My friend Sonal Shah is working on a new initiative at Google.org to help fuel the growth of Small- & Medium-size Enterprises (SMEs), initially in India & Africa. Along with Omidyar Network & the Soros Economic Development Fund, Google.org recently announced the creation of a $17M investment company focused on SMEs in India.
VentureBeat reported the investment company announcement, and provided other info on commercial capital projects in India, including a report on India infrastructure investment by Arun Natarajun of Venture Intelligence.
These SME initiatives have tremendous potential, and i wish Sonal & Google.org & other groups best of luck with their efforts. Go small business investment!
Below are two short video clips that explain more about the five core initiatives Google.org is doing; the end of the first video & the second video specifically discuss the SME initiative.
Video on Google.org & Five Core Initiatives:
- Renewable Energy Cheaper Than Coal (RE<C)
- Accelerate Commercialization of Plug-In Vehicles (RechargeIT)
- Predict & Prevent Global Emerging Threats (ex: disease, climate risk)
- Inform and Empower to Improve Public Services
- Fuel the Growth of Small & Medium-Sized Enterprises (SMEs, @ 7m30s)
Video on SME Initiative:
My Steamy Love Affair (!) with Microfinance, Startups, & Small Business Finance
Helping grow SMEs is an interesting topic that is closely related to two of my favorite subjects, startups & microfinance. Over the past 5 years i've spent time learning about microfinance & helping support Unitus, Kiva, & Microplace, and more recently running the Silicon Valley Microfinance Network (SVMN.net). For the past 10-15 years, i've been trying to learn how to start & run tech startups better, and figure out how to make it easier to get them funded & financed.
That's Right Ma'am.. I Got My MBA from The School of Hard Knocks
Having spent a few years at PayPal & eBay, i was always fascinated by how small business provides a huge engine of growth for many global economies, yet equally amazed at how little access to capital & business education most SMEs have. As a small business owner myself for a few years back in the mid-90's, i learned this the hard way. My first company, Aslan Computing, was a small consulting shop performing internet & e-commerce projects for clients in Silicon Valley and San Francisco. I started out as an independent developer doing database consulting & programming for Microsoft & Intel, then gradually we grew into a small consulting group of ~15-20 people.
But i was pretty clueless about basic business finance, and altho we grew rapidly so did my personal debt: in the first few years of the business i ran up almost $250K of personal & business debt, and explored every possible wacky financing angle including: high-interest credit cards (~10 of them, at one point over $100K in debt), borrowing money from employees, equipment leasing, factoring invoices, and selling equity to friends & family. I even tried raising venture capital, but slowly came to realize most VCs aren't likely to fund consulting businesses (tho US Web, Scient, & Viant all did manage to get plenty of VC funding during the late 90's). I once had an offer from an angel investor to put $250K into the company in exchange for 20% equity, but i wasn't very experienced at the time, and i wasn't sure about the investor. Well, you know the old adage: experience is what you get when you don't get what you want.
Folks, lemme tell ya: i got a lot of experience out of those years.
Overall it was quite the financial & emotional rollercoaster, and while i managed to make payroll mostly on time for ~3 years, eventually we ended up selling the business to a larger partner for a rather modest sum. It was a small win, but i wish i spent more time learning how to manage our finances better, and had created a better financial foundation for the business with more reasonable access to credit. Ah well, nothing like the school of hard knocks to teach you a tough lesson. And perhaps also, to discover a new market opportunity.
Getting Back on the Bike... After RTFM
Anyway, that experience made me hungry for more info on venture capital, startup finance, and in general on how small businesses get access to capital. In 2000, i read The Venture Capital Cycle by Gompers & Lerner, which explained a lot about the motivations of VCs and their LPs. In 2001-2002, i read Hernando de Soto's incredible book The Mystery of Capital, and Muhammad Yunus' first book Banker to the Poor.
Both books focus on how sole proprietors & small business have limited access to capital, and also typically a lot of bureaucratic red tape, but that in the right environment & with good capital availability small businesses can thrive. Around the same time i also read MoneyBall by Michael Lewis, which made me think a lot more about how people overlook & underemphasize metrics.
Creating New Asset Classes & Securitizing Small Business
Ever since reading these books, and after i wrote the first draft of my magnum opus on Securitizing Happiness, i've become convinced there is a huge missing asset class in small business debt & equity that could dramatically help fuel the growth of the global economy. All we are missing are 3 things:
- a way to automate business metrics & provide greater transparency
- a way to lower transaction costs & accelerate the financing process
- a way to provide back-end liquidity / fuel exits to 'make' the market
Gotta be a Pony in Here Somewhere !?!
While these are difficult & challenging issues to address, i'm optimistic several organizations are working on solutions that may emerge over the next few years. In that light, it's great to see Google.org and others going after these opportunities. I'm hopeful for the future, and i look forward to seeing what happens next :)