Fight Poverty Through Entrepreneurship

It's a big week for entrepreneurship.

Today is the start of the Global Entrepreneurship Summit, hosted by President Obama at Stanford University. More than 700 entrepreneurs from 170 countries are flying in to meet with Silicon Valley executives, international organizations, and investors. It's a great opportunity to connect global entrepreneurs' big, bold ideas with Silicon Valley's unbeatable experience taking innovations to scale.

Why should you care about entrepreneurs?
Entrepreneurs create jobs--lots of them. Around the world, small and medium businesses create 66% of full-time jobs. In low-income countries, it's a staggering 78%. They drive innovation. They create new industries. And they open new markets. We couldn't live without them.

That is particularly true in poor and rural parts of the world. Today more than 341 million young people in developing countries are unemployed--more than the entire population of the United States. Another 536 million are underemployed. Why leave that much talent behind? If we can help young people get good jobs, we will all reap the benefits in economic growth and stability.

What's it like for entrepreneurs in developing countries?
We sometimes take the resources American entrepreneurs have available to them for granted. But in many low-income countries, entrepreneurs don't have the support systems they need. It's particularly challenging for businesses in the "Pioneer Gap"--those entrepreneurs that have successfully tested an idea and are transitioning to the long journey to bring it to scale. The lack of resources during this phase kills many of the most promising social innovations.

How can we help entrepreneurs thrive?

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Photo credits: Bobby Neptune/USAID

If you want a tree to grow, it's not enough to plant a seed. You need to make sure there is good soil, water, and sunshine. The same is true for entrepreneurs. They need different types of support over a long timeframe--the kind of support that helps them bridge gaps and become self-sufficient.

That's why USAID combines direct investments in innovators--through programs like Development Innovation Ventures and Grand Challenges for Development--with support to the broader ecosystem for entrepreneurs. One way we do this is by partnering with financial intermediaries to support impact investments in emerging markets.

For example, we provide funding to Intellecap, enabling them to structure partnerships between social enterprises and corporations. Through these partnerships, entrepreneurs get connected with the technologies, supply chains, and sales channels they need to succeed. USAID funding supports Intellecap's consulting services, giving them the bandwidth to set up these partnerships. It specifically targets enterprises owned or led by women, giving them the support they need to scale.

USAID also supports Village Capital's investment fund, which consolidates private capital to invest in entrepreneurs. Village Capital starts with a cohort of entrepreneurs who go through an accelerator together to build skills. At the end of the program, they use a peer-selection process to determine who will receive Village Capital's funding.

Given the innovative nature of the fund and the size of the investments they make, Village Capital would not have been able to manage the fund with a standard fee of 2%. To catalyze private investment, USAID provided a grant to cover a portion of Village Capital's management costs, bringing their fee down to the industry standard. This helped them attract new investors and raise $15 million in private capital commitments.

We can't do it alone.
Through partnerships like these--and others in USAID's Partnering to Accelerate Entrepreneurship initiative--we catalyze private investment and help create an environment where entrepreneurs can thrive.

We have so much to gain when entrepreneurs are successful. Let's make sure they get the support they need.

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