who are funded fail and live off the fruits and benefits of the rest . The model works extremely well from the investor's perspective , It is a model which is taking hold all over the globe. But is it the right model?
Lets us assume that this is the right model for the West/developed markets, It has certainly produced a great deal of wealth and produced new industries products, services and organisations . But is it right for low income countries. At Demeter we believe that it is not the right model. Rather than seeing a few successful we want the 'many to be successful " Rather than producing one business worth $ 100m we would like to see 100 business worth $1m each, This model will have a greater impact on prosperity and economic development. It will not only employ more people, provide a greater diversity of businesses but it will inspire others to become entrepreneurs and create wealth in their local communities/regions/countries. How do we ensure that more people are successful?
At Demeter we believe the answer is to by provide continuous support , tools platforms and networks which help to ensure that 60-70% are successful . We try to adopt metrics and investment benchmarks which are consistent with the challenges and developmental stages of low income countries . We need to define and celebrate success as building businesses in the $ 400- 700K range which employ, educate and train people . Wealth creation, in this model, comes from the many ( yes there will be few big successes but this is a bonus not a goal ) The examples these people offer will inspire others to become entrepreneurs and this will lead to the development of knowledge based skills- the seeds of future prosperity
Countries,, markets , entrepreneurs , industries are all different . We need to adapt the way to do entrepreneurship to reflect these differences. We need to make sure the dice are not loaded against those people who take the bold steps necessary to create businesses in low income countries .