Bottom-Up Entrepreneurship Professor Iqbal Z. Quadir Founder and - PowerPoint PPT Presentation

Bottom-Up Entrepreneurship Professor Iqbal Z. Quadir Founder and Director Legatum Center for Development & Entrepreneurship at MIT Institute of International and European Affairs (IIEA) Dublin May 23, 2012 HTTP :// LEGATUM . MIT . EDU

Developing countries are the 75% world: • 75% of the world population is in developing countries • 75% of the world’s growth over last decade is in developing countries • 75% of the flow of funds (remittances + aid) is remittances • 75% of the world’s mobile phones are in developing countries • 75% of the world’s GDP could be in developing countries by 2050 HTTP :// LEGATUM . MIT . EDU

Distribution of powerful, connected computers in low-income regions 1B 0.6B mobiles 0.6B mobiles mobiles 85% of the world’s youth (10-25 years old) live in developing countries …we have to see the world in a new way HTTP :// LEGATUM . MIT . EDU

Legatum Center at MIT Promoting the creation of technology- based, for-profit enterprises in low-income countries HTTP :// LEGATUM . MIT . EDU

Legatum Fellows • MIT students launching innovative, for-profit enterprises in low-income countries • 90 Fellows since 2008 HTTP :// LEGATUM . MIT . EDU

The Legatum Fellowship • Financial support • Entrepreneurship ecology • LCDE network, speakers (conferences/lectures/seminars), staff, alumni, current Fellows • Investors, entrepreneurs, potential partners, new technologies • Help students overcome their individual inventory of needs • Academic course: Entrepreneurship and Prosperity in Low-income Countries HTTP :// LEGATUM . MIT . EDU

Bilikiss Adebiyi Legatum Fellow 2010-2011 2012 MBA, MIT Sloan School of Management Founder and CEO, Delman Recycling Solutions • Scrap recycling startup in Nigeria • Reclaims scrap metal marring the landscape while strengthening Nigeria’s steel industry • Nigeria imported $2.4B iron/steel in 2009 • Plans to set up scrap processing plant in 2012 HTTP :// LEGATUM . MIT . EDU

Javier Lozano Legatum Fellow 2009-2010 2010 MBA, MIT Sloan School of Management Founder and CEO, Clinicas del Azúcar • Low-cost diabetes clinic chain in Mexico • Innovative, evidence-based, low-cost diagnostics technology • Unlimited consultations for annual fixed fee • Addressing the problem of >10 million diabetes patients in Mexico, 90% with poor or no healthcare • Returned to Mexico post-graduation and received financing • Opened first clinic in September 2011 HTTP :// LEGATUM . MIT . EDU

Karan Singh Legatum Fellow 2010-2011 2011 MBA, MIT Sloan School of Management Co-Founder, Ginger.io • Mobile phone-based platform for patients, health care providers researchers • Tracks behavior to gain health insights • Closed successful first round of financing • Novel idea capitalizing on India’s large market HTTP :// LEGATUM . MIT . EDU

My own entrepreneurial experience helps explain the work of the Center. HTTP :// LEGATUM . MIT . EDU

I went to the U.S. from Bangladesh in 1976 and realized… Photo by Christopher Harting …good U.S. universities are not concentrated in Washington, D.C. HTTP :// LEGATUM . MIT . EDU

1980s-90s: Dispersion was happening in front of my eyes Mainframe computer Personal computers HTTP :// LEGATUM . MIT . EDU

Connectivity Is Productivity 1971 1993 … and phones would follow Moore’s Law HTTP :// LEGATUM . MIT . EDU

Cascading prices of digital technologies allowed further dispersion Moore’s Law: • Processing power per $ doubles every 18 months & quadruples every 3 years. • Price of computers falls more than 10,000x in a single generation HTTP :// LEGATUM . MIT . EDU

Bangladesh in 1993 70% 20% • 1 phone for 500 people • Virtually no phones in rural areas where 100 million people lived HTTP :// LEGATUM . MIT . EDU

Misconception #1 Poor countries are under-resourced › Poor countries are extremely wasteful HTTP :// LEGATUM . MIT . EDU

Misconception #2 Poor people lack buying power › Productivity tools create buying power HTTP :// LEGATUM . MIT . EDU

Misconception #3 You need to start with money to make money › Shared-access breaks that vicious cycle HTTP :// LEGATUM . MIT . EDU

Misconception #4 Inability to meet primary needs › Income is the ability HTTP :// LEGATUM . MIT . EDU

Demand side Supply side Connectivity is Prices cascading productivity; down productivity translates to purchasing power HTTP :// LEGATUM . MIT . EDU

Concentration of resources stood in my way Problem : Lack of Other Infrastructures • No credit checks • A few bank branches to collect bills • Contact points for customer service Solution: Partner with Microcredit Grameen Bank • Branches/offices throughout the rural areas • Each has 2-3 million borrowers • Excellent repayment records • About 95% borrowers are women HTTP :// LEGATUM . MIT . EDU

The microcredit model Milk Money Grameen Bank Money Money HTTP :// LEGATUM . MIT . EDU

The Grameenphone model Service Money Grameen Bank Money Money HTTP :// LEGATUM . MIT . EDU

March 1994 Encouragement from Grameen Bank, but no funding commitment May 1994 With angel funding, created Gonofone ( “ phones for the masses ” ) HTTP :// LEGATUM . MIT . EDU

Creation of Grameenphone 12 / 04: Gonofone exits 12 / 00: Move to Harvard to teach Telenor: know-how 12 / 99: IFC funding Grameen: 3 / 97: Grameenphone services launched distribution 11/ 96: Grameenphone receives cellular license 11/95: Telenor and Grameen Bank make commitment 9 / 95: Telenor shows interest 5 / 94: Gonofone established 3 / 94: Grameen Bank encouraged Total Initial 2 / 94: Cellphone is a cow Funding: 5 / 93: Met with Muhammad Yunus $120 million 2 / 93: Connectivity is Productivity HTTP :// LEGATUM . MIT . EDU

Grameenphone success in Bangladesh • 300,000 retail entrepreneurs, giving access to 100 million (at one time) • 35 million subscribers • 80 million cell phones in Bangladesh (including phones from other providers) • 1 of 2 people have a phone • Over $4 billion in revenues for industry • Over $1 billion in profits HTTP :// LEGATUM . MIT . EDU

Mobile phone success is a global phenomenon Countries’ GDP $ billions in infrastructure Company profits People’s ability to pay People’s productivity Productivity tool HTTP :// LEGATUM . MIT . EDU

This success can be Countries’ GDP generalized to other $ billions in infrastructure technologies Company profits People’s ability to pay People’s productivity Productivity tool HTTP :// LEGATUM . MIT . EDU

A win-win-win paradigm Tools make people more productive, then: • Businesses win by selling tools • People win by earning more • Countries win when citizens have more earnings HTTP :// LEGATUM . MIT . EDU

What are the tailwinds for this kind of progress? HTTP :// LEGATUM . MIT . EDU

1 Western technologies can empower individuals HTTP :// LEGATUM . MIT . EDU

2 Western thinkers can help us understand how economies develop Friedrich Hayek 1899-1992 David Ricardo 1772-1823 Adam Smith 1723-1790 Joseph Schumpeter Ronald Coase 1883-1950 1910- HTTP :// LEGATUM . MIT . EDU

3 Angel funding/VC funding HTTP :// LEGATUM . MIT . EDU

4 Their knowledge of their native countries gave them “home field advantage” Robin Li, founded Baidu Mo Ibrahim, founded Celtel Ayisi Makatiani, founded Africa Online Miko Rwayitare, founded Telecel Azim Premji, founded Wipro HTTP :// LEGATUM . MIT . EDU

These entrepreneurs were trained in Western universities Robin Li, founded Baidu Mo Ibrahim, founded Celtel Ayisi Makatiani, founded Africa Online Miko Rwayitare, founded Telecel Azim Premji, founded Wipro HTTP :// LEGATUM . MIT . EDU

5 Western universities can train developing country entrepreneurs HTTP :// LEGATUM . MIT . EDU

What are the headwinds? HTTP :// LEGATUM . MIT . EDU

What are the headwinds? A lack of good governance HTTP :// LEGATUM . MIT . EDU

Externally- Government empowered Neglects People governments may not take Impoverishe care of people d People HTTP :// LEGATUM . MIT . EDU

Economically- Government empowered Addresses Needs of People people create checks and Empowerme balances nt of People HTTP :// LEGATUM . MIT . EDU

Emergence BioEnergy (or, More on Cows) HTTP :// LEGATUM . MIT . EDU

A New Approach to Rural Electrification  Tens of millions of small dairy farms exist across South Asia and Africa producing milk Cattle Revenues Milk  What if with some additional capital investment, you could triple the economic returns on cattle and provide reliable access to electricity? 42 HTTP :// LEGATUM . MIT . EDU

Emergence BioEnergy Utility Station • Generate reliable electricity and create new economic value from cattle Cattle Revenues Commercial Space Milk EBUS Refrigeration Electricity Fertilizer Methane Credits • Additional revenues keep the price of electricity reasonable despite small-scale generation 43 HTTP :// LEGATUM . MIT . EDU