Village Capital-ito, Part Dos

I left off in my last post describing the mini Village Capital program that we were in the process of piloting at Yachana High School. (Need a refresher?) After 3 weeks of intense business planning, slight confusion, intermittent frustration, and lots of learning on both ends, we selected a winning social enterprise! Of course everyone is a winner in Village Capital-ito, which is evident in the 8 sophomores who can now rattle off the importance of a value proposition and the difference between startup and overhead costs.. However Gina and Manual of “Nuevo Amanecer” (A New Day), an organic fertilizer company, came out as clear winners by receiving over 60% of first place votes by their peers and teachers.

Gina and Manuel of "Nuevo Amanecer," an organic fertilizer company

Now I want you to think of all 16 year olds you know… think any given pair of them could come up with feasible social enterprise in 3 weeks? As I’m sure you can imagine, I was left completely jaw-dropped and speechless after listening to each group’s final presentation. True, I led them through a few workshops beforehand on business modeling and how to calculate costs over time, etc… but I can’t possibly take credit for how well each group performed. These kids have business savvy in their genes.

The business model canvas, jungle-fied.

In general Ecuadorians are extremely entrepreneurial, occupying the 7th place for total entrepreneurship activity (TEA) in the world. However, the majority of Ecuadorian entrepreneurial activity is necessity-based (due lack of other employment options) rather than opportunity-based (starting a new venture despite available employment options). But after having witnessed such stellar business plans from students who had just learned the meaning of “profit model” and how to calculate a percentage, it’s evident that this ratio is nearing a tipping point.  Watch out, world… my confidence in Ecuador’s entrepreneurial talent is stronger than ever.

As always, I’m getting ahead of myself. How did Village Capital-ito actually go down? Before turning all the Yachana students into wildly successful social entrepreneurs, we had to start with the basics. The program kicked off with a brief lesson on business modeling, followed by a giant brainstorm

"Lluvia de ideas"

of the best and the worst of the Ecuadorian Amazon; everything from Kichwa culture, fried yucca and our favorite animals to deforestation, pollution, and extreme poverty. The students later broke into teams based on mutual interests from what turned into a brain-downpour of needs and opportunities within the region. Each team was then tasked with creating a profit-generating business around their chosen social opportunity / need using the resources that are immediately available in the Amazon.

Sounds like a tall order, but these chicos rose to the challenge and then some. The social enterprises that would begin to take shape from that point forward included:

  • Artesanias Regionales (Regional Handicrafts): an intermediary dedicated to providing employment and greater income to local artisans by buying their products and re-selling them in areas frequented by international visitors such as city centers, popular hotels, and tourist attractions.
  • Muchshuk Kawsay (Kichwa for ‘New Life’): a socially conscious manufacturer of Balsa figurines. Balsa wood is typical to the Amazon, and Muchshuk Kawsay plans to source their material responsibly and educate customers about the different aspects of the Amazon through various figurine designs such as plants, animals, and insects.
  • Nuevo Amanecer (A New Day): an organic fertilizer manufacturer that utilizes native plants and traditional knowledge to create 100% organic plant fertilizers. Their main objective is to prevent illness from chemical use and contamination of water sources.
  • RRR – Reducir, Reusar, y Reciclar (Reduce, Reuse, Recycle): an educational firm that sells workshops and certification programs to the governments of rural communities and towns on how to properly dispose of recyclable material and reduce waste.

Artesanias Regionales working on their business plan

Let the peer-evaluating begin!

After presenting the first drafts of their business plans the following week, we began to dive deeper into the entrepreneurial process by exploring subjects such as pricing strategies and competitive advantage. A mid-point poll was taken where students had the opportunity to openly rank, applaud, and critiqued each other’s business models. During the third and final week of instruction we incorporated some basic math to forecast operating costs and earnings after 3 years. Never before have I seen so many “light bulbs” turn on at once as when each student began to realize that they could run a lucrative business that also generated a positive social return!  Village Capital-ito was working…

Johanna busting chops during the question and answer session

When the day finally came to present their final business plans, an air of nervous and excitement circulated throughout the classroom. Each group had stayed up late the night before to place the finishing touches on their marketing materials, financial projections, and oral presentations (the only reason I know this is because my room is right next to the library and our inch-thick walls do little to muffle noise. Mental note for anyone who comes to work at Yachana: don’t pick the room closest to where all the late-night homework takes place). After each team had successfully presented, the students were asked to rank each enterprises from 1 – 4 based on feasibility, potential social impact, and projected financial return. In previous Village Capital programs around the world, usually 1 – 2 particpating enterprises receive the majority of peer votes. So as was expected, one enterprise from Village Capital-ito came out as the clear favorite: Nuevo Amanecer.

While I’m definitely going to consider this first go-around a success, there were lots of lessons learned along the way. For instance, Latin American culture places a high importance on hierarchies – students are below the teachers which are below the principal, etc. When I told the students that they themselves would be evaluating each other’s business plans, you would have thought I told them the sky is red. After we conquered that hurdle, even greater confusion ensued when I told them “there are no wrong answers in brainstorming.” I won’t go into too much detail, but the Ecuadorian public education system is (sadly) built around rote learning; the teacher dictates the facts and the students copy, repeat, and memorize regardless of whether or not they understand what they’re “learning.”

Needless to say, I think some of the students began to doubt my own intelligence since I refused to grade their work or feed them answers. But that’s okay. I’m happy to play the part of the crazy gringa so long as projects like RRR, Nuevo Amanecer, Muchshuk Kawsay and Artesanias Regionales keep coming up in our future Village Capital-ito programs 🙂

Successful Village Capital-ito grads! Joined by the crazy gingo teachers

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




Wait, what again are you doing in Ecuador?

…. I seem to get this question a lot.  Don’t tell anyone, but even though I’ve already been here in Ecuador for a few days, I still don’t really know the complete answer.  I would imagine that if you placed all the people to whom I’ve given some sort of answer in a room together, you’d probably think I have multiple personalities.  Given the many stakeholders, deliverables, and project tasks that have been tossed up over the past few months, the possibilities for what I’ll actually accomplish are endless (and quite frankly, a little overwhelming).

Therefore – to clear it all up for you guys and myself, I’m going to use this space for some good old fashioned project organization.  I was inspired last week by little sister’s first week in high school Chemistry where they learned how to write up a proper lab experiment.  And since my project here is quite experimental in itself.. I think that’s precisely the format I’ll use to relay to you, my loving public, and to myself what the heck I’m doing down here.  So here ‘goes..

Background: One of the greatest things to come out of the development/NGO/social enterprise/foreign aid/do-gooder space in the past 10 years (in my opinion) is impact investment. What is impact investment you ask? As one of my classmates used to say, that’s a GREAT question. In my own words, impact investment is the flow of capital (cash) from a social investor to a social entrepreneur with the intention that this injection of capital allow the entrepreneur’s enterprise to scale and grow not only in revenue, but also in social impact. If this defintion doesn’t do it for you, check out this, and this .  Oh and this too!

Now some of you critical thinkers out there might be wondering what I mean by “social.” And my response is – what does it mean to you? For some investors, social impact may come in the form of clean energy, last-mile power distribution, or employment. For others, it could mean access to healthcare, affordable basic goods and services, or education. For instance, First Light Ventures aims to invest in companies that provide affordable basic goods and services to impoverished individuals.

So far, impact investment has made wonderful headway in the United States. And while we in the US definitely have our own social problems, there are BILLIONS of people in the world living below the poverty line, many of whom live in emerging markets. Foreign aid efforts have been proven inefficient, and microfinance for the most part is geared toward individuals. Impact investment allows social entrepreneurs who would otherwise be overlooked by traditional investors the chance to play in the venture capital space and prove that not only can they sustain a profitable business, but also one that benefits society as a whole. This leads us to the main reason for me being here….

Problem: Well, there are a lot of those out there. I’ve settled on one that is pretty all-encompassing, and we’ll go ahead and call it a challenge. Problem is such a weird word…

1) How can impact investors most effectively and efficiently channel much needed capital to social entrepreneurs in emerging markets? And more specifically, in the rural Amazon of Ecuador?

Hypothesis: The Village Capital (VilCap)  business accelerator model (more on this in a later post!) will help to harness social innovation and entrepreneurs in the Amazon region of Ecuador, and thus further promote social and ecnomic development in the region.

Methodology: Well, here I am in Ecuador so the first hurdle has been conquered. One of the biggest challenges for impact investors is actually getting to countries such as Brazil, Lebanon , Egypt or Ecuador. Not to mention, language and cultural barriers are abound in these locals, making it difficult to work effectively in a limited time contraint. Lucky for me, hablo español, I am familiar with latin culture from previous travel and educational experiences, and the kind folks at the Yachana Foundation  have agreed to host me for next 5 months in exchange for some entrepreneurship training at their high school.

So, in order to tackle this challenge I’ve been tasked to perform feasibility study, or estudio de factibilidad, on whether or not a business accelerator or some other type of medium for impact investors and social entrepreneurs to gather is possible in the Amazon region of Ecuador. And since this blog post is quickly turning into a novel… I’ll wrap it up by saying that over the next 5 months I’ll be visiting various micro enterprises and social businesses in the Amazon, venturing to existing business incubators in Ecuador to see how they run their ships, working closely with the entrepreneurship program at Yachana, and talking to anyone and everyone who will listen to my ideas 🙂

Until next time, sending you all lots of latin love 🙂