Entrepreneur Commons: entrepreneurs in developed countries also need help
Location
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
About You
Location
Project Street Address
Project City
Project Province/State
Project Postal/Zip Code
Project Country
Your idea
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
YouTube Upload
Project URL
Positioning of your initiative on the Mosaic of Solutions™ diagram:
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
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
Innovation
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 .
Impact
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)
Sustainability
Financing source
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.
The Story
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
| Attachment | Size |
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| Marc Dangeard | 11.31 KB |
 | Vibhu Arya said: Very interesting. ---------- Featured Commentator Ashoka's Changemakers about this Competition Entry. - 1232 days ago read more > |
| mdangear said: Thank you for your interest. From a financial prospective, it will take approximately 150K to get this project off the ground, which ... about this Competition Entry. - 1240 days ago read more > |
| kbray said: Thank you for submitting your entry! We would like to learn more about your financial plan and future goals for piloting this ... about this Competition Entry. - 1244 days ago read more > |
| Eileen Knowles said: ---------- McMaster University Almuni about this Competition Entry. - 1287 days ago read more > |
Comments
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McMaster University Almuni
Thank you for submitting your entry!
We would like to learn more about your financial plan and future goals for piloting this initiative. We are interested in more specifics about your intent: which concepts do you plan to promote? What kind of “change” do you envision? How do you plan to distinguish yourself in the field?
We wish you the best of luck in the inception and promotion of your project!
Since the judges spend more time reading the entry form than the comments, please also update your entry in addition to responding to our questions and other comments. This will provide the panel of expert judges with the most comprehensive explanation.
Thanks so much! We look forward to learning more.
Best wishes,
The Changemakers Team
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Kaylena Bray
Ashoka's Changemakers
Thank you for your interest.
From a financial prospective, it will take approximately 150K to get this project off the ground, which I am hoping to get through grants.
This will allow us to create the social network of entrepreneurs (incorporation and initial infrastructure).
Beyond this, the project will be financed from several sources:
- fees from memberships
- sponsoring (lawyers, accouting firms, etc...)
- 2% management fee from the Fund itself
This will pay for staff to coordinate the various meetings between entrepreneurs, who will be organized in self-help teams.
The idea is to promote collaboration between the entrepreneurs within the social network - within a chapter, and across chapters around the world.
The expected result of the process is less failure, because entrepreneurs will not be maintained in the dream of getting money from angels or VCs, they will be given instant feedback on whether they can get a loan or not, and if not, why. Since the filtering process is made by entrepreneur-peers, it is not like being denied by a banker, but should be received as positive comment on what needs to be done to fix the issues identified.
The big difference with what is being done otherwise is the access to initial funds even for people who do not have "friends and family". And the initial loan should go a long way: according to Inc Magazine, the median capital used to start the companies that made it to their Inc top 5000 list is 25K.
While philanthropists can get a lot done with their money in developing countries, and therefore tend to go there first, there is also a need for entrepreneurs here in the US, specially when it comes to social entrepreneurs because they clearly do not fit the standard for regular investors. The Entrepreneur Commons is the answer to that specific problem.
Very interesting.
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Featured Commentator
Ashoka's Changemakers
The Entrepreneur Commons™ is about bringing the human back into capitalism.
As Muhammad Yunus says:
"Capitalism takes a narrow view of human nature, assuming that people are one-dimensional beings concerned only with the pursuit of maximum profit. The concept of the free market, as generally understood, is based on this one-dimensional human being. Mainstream free-market theory postulates that you are contributing to the society and the world in the best possible manner if you just concentrate on getting the most for yourself. [...] The presence of our multi-dimensional personalities means that not every business should be bound to serve the single objective of profit maximization"
Entrepreneur Commons is a social business offering peer-to-peer loans to social entrepreneurs. It offers funding to early stage social businesses, and the fund is managed by a not-for-profit social network of entrepreneurs - a support platform that can scale, and that also provides a way to screen deals, based on inclusion of every entrepreneur into the process rather than exclusion through a competitive process. It simplifies the investment decision for social investors because success can easily be measured - when the beneficiary businesses are social businesses and loans (with rates that can be benchmarked against market returns) are paid off, then the social investor can be satisfied that he has done his part.