BIDweb - Brings together emerging market entrepreneurs, investors and coaches through a multi-community platform

Competition Finalist

This entry has been selected as a finalist in the
The G-20 SME Finance Challenge competition.

BiD Network's current online SME platform with 35,000 members, is the world's largest. BiD will be rebuilt into a multi-community webplatform that brings together entrepreneurs, investors and coaches. Entrepreneur's need faster and simpler service with better access to local peers, coaches and business angel groups. Investment syndication and GSM mobile apps for low internet areas are part of this

About You

Organization: BiD Network Foundation Visit websitemore ↓↑ hide↑ hide

About You

First Name

Thierry

Last Name

Sanders

Your Organization

BiD Network Foundation

Country

Netherlands, NH

About Your Organization

Organization Name

BiD Network Foundation

Organization Website

Organization Phone

+31-20-7555000

Organization Address

De Ruyterkade 107

Organization Country

Netherlands, NH

Organization Type

Non-profit/NGO/Citizen-sector Organization

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Your solution

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Name Your solution

BIDweb - Brings together emerging market entrepreneurs, investors and coaches through a multi-community platform

Describe Your Solution

BiD Network's current online SME platform with 35,000 members, is the world's largest. BiD will be rebuilt into a multi-community webplatform that brings together entrepreneurs, investors and coaches. Entrepreneur's need faster and simpler service with better access to local peers, coaches and business angel groups. Investment syndication and GSM mobile apps for low internet areas are part of this

Country your work focuses on

n/a

If multiple countries, please list them here. If your solution targets an entire region, please select it below

Current countries: 6 in Latin America, 5 in Africa, 2 in Asia. We wish to serve 50 more in Africa, Asia, Lat. America

Region(s) your solution focuses on:

Africa, East Asia and the Pacific, Europe and Central Asia, Latin America and the Caribbean, Middle East and North Africa, South Asia, North America.

Range of turnover in your target firms, in USD

Less than $1 Million, $1-5 Million.

Average turnover in USD of your target firm

USD 800,000

Number of employees in your target firms

Fewer than 5, 5-24, 25-49, 50-74.

Average number of employees of your target firm

5-10

Specify the size, average and range of expected loans or investments in each target firm

We accept start-ups and established firms seeking between USD 10,000 and USD 2 million. The average finance needed is USD 200,000. Of the 60 transactions brokered for USD 9 million between 2007-2009 50% were equity and quasi-equity and 50% were loans, often subordinated or royalty finance.

What stage is your solution in?

Operating for 1‐5 years

Innovation

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What makes your innovative solution unique?

1. No one else does what we do via internet at a multi-country level at this scale. The demand is overwhelming;

2. Solving the missing middle financing gap for SMEs on a massive scale is our mission. Mobilizing LOCAL finance using local business angels as a catalyst is innovative.

3. We use internet. This makes our approach very cost effective. We gave feedback to over 9500 applicants. We helped start about 400 SMEs in 4 years at a cost of USD 20,000 per SME. Creating an average of 10 new jobs, at USD 2000 per job.

4. SME incubators in developing countries keep calling us for a copy of the platform to manage their 100,000 (Indonesia) or 60,000 (Egypt) SME clients. We can't deal with scale with our current platform. We now know exactly how they can be served.

5. In 2011 we will start in countries like Burundi, Liberia, Rwanda, Kosovo with internet penetration below 2%. We will develop off-line forms and mobile phone (GSM) technologies to source business proposals via voicemail and key-in applications which feed into the web platform. This also helps where literacy is low.

6. BiD has established Business Angel groups (informal investors) in Argentina, Colombia, Peru and Tanzania to help mobilize local equity capital. This is cheap and effective and the demand for new countries is phenomenal (Indonesia wants one in every city, as do some African banks, etc.). The BiD platform will facilitate these investor communities.

7. We have an effective online coaching programme with 500 coaches. Engaging international coaches with local SMEs, this can also be upscaled. The platform will encourage peer-mentoring between SMEs and investors.

8. We never set up local offices, we always work with existing local partners.

9. BiD will include an online investor syndication and transaction function to bid directly to SMEs via local service providers.

How does your proposed innovation leverage public intervention in catalyzing private SME finance?

Yes, BiD leverages private, corporate and public actors to achieve its goals. Together they make up some 700 organisations that support our network.

CURRENTLY:
. In the west BiD leverages the support of the Dutch government's agencies like FMO for SME Finance, PUM for knowledge transfer, CBI for export advice, PSI for SME startup grants, the embassies for local outreach, NCDO for communications and events, and more.

. In the USA, the Obama administration's program on Global Entrepreneurship invited BiD Network's director to their advisory board. For this BiD Network organised "listening sessions" on SME Finance and on Connectivity for entrepreneurs in Muslim majority countries.

. In Mexico BiD's partner is Fundacion-E who coordinates all incubator activities in the country for the Mexican government.

. In Ecuador BiD's partner is ConQuito which is the entrepreneurship programme of the Municipality of Quito - also the largest programme of its kind in the country. Together we organise national business plan competition.

. In Argentina the government's investment matching program co-invests with private investors to finance SMEs. In 2009 6 companies got seed funding in this manner.

. In Tanzania the President talked on a televised programme on entrepreneurship and in support of the BiD Challenge - the BiD Network business plan competition.

. In Colombia BiD's partner La Universidad de los Andes works closely with the Ministry of Commerce to ensure public, financial and PR support.

FUTURE:
We see a lot of potential for catalyzing SME finance through joint public intervention. The methods can be clustered in 4 ways:

1. Bring our online platform to Government entrepreneurship agencies and incubators. BiD has had several requests to copy our model to support the Enterprise Agencies of the governments of Vietnam, Egypt, Indonesia, Turkey, El Salvador and other developing countries. With our current platform we can't deal with the volume and language diversity. This proposal is to make the changes necessary to facilitate a multi-community platform;

2. As of 2011 BiD with a parter organisation www.spark-online.org will develop advocacy strategies for removing barriers to doing business in 6 countries: Burundi, Liberia, Rwanda, Colombia, Kosovo and Palestine. Our approach will be bottom up: entrepreneurs' experiences will be used to inform policy makers on the issues. Entrepreneurs will be given a platform to speak up. If successful in improving the www.doingbusiness.org indicators we will expand this programme.

3. Entrepreneurial and investor culture needs to be cultivated. We aim to develop TV formats like "Dragon's Den" to develop an interest in entrepreneurship. Likewise investing in SMEs is a new phenomenon. BiD aims to cultivate interest among the wealthy & middle class. Leveraging local capital is better and easier for SMEs than engaging western capital. Public TV channels can be used to promote this.

4. We plan to lobby local governments for incentives for capital markets. This can range from creating matching funds; tax rebates & exemptions; mobilizing credit from banks. Our approach is entrepreneur or investor driven - they sign petitions and lobby on their own behalf as groups.

What barriers does your proposed solution address?

Asymmetry of information, Lack of collateral, Lack of financial capacity, Unavailability of financial products tailored to SME needs, Lack of institutional capacity of financial intermediaries, High transaction costs for financial intermediaries to serve SMEs, Underdeveloped local capital markets (term local currency funding, exit options for SME equity), General barriers to SME development related to investment climate, Lack of financing to women entrepreneurs, Specific barriers to fragile and weak states.

If you checked any of these barriers, describe how your solution addresses them

. Asymetry of information: The BiD platform makes entrepreneur information available to investors. This is structured through business plans, due diligence information, surveys, etc. Market and country information http://www.bidnetwork.org/smallbusinessguide is available to all parties.
. Lack of collateral: BiD promotes two uncollateralized financial products among its SMEs and Investors. These are Royalty-based finance and subordinated loans. The former has royalties pegged to sales performance. Whereby starting SMEs pay very little, but once sales grow their cost of finance increases.
. Lack of financial capacity: BiD trains both SMEs and investors in due diligence, financial statements, financial contracts, term sheets, monitoring approaches. Investors in developing countries are not used to investing in SMEs.
. Tailoring Financial products to SMEs: Over the past 60 deals that we have brokered we have seen that Royalty based finance works well for both investor and SME. SMEs are given breathing space to grow. And once they do grow the investor gets a fee over revenues/sales with an exit multiple.
. Financial intermediaries: BiD has trained 11 partner organisations in the origination of SMEs, the vetting process, the financing mechanisms and how to match SMEs to investors & setting up Angel groups - this we will continue to do.
. Transaction costs: by use of our internet platform; sharing of materials both legal and financial; creating volume. All these things help to reduce transaction costs.
. Capital markets: this has been explained above. For exits, the BiD platform will mediate to realize exits for investors.
. Barriers to entry: In 2011 BiD will start advocacy activities in 6 fragile states.
. Women entrepreneurs: BiD Network hosted the world's first international women entrepreneur's Challenge with ING Bank in 2009/2010. We will continue this successful formula.
. Fragile states: In 2011 BiD will start SME development activities in Burundi, Liberia, Rwanda, Palestine, Colombia and Kosovo. Many measures have to be taken to be effective in these countries. With this experience we hope to be well placed to stimulate SME entrepreneurship in countries with over 90% Micro enterprises,with a very low level of entrepreneurial culture, low internet penetration and high financial risk.

Impact

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Provide empirical evidence of your proposed solution's success/impact at present. If your project is in the idea phase, please provide evidence that speaks to its potential impact

Over the years 2005-2008 BiD Network had a total budget of 4 million Euros. Over this same period BiD managed to help start 300 SMEs, creating about 2500 direct jobs. (Our impact is probably higher. However, only about 50% of the entrepreneurs surveyed respond). Financially this translates to a new direct job for about $2000 and helping start a company for $20,000. Within the first 2 years of the start a BiD SME will create an average of 8 new jobs and will create about 20 by the third year. 40% of companies go out of business in the first two years.

In 2008 BiD Network started an investor matchmaking service. At the end of 2009 this effort lead to 60 matches between investors and SMEs totalling USD 9.5 million. The average investment size being about USD 200,000.
BiD Network thus leveraged $1.8 for every $1 of budget. This trend is increasing today.

Additional facts are that of all the "applicants" (entrepreneurs) entering the BiD platform 50% will go on to write a business plan. Of these 45% will start their business. About half of these have received support from a coach. 85% of coaches want to coach again the year after. They are satisfied with the service and impact they are having. 30% of the applicants are established businesses, the rest are startups with no sales track record.

All of this data has been audited, verified and monitored carefully.
Recently the Dutch Ministry of Foreign Affairs evaluated our programme and called BiD Network a courageous and pioneering organisation who knows how "to sail a ship while building it". We are flexible in our approach if we see that results are not emerging.

Here are some other anecdotal or indirect impacts worth mentioning.
. Many entrepreneurs and coaches garner important information by exchanging questions and ideas with eachother via our webplatform. There are currently 35,000 members. 9500 have submitted a business idea. 2000 have submitted a full business plan.
. Kiva.org was a BiD Network compaetition business plan in 2004, the first year of the BiD Challenge competition. MyC4.com's founders gained many insights and advice form BiD Network prior to starting their platform.
. The 11 national partners of BiD Network recently proclaimed that they would still need and use the current website even if the organisation would cease to exist.
. BiD Network inspired ING Bank to launch the 1st women entrepreneurs business plan competition. It inspired WWF to launch a nature-business competition, now for the 2nd year running. It inspired Barclays and GVEP to launch an East Africa competition for Access to Clean energy.
. BiD Network organises an Annual Event whereby the best entrepreneurs from around the world are invited to pitch their plans to European investors. About 500 participants usually turnout to make connections. NGOs and Banks are increasingly attending to get a better understanding of the SME Finance market.
. Almost all businesses that make it to our final rounds have some element of positive social or environmental impact.

How many firms do you expect to reach?

YEAR________________2010___'11____'12___'13_____'14____'15
SME_Applicants_______1500__2550__4500__7500__11250__15000
Full_BPs______________675__1148_2025__3375___5063___6750
Investment_grade_BPs__138___218___369___619_____971___1391
* BPs = Business + Financial Plan
* 30% Established firms

What is the volume of private SME finance you aim to catalyze?

YEAR_______________2010__'11___'12___'13____'14___'15____'16
Groups/Nations_______11___17___30_____50_____75___100____150
SMEs_Started________253__426__749___1249___1882__2528___3784_
SMEs_Financed________28___44___74____124___194____278____409

All forecast data displayed here and the table above assume no improvement in efficiencies. It is based on growth over the last 5 years.

What time frame will be required to reach these targets?

See above

Does your solution seek to have an impact on public policy?

Yes

What would prevent your solution from being a success?

1. No upgrading of the current BiD WebPlatform.
2. No funding. We need USD 5 million over the next 4 years to achieve this.
3. The inability to generate sales revenues through the platform.
4. Financing of SMEs through grants, will discourage local capital market development;

Describe the social impact of your innovation. Please include both numbers and stories as evidence of this impact

Over the years 2005-2008 BiD Network has helped start or finance close to 300 SMEs in emerging markets. These SMEs have created some 2500 direct jobs. This has created about 2.5 times that number in indirect jobs. To achieve this BiD Network connected 60 SMEs with investors for a total of USD 9 million. In addition, 185 SMEs started through their own efforts.
BiD SMEs generally create 8 direct jobs in the first 2 years, and 30 jobs by the end of the fourth year. Many have come back for second round financing. About 40% go bankrupt by the 3rd year.
Due to our international coaching programme many SMEs get access to international buyers and sellers. They become more professional.

The BiD Challenges (business plans competitions) highlight people and technologies that promote access to services which address primary needs such as access to energy, food technologies, water, women's jobs. Access to these basic goods and services lead to large social improvements.

Difficult to measure is the intensive internal messaging going on between the 35,000 BiD Network members – sharing insights in business.

Social benefits of Barefoot Power (BFP)
Barefoot Power is a for-profit company offering a cheaper, safer and cleaner alternative to kerosene in developing countries through low-cost, expandable lighting systems.
Globally, BFP estimates that 1.5 billion people use kerosene for cooking and lighting purposes. A reduction in kerosene lighting has many benefits: less fires; children can study longer hours; women’s literacy may improve; the air is cleaner. Outdoor lighting improves overall community security and reduces crime.

In 2009, BFP sold over 50,000 rechargeable LED lamps and is expected to supply an additional 4 million lamps over the next four years. Through BiD Network, they have leveraged over 1 million USD in funds which allowed them to pre-finance purchase orders

Sustainability

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List all the funding sources that are required for the sustainability of this solution

BIDweb needs USD 5 million in finance to make the solution work. We seek USD 2.5M in grants and USD 2.5M is equity or subordinated/shareholder loans. The BIDweb project can be undertaken through a newly established Dutch LLC (called a BV).

Funding sources that can be disclosed and committed are:
BiD Network Foundation USD 560,000 equity
Rabobank Group USD 340,000 suboordinated & convertible loan

Other funding sources (which cannot be disclosed without the signing of an NDA, and certainly not publicly publishable on this website) are from Dutch, Asian and US investors and Foundations. None of this has been committed or signed yet.

Financing amounts can be seen below.

Demonstrate how your proposed solution has the capacity to graduate from dependence on public finance. What is the time frame?

EURO
Years______2010___2011____2012___2013___2014___2015___2016___2017
Sales______250k___300k____600k___1.5m___2.2m___3.0m___4.3m___5.7m
Expenses___0.5m___1.5m____1.8m___1.5m___1.7m___2.0m___2.5m___3.0m
Balance___-250k__-1.2m___-1.2m______0____0.5m__1.0m___1.8m____2.7m
Financing:__0.5m __2.0m____1.5m (=3.9m Euro = USD 5m)

BIDweb will earn money through sales which should in 2013 be equal to expenses, after that the entity should be able to be profitable.
We envision that not only BIDweb makes money, but that community administrators can earn money from their members and those seeking to sell services. Members will be able to earn through the financing eachother or sales of goods and service. This way each member of the platform has a vested interest to make the platform a thriving economic ecosystem.
BIDweb is expected to have an IRR of 23%.

Demonstrate how your proposed solution will survive a potential loss of its largest private funding source

BiDweb will not start full-blown redevelopment of the platform until at least 50% (USD 2.5m) has been signed and committed. Within the first 9 months the project will be able to demonstrate enough tangible evidence that the remaining investment will be committed within 2011.

Additionally the contractual obligations of shareholders will be such that trade sales will only be allowed once the payback period has been reached (+/- 4 years).

Please tell us what kind of partnerships, if any, could be critical to the greater success and sustainability of your innovation

For communities BiDweb will seek collaboration with member organisations of incubators & SME centers like InfoDev and Empretech. These incubators with many entrepreneurs as clients are the prime community administrators of BiDweb. The number of communities and the number of members per community determine sales volumes.

Organisations like Chambers of Commerce, accountants, SME banks, Venture Capital associations, utility companies will also form an important source of SMEs.

For mentors and coaches BiD will collaborate with local business schools, professional services firms and large corporations. Through this model BiD already serves entrepreneurs with 500 coaches.

For investors BiD will work with local banks with ‘private clients’; with venture capital associations like AVCA and LAVCA. But also with rotary, financial media, golf clubs, etc.

NB. Most of these partnerships are already in place in our current 11 countries.

Are there non-financial issues that could threaten the sustainability of your proposed solution?

Internet penetration in developing countries is a major determinant of success of web platforms. Less than 2% of the populations of many developing countries have internet access. On average of all DAC countries it is 13%. We are however, not discouraged, for 2 reasons:
a) Tanzania has an internet penetration of 1%, yet BiD still receives over 200 business plans from SMEs per year from Tanzania;
b) BiDweb will in 2011 develop mobile applications for GSM phones. This will allow entrepreneurs with no web access, but with a phone, to call a hotline – key-in data, and choose through menu options and pitch via a voicemail system. This will be relayed to the web-repository. Communication back will go via SMS. The population of Bangladesh for example has 0.5% internet penetration, yet it has over 40% mobile access.

Please tell us if your proposed solution aims to scale up through a high growth sector, expand immediately to multiple sectors, and/or scale up geographically

It is the entrepreneurs and investors that decide which sectors will be leading via the platform, not us. Currently 30% of BiD SMEs are from the Agri & Food sectors. Then followed by services and small scale production and manufacturing.
The upscaling of the BiDweb is more a function of countries chosen rather than sectors.

The main determinants of growth (for BiD) are:
i) Internet penetration in a country (ITU data)
ii) The doing business rank
iii)Access to Finance (see: World Bank, Beck & Levine data)
iv) Staring entrepreneurs per head of the population (Entrepreneurship & GEM surveys)
v) Size of a written language. It must be used by at least 50million people over multiple countries.

202 weeks ago Matt Guttentag said: On October 27, 2010, the judges reviewed entries for the Changemakers G-20 SME Finance Challenge competition and would like to pass on ... about this Competition Entry. - read more >
204 weeks ago BIDweb - Brings together emerging market entrepreneurs, investors and coaches through a multi-community platform has been chosen as a finalist in The G-20 SME Finance Challenge.
212 weeks ago Thierry Sanders updated this Competition Entry.
212 weeks ago Thierry Sanders updated this Competition Entry.
214 weeks ago Thierry Sanders updated this Competition Entry.
216 weeks ago Thierry Sanders updated this Competition Entry.
216 weeks ago Thierry Sanders updated this Competition Entry.
217 weeks ago Thierry Sanders updated this Competition Entry.
217 weeks ago Thierry Sanders updated this Competition Entry.
217 weeks ago Thierry Sanders updated this Competition Entry.