Village Capital-ito! Part 1.

This title needs some explaining.  And bear with me… this post is un poco long, hence me dividing it into 2 parts.  I’ll try to keep you entertained along the way with pictures and my (often failed) attempts to be funny.  Get comfy, and happy reading =)

In previous posts, I’ve mentioned working with a social enterprise accelerator called Village Capital.  After such posts, a few of you have sent kind emails and notes saying that while the pictures are nice, most of what I write  zooms straight over your head.  And that’s just no bueno.  So here goes – my grand attempt to explain Village Capital, impact investment, business accelerators, and social entrepreneurship.  But promise me this – if I clear all this up for ya’ll, will someone please tell me (in one sentence) what the heck all this “Occupy Wall Street” stuff us?  Not a single news source has been able to give me a straight answer….

I digress…

So travel back in time with me circa 2006.  Muhammad Yunus and the founders of the Grameen Bank have just won the Nobel Peace Prize for making popular the financial tool that forever-changed development: Micro-credit.  Micro-credit was designed so that the “un-bankable,” or rather those who did not have sufficient income for a traditional bank loan, could be granted small loans at low interest rates.  With these affordable loans they could then start a small business, purchase a piece of machinery, invest in a few pairs of animals, or purchase some other type of working “capital” that could help to generate more sustainable income for their family.

What’s unique about micro-credit is that within the Bangladeshi communities that were initially served, the Grameen Bank formed small groups of individuals and asked them to vote amongst each other as to who was the most “loan-worthy” at the time.   This peer lending model not only created solidarity within each group, but also established accountability and a faint sense of peer pressure.  If an individual did not work to repay their loan, chances are their peer lending group would not vote to grant them another loan in the future.  Within peer lending groups, micro loans have an average repayment rate of 97%.  You don’t have to be a Swiss banker to see that the peer lending model works.

So now let’s travel forward in time to late 2010.  (But remember the concept of peer-lending, you’re going to need it later!) First Light Ventures, an impact investment fund, was brainstorming cost-effective ways to expand their portfolio of social enterprises and unlock the potential of social entrepreneurs in emerging markets.

Stop… I know what you’re thinking.  “There you go and lose me again, Megan.  What in the world is impact investing?  And how is a social enterprise different from a regular enterprise? 

Hold your ponies, I’m getting there.

A social enterprise, led by a social entrepreneur, is different from a traditional for-profit enterprise in that in addition to generating a profit, a social enterprise also measures its success by the amount of social impact it creates.  That is to say, a social entrepreneur will not consider his venture a success (despite any cash that is rolling in) unless his social mission is also being fulfilled.  Social and impact are a bit harder to nail down, and can mean different things to different entrepreneurs.  This in and of itself is a beautiful thing and creates room for innovation across a variety of social needs….employment, healthcare, education, affordable access to basic goods and services, climate change mitigation, waste management, security, financial services…. You get the point.

Typically, social enterprises are geared toward the “Bottom of the Pyramid” (BOP), which represents the 2.5 billion people in the world that makes less than $1,000 a year.  The population at the BOP makes up a large consumer market that, if given the chance to consume and take advantage of goods and services that are affordable, sustainable, educational, useful, nutritious, safe, etc., could begin to lift itself out of poverty and toward a higher standard of living.

For example, Yachana Technologies (YT) assembles and distributes 20-liter home water purification systems that eliminate 99% of all water impurities.  Their mission is to provide clean, affordable, safe drinking water and reduce dependency on plastic water bottles.  If a family in the Ecuadorian Amazon making $800 a year decides to invest in a  “Yachana Technologies water purification filter” for $40 (about 5% of their annual income), over time this family will save approximately $80-$100 a year on what they would have spent purchasing bottled water,  their children will be at a lower risk for contracting parasites, dysentery, and other digestive illnesses and thus be able to attend more days of school, and finally the family will not be throwing away toxic, petroleum-based plastic bottles that when burned pollute the air more than any other type of burned material.  YT then uses its profits to expand production and introduce its water filters in other areas where clean drinking water is scarce.

Saving money, happy healthy kids, less pollution, and profits to expand… genius!  If you don’t have warm fuzzies and goose bumps just thinking about a child drinking water free of bichos del ombligo (belly-button bugs) for the first time, I don’t think we can be amigos anymore.

Yachana Water Filters

= clean drinking water for all


= warm fuzzies

So what happens when Yachana Technnologies wants to expand their filters to the Peruvian Amazon or work on prototypes for different BOP solutions?  One option is to attract an impact investor or an impact investment fund.  What is an impact investor?  Darn glad you asked.  Impact investors “actively seek to place capital [cash money] in businesses and funds that can harness the positive power of enterprise.”  Some social businesses may have too large of a financial need to solicit a micro-loan or may be ineligible for grants that are intended for non-profit organizations.  “Impact investing has the potential to unlock significant sums of private investment capital to compliment public resources and philanthropy in addressing pressing global challenges” (

However, one of the biggest hurdles for impact investors is actually getting people on the ground in emerging BOP markets to scope out social enterprises, meet the entrepreneurs (and converse in their native language), and report back to their board as to which enterprise is the most investment worthy.  First Light Ventures, the impact investment fund I mentioned earlier in this post (probably seems like forever ago), was struggling with this same problem.

And then it hit them… peer lending! In case you’ve already forgotten, in the peer lending model individuals voted amongst themselves as to who received the micro-loan.  Could this same model work with social entrepreneurs looking to receive seed capital?  It sounded like a solid idea, so First Light Ventures decided to test it out.  Small groups, or “cohorts,” of pre-selected social entrepreneurs were taken through a 12-lesson business accelerator program where they were mentored by seasoned social entrepreneurs, given workshops on how to improve their businesses, scale their models, attract capital, successfully pitch their idea, etc..  All throughout the process, however, the entrepreneurs voted amongst themselves as to which social enterprise was the most investment-worthy.  Sure enough, at the end of program 2 enterprises were left with a majority of the votes and therefore won a seed investment from First Light Ventures…. And the Village Capital model was born!  This peer-selection process has since been implemented (very successfully) by Village Capital in San Francisco, Boulder, New Orleans, Mumbai, Sao Paolo, and London.   The program has (in just 1 year!) graduated 137 participants and will have awarded nearly $1 million in seed capital to winning social enterprises.  That’s $1 million going toward product development, job creation, market expansion, and all-around “good stuff” for the Bottom of the Pyramid population.

Are you feeling warm fuzzies again, too?

I know you’re probably also feeling bad for the enterprises that don’t win (I was too), but don’t worry!  It’s a win-win!  During the acceleration process each enterprise gains access to invaluable mentoring and business coaching, will be exposed to a variety of additional impact investors, and most importantly leaves with a life-long network of peer social entrepreneurs.

So let’s bring it on home for now, because I’m just as tired of writing as you probably are of reading.  The whole point of me laying this all out is because while I’m down here researching possibilities for Village Capital in Ecuador,  I’ve actually decided to test a micro-version of Village Capital, Village Capital-ito, (add –ito to anything in Spanish and you make it mini) at the Yachana High School.

…And it’s going great!  The students have spent the last 2 weeks developing social enterprises for the Amazon and have already begun to critique and offer suggestions for each other’s ideas.  In part 2 of this post, I’ll tell you all about each group’s social enterprise, the triumphs and lessons learned along the way, and reveal the winning team of student entrepreneurs!

Photo credits:

Read up, folks!

I’m loving this weekend’s news coverage of “Bottom of the Pyramid” business solutions, so I thought I would share some of my favorite articles.

After a great week of social enterprise visits, entrepreneur meetings, and project proposals in Quito (more on these awesome adventures in a later post), I’m more than ready to head back to Yachana tomorrow… this time armed with an arsenal of insect repellents and light layers.

Coming up…

On Thursday I’m starting a “Village Capital Junior” program at the high school, whereby the students will create their own mini-social enterprises and peer review each other’s work along the way.  At the end of three weeks, they will have (hopefully!) learned how to create a business model, pitch their business idea to classmates, and identify key success factors for a successful enterprise.  The peer-selected winners of “Village Capital Junior” may even have the chance to present their business ideas to the Yachana Directors for a chance to take out a small loan and put their business plan into action!  I’ll be sure to relay the results.

Starting this week and continuing through the next month, I’ll also be conducting research and administering surveys on the adoption of social media sites in the Amazon.  The US has already seen the impact that sites like Facebook and Twitter can have on personal relationships, commerce, and mass communication.  Not to mention, the unprecedented voice they can give to a politically charged nation.  Living in an area that is on the cusp of adopting google, facebook, youtube, and all other off-spring of broadband internet is pretty exciting, and therefore worth researching!

Oh, and by popular demand, more baby otter footage 🙂

Probably the cutest thing in the entire Amazon





 We’re flying by the seat of our pants down here in Ecuador these days. Lots of last minute meetings, travel plans, school changes, misunderstandings, and project alterations.  Honestly, it’s been a roller coaster and I’m just now starting to “enjoy the ride.”  For those who know me well, you can imagine it took some time for me to forego my google calendar that schedules my day in 15 minute increments and the notion that I could expect a meeting to start on time.

It’s quickly becoming apparent, however, that Ecuador has operated this way for quite some time and more importantly, doesn’t really see anything wrong with it.  Granted, spontaneity, complete neglect of foresight, and living in the moment each have their perks.  Little setbacks here are commonly followed by a mere “meh” or “oops.”  And In the words of my favorite entrepreneur in Ecuador, Douglas McMeekin – founder and president of Yachana, “If I sat around and took the time to 100% think through it all (all being the entire Yahana Foundation) it would have never gotten done.”  That may be true…

But over the past few weeks I’ve seen how the “go with the flow” Ecuadorian mentality can also lead to major inefficiencies, organizational setbacks, and most importantly, loss of opportunity.  Perhaps it’s the cultural tendency to think mostly in the “short term,” or Ecuador’s age-old habit of making quick fire decisions without really, well… thinking or communicating (i.e. throwing out 7 presidents in 10 years without stopping to wonder how that may look to investors wanting to invest in a “politically stable” country).

Below you’ll find three “Oops” instances from my first month in Ecuador that may help to illustrate exactly what I’m talking about.  They each vary in the severity of their consequences, but all could have possibly been prevented with a little previsto (foresight), planificación a largo plazo (long-term planning), rendición de cuentas (accountability), and comunicación (I shouldn’t have to translate this one….).  I really don’t know if Ecuadorians will ever adopt such practices, nor do I think it’s anyone’s place to tell them they should.  But the consequences are difficult ignore, and if left ignored Ecuador will continue to struggle in its effort to transition from an emerging market to one that is developed, self-sustaining, and thriving; not to mention delay the interest of impact investors who so whole-heartedly want to see countries like Ecuador realize their hidden potential.

Example 1

I walk up to a friend from Mondana (community where Yachana is located) and notice that the strap of her cotton bag is becoming unraveled and hanging on by a thread.

Me: I notice your bag is becoming unraveled.  I know how to fix it if you have some thread and a needle. Want me to help?

Girl: Oh yes, it’s been unraveling for a few days now.  But no thanks, I’ll just wait and fix it when it breaks.

Me:  Well if you want I could fix the tear and reinforce the rest of the strap, that way it will last longer and you won’t have to worry about fixing it if it breaks while you’re away from home.

Girl: Really? You know how to do that?  How interesting.  Thanks, but it’s still not broken yet.  I’ll just wait. 

Me: ………

I haven’t seen her in a few days, but I can guarantee that strap has surely broken by now.  And I doubt she was carrying around a needle and thread, because that would be downright crazy…

Example 2

My friends and I are about to cook dinner at our hostel in Tena, and have invited a few amigos who were staying elsewhere to join us.  The kitchen is outdoors, in a common area, and open to hotel guests.  Out of respect we thought we would mention to the hostel owner that we would be having some friends over.

Us: Señora, we´ve invited some friends over for dinner and wanted to let you know.  We’ll be very quiet and clean up after everything.  Your outdoor kitchen is amazing and we’d love to show our friends.

Señora: What? No, only guests can use the kitchen.  Your friends cannot come. I built that kitchen for paying customers only.  (she finally allowed our friends to come over, but only because I think she felt bad that we had already bought all the food…)

Obviously I’m not about to tell a Señora how to run her business.  But the kitchen has been built and is therefore a sunk cost.  Allowing a few non-customers to enjoy the space alongside hotel guests would not have cost the owner a single extra penny.  In fact, by allowing friends of guests to enjoy the hostel’s new common spaces she is essentially employing more mouths to spread the word about her business for free!  You can’t buy that kind of word-of-mouth publicity in the tourism industry.  But the curse of the short-sighted Ecuadorian business owner continues….

Example 3

This example is perhaps the most heartbreaking of all, but it also represents a wonderful lesson in communication, accountability, and organizational sustainability.

At Yachana, which is a considerably well-run organization compared to others in Ecuador, I’m still a little confused as to who exactly is in charge of what, and what exactly each department is responsible for at the lodge.  This became even more apparent after a serious storm this past Sunday when the Napo River rose so high and grew so wide that low-lying houses, buildings and moored boats were in serious danger.



As soon as river started to rise early Sunday morning, boat owners from around the community began to bring their canoes to higher, more secure ground.  And rightfully so – since there are no roads and the community relies on its canoes to travel to/from the market, school, and elsewhere.  But what about Yachana’s boat – the 30-person, dual-motor, covered fiber-glass canoe that brings tourists (aka income) in and out of Yachana multiple times a week? Who is responsible for keeping that boat safe? The hotel manager?  The higher ups in Quito? Whichever boat operator is on duty?

By about mid-day, the river was raging.  Actual trees were being ripped out of the ground and carried down the river.  By the time Yachana’s boat operator decided he should probably move the boat to safer ground, it was too late.  Upon trying to nudge the boat into a small cove, the current caught the tail end of the canoe and whipped it around horizontally so that the whole boat was sideways.  Unable to regain control against the current, the boat was forced against a tree and endured hours of river-beating until it was actually flipped upside down from the force of the current.

Bye-Bye, boat.

While witnessing this tragedy I had an enlightening conversation with one of the lodge’s staff members…

Me: Who is in charge of keeping the boat safe?

Staff member: I’m not really sure.

Me:  Oh.  Well who will tell the hotel management in Quito the boat is destroyed?

Staff member: I’m not really sure.

Me: Oh. Is boat insurance available in Ecuador?

Staff member: (laughing) I’m not really sure, but probably not.

Me: Uh oh.  So who pays when something like this happens?

Staff member: I’m not really sure.

Me: And how often does the river flood like this?

Staff member: Oh, at least once a year. 

So essentially, it is certain that the river will show its fury at least once a year.  It’s 100% going to happen. But have measures been taken to put someone charge and establish a contingency plan in the event the river tears up more than just trees?  Nope.

Mental note – there is a business opportunity in the boat insurance industry in Ecuador.