Entrepreneur Commons
entrepreneurs in developed countries also need help
Project Street Address
Project City
Project Province/State
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Project Country
Year initiative/program began:
2008
Field of work
Banking/Financial Services
If Field of Work is "Other" please define in 1-2 words below (and explain in detail in the entry form):
Service / Activity focus (If "other" please explain in entry form)
Equity Financing
Year organization founded (yyyy)
2008
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Which of these barriers is the primary focus of your work?
Social benefit businesses not deemed investment worthy
Which of the principles is the primary focus of your work?
Leverage the stake individuals have in financial success of the group
If you believe some other barrier or principle should be included in the mosaic, please describe it and how it would affect the positioning of your initiative in the mosaic
This field has not been completed. (333 words or less)
Name Your Project
Entrepreneur Commons: entrepreneurs in developed countries also need help
Describe Your Idea
What is your signature innovation, your new idea, in one sentence?
The Entrepreneur Commons is a fund to do seed investment through debt guaranteed by a mutual guarantee fund and managed by a social network of entrepreneurs
Describe what makes your idea unique—different from all others in the field.
The uniqueness of the idea is not in its novelty but rather in its implementation in an environment where the existing proven mechanism it relies on have not been applied yet. The idea is to apply concepts and processes developed for microfinance to entrepreneurs in developed countries, that are very poorly served at the seed financing stage, and then mitigate the risk on the debt with a mutual guarantee fund, which is something that banks will consider in Europe but has never been applied to Angel Investment.
How do you implement your innovation and apply it to the challenge/problem you are addressing?
Today, and outside of Friends and Family, entrepreneurs have to rely on Angel Investors or Venture Capital. The problem with this existing mechanism is that most Angels do not have enough wealth that they can spread themselves over a statistically significant number of deals. So they know they are playing the lottery when they invest, and therefore they tend to invest in companies that have a 10x potential return on investment. Which leaves out the vast majority of social businesses that focus on sustainably improving the community or the environment.
The goal of the Entrepreneur Commons offering is to remove return of investment from being the only measure of success. Instead, the loan rate is bench marked against the regular market (for example S&P500) and then success is repayment of the loan with a social focus.
Do you have any existing partnerships, and if so, how did you create them?
I have soft commitments from Angel Investors who played the lottery game and have been frustrated themselves with the existing process
In which sector do these partners work? (Check all that apply)
Private sector .
Provide one sentence describing your impact/intended impact.
The intent is to bring a major change to the way early stage ventures are (not!) financed today, through a debt mechanism that resolves a lot of the issues related to this type of investment (typically done through equity).
Please list any other measures of the impact of your innovation.
A good way to measure success will be through the number of ventures that we are able to help become successful, and of course the default rates on the loan.
Does your innovation address and/or change banking regulations?
The whole process can be implemented within the existing regulations, at least as I have seen it in the US and most probably in Europe as well since mutual guarantee fund are in existence there since 1917. So there should be no need for change in banking regulations, at least not until we have better data proving that it would help the process even further.
How many people does your innovation serve or plan to serve? Exactly who will benefit from your innovation?
The Entrepreneur Commons can have a global impact, because the same issue has been identified in various states in the US and in several countries in Europe. I have personally discussed this with people in Texas, New York, Germany, France and Spain who would all benefit from such a scheme. The beneficiaries are entrepreneurs firstly, but then also the whole ecosystem around them as they will be able to hire people and grow their business within their local economies and beyond.
This Entry is about (Issues)
How is your initiative financed (or how do you expect your initiative will be financed)?
The Entrepreneur Commons provides a platform that will help entrepreneurs and investors work together. The staff requirements are for a small group of people to make sure entrepreneurs can meet on a regular basis to help each other, which only exceptions handled by a steering committee of entrepreneurs and investors. Mutual Guarantee funds in Europe are sustainable, and they typically take 1% of the funds loaned to pay for staff and infrastructure.
The plan is to initially charge 2% of the money loaned, plus charge a membership fee to entrepreneur members, and then we rely on sponsors (law firms, accounting firms, consulting firms, etc...) to cover all cost. Since the Entrepreneur Commons is a not-for-profit any savings will be passed to members through reduction of the "management fee" or membership fee.
If known, provide information on your finances and organization:
- Expected funds to start: $150K (to pay for the legal structure, and some basic infrastructure, plus the time for somebody to set it up).
- Once this is going, the size of the fund will determine the exact staffing requirements. Initial plan is to start with one location and at least $3M in the fund, which represent 30 loans at $100K, so 3 to 6 groups of entrepreneurs of 5 to 10 entrepreneurs (based on maturity, sector, affinities). One person should be able to handle the management of the platform at this level. Staff can be added as needed after that point and as the fund grows (total angel investment in the US is $20B every year, so the fund could easily grow much bigger than $3M once it gets started).
What are the main financial barriers and how do you plan to address them?
The main issue is to find the initial set of investors to make up the initial $3M fund. I am talking to investors one after the other to convince them that it is worth trying.
The idea has been presented on Social Edge (Skoll Foundation) for discussion, and the more buzz around the idea, the easier it becomes to communicate around it and convince.
Aside from financial sustainability, how do you plan to grow the initiative?
The Entrepreneur Commons is a blueprint, and as soon as the first "chapter" is set up, the plan is to establish other chapters in various location, through local sponsors. One effort is already under way in New York while I am working in the San Francisco bay area. The goal ultimately is to get a whole network of chapters worldwide to also help entrepreneurs grow their business worldwide faster and better through this network.
Please select one
What was the motivation or defining moment that led to the creation of this innovation? Tell us the story.
I have always been interested in Entrepreneurship, and always very frustrated with the current process of financing. I went through it myself when I started my own company, and I have seen it from the trenches that unless you have friends and family, or some level of luck, it is very hard to get funding. I have been helping entrepreneurs for the past 3 years, and I see that most still struggle through the process, spending a lot of time and energy trying to get money when they should try to sell what they have. I moved 18 years ago to Silicon Valley because I thought VCs were the answer (the perception of the outsider fed by newspaper stories of wild successes), and they are not. I started an Angel group 3 years ago because I thought Angels were the answer, but again the reality is that they are not.
There is still a need for an organization that will foster entrepreneurs and help them grow into successful ones.
Please provide a personal bio of the social innovator behind this initiative.
As I mentioned earlier, I have always been interested in Entrepreneurship. France being an environment with a lot of friction I moved to the US in 1990. I started my own company in 1995, providing a shopping basket technology to enable ecommerce. Too early to make it a success, I sold the assets before the bubble started. While working at Oracle on eCommerce/SaaS I helped a company set up offices in Silicon Valley in 1998, to do technology watch. I started a program to help entrepreneurs in 2004 called Club Entrepreneur with the Swiss American Chamber of Commerce, then I initiated a similar program called Business Booster with the French American Chamber of Commerce in 2005. As a result of these programs, I co-founded the European American Angel Club in 2006. And I am now starting the Entrepreneur Commons in 2008.
a) Please identify the individuals that your innovation benefits (Please check all that apply)
Producers , Holders of assets.
b) Do you help the people you serve to buy goods or services using financial innovation? If so, how?
A side-effect of the entrepreneurs working within the Entrepreneur Commons and helping each other will be that they will also be more efficient in picking "good" service providers, but this is not the main focus.
c) Do you help the people you serve to sell goods or services using financial innovation? If so, how?
N/A
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