The Gap in the Entrepreneurial Ecosystem
For entrepreneurs with an already viable business plan, resources are everywhere; but in order to take the first and most difficult step, transforming an idea into a commercial operation, the existence of support and resources is virtually nil.
Our CEO Pablo’s story perfectly illustrates this lack of support: “I come from a low-income family and I knew I had no money to pay for any of my employees… especially software developers to develop the platform. Whenever I talked to support programs and early-stage investors in the US, they all wanted to see we had some traction and many were extremely sceptic… How was I going to develop Bridge for Billions without any money to initially develop the platform?”
The issue can be boiled down to the problem of what came first, the chicken or the egg? Entrepreneurs want access to an incubator to develop their business plan, but find this access denied unless they already have a viable business plan. The problem is circular and illogical, so why does this support vacuum exist?
To analyse this gap, a distinction must be drawn between companies at seed-stage and those at startup stage. Whilst both find themselves at an early point in the entrepreneurship process, a seed-stage company will generally not yet have established commercial operations and requires funding for essential pre-startup R&D. By contrast, a company at startup stage will usually have assembled key management, conducted market studies and prepared a business plan, rendering them far more attractive to outside investors.
If seed-stage finance can be defined as the capital necessary to start a company and to find a product-market fit, the vacuum of financial support becomes the inevitable consequence of an ecosystem in which investors act rationally. Very young companies clearly pose the greatest risk to investors: they possess no assets, no network and are usually untested in the market. Investors weigh this risk against the benefits of an innovative or visionary approach and more often than not, the risk factor takes the upper hand. According to European Venture Capital Association data, from 2007–2013 early stage companies received less than 6% of private equity funds. The problem appears rational and inevitable, perhaps the chicken and the egg dilemma is not as illogical as it seems.
With seed-stage companies finding themselves in the “valley of death,” capital is primarily raised via the three Fs: fools, friends and family. This being said, new actors are joining the playing field, with incubation programs situated in most major cities now providing capital, mentorship and office space. However, this evolution in fact compounds the pre-existing problem of finding seed-stage financing with the issue of systematic discrimination prevalent in entrepreneurship ecosystems.
Geographic location, educational background and wealth limit the ability of entrepreneurs to receive mentorship, support and visibility. The majority of early-stage entrepreneurs only have access to incubation or acceleration support programs which request equity or high fees, rarely exist outside main cities and have very low acceptance rates. As a result, entrepreneurship ecosystems globally are not inclusive, systematically excluding low-income, women and minority entrepreneurs. This structural inequality impedes entrepreneurs, not only in their ability to raise finance, but also in their search for quality mentorship. The problem is complex, and results in innovative solutions being auto-filtered to fit a market-based bias, benefiting only the wealthiest customers.
So how then do we solve this problem of the chicken or the egg? At Bridge for Billions, we believe the best solutions come from those who have personally experienced the problem and we see technology as the springboard for development. Our process challenges the market-based bias by taking a market-based approach, keeping the structure of incubation systems but removing the profit-driven incentive and globalising access via the use of an online platform. As our mentors are volunteers, not only is the risk related to investment alleviated, but the quality of mentorship is arguably better. The voluntary nature encourages a two-way learning process for entrepreneurs and mentors, providing a more individualized experience for every entrepreneur.
Through our 8 business tools, including a value proposition, pricing and business model, growth plan and financial projections, our aim is to fill the gap. We give our entrepreneurs the support necessary to define their business and financial needs, helping them develop and present a credible case for investment and then signposting them to the type of financing which best-suits their particular project.
To date, our efforts to diversify entrepreneurship ecosystems have been successful. The 120 entrepreneurs we have incubated represent 21 different countries, 45% of our entrepreneurs are female and 59% of them are aged 30 or younger. The industries in which our entrepreneurs work are also far more diverse than in traditional ecosystems, with 22% operating in education and 16% in agriculture. To ensure no entrepreneur is left behind due to lack of funding, we currently offer merit-based discounts, evaluated on a case by case basis, to more than 60% of our entrepreneurs. We have also formed partnerships with global networks, aiming to provide outreach support to as many entrepreneurs as possible. Discounts are available through these partnerships, ensuring maximum social impact.
Bridge for Billions is successfully working towards achieving geographical, socioeconomic and gender parity in entrepreneurial ecosystems, bringing to light innovative solutions across a broad range of sectors. Of course, there remains much room for growth: by developing Bridge for Billions’ global reach, our mission is to decrease the failure rates of new businesses and empower a generation of innovators with the potential to contribute to the development of local economies. Through the democratization of access to quality entrepreneurship support, we aim to gradually bridge the gap.
Want to take the leap of faith? Begin structuring and developing your business with Bridge for Billions today, sign up here for a 7-day free trial!