Bottom-Up Entrepreneurship - Institute of …//LEGATUM.MIT.EDU Bottom-Up Entrepreneurship Professor Iqbal Z. Quadir Institute of International and European Affairs (IIEA) Dublin May

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Bottom-Up Entrepreneurship

Professor Iqbal Z.

Quadir

Institute of International and European Affairs (IIEA)

Dublin

May 23, 2012

Founder and Director

Legatum Center for Development & Entrepreneurship at

MIT


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


1B

mobiles 0.6B

mobiles 0.6B

mobiles

Distribution of powerful, connected

computers in low-income regions

85% of the world’s youth (10-25 years old) live in

developing countries …we have to see the world in a new way


Promoting the creation of technology-

based, for-profit enterprises in low-income

countries

Legatum Center at MIT


Legatum Fellows

• MIT students launching innovative, for-profit

enterprises in low-income countries

• 90 Fellows since 2008


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


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


Javier Lozano Legatum Fellow 2009-2010


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


Karan Singh Legatum Fellow 2010-2011


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


My own entrepreneurial

experience helps explain the

work of the Center.


Ph

oto

by C

hristo

pher

Ha

rtin

g

I went to the U.S. from Bangladesh in 1976 and

realized…

…good U.S. universities are

not concentrated in

Washington, D.C.


Mainframe

computer

Personal computers

1980s-90s:

Dispersion was happening in front of my

eyes


1971

1993

Connectivity Is Productivity

… and phones would follow Moore’s Law


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


•1 phone for 500 people

• Virtually no phones in rural areas where 100

million people lived

Bangladesh in 1993

70%

20%


Misconception #1

Poor countries are under-resourced

› Poor countries are extremely wasteful


Misconception #2

Poor people lack buying power

› Productivity tools create buying power


Misconception #3

You need to start with money to make money

› Shared-access breaks that vicious cycle


Misconception #4 Inability to meet primary needs

› Income is the ability


Demand side Supply side

Connectivity is

productivity;

productivity translates

to purchasing power

Prices cascading

down


Problem: Lack of Other Infrastructures

• No credit checks

• A few bank branches to collect bills

• Contact points for customer service

• Branches/offices throughout the rural areas

• Each has 2-3 million borrowers

• Excellent repayment records

• About 95% borrowers are women

Concentration of resources stood in my

way

Solution: Partner with Microcredit Grameen Bank


Milk Money

Money Money

The microcredit model

Grameen Bank


Service Money

Money Money

The Grameenphone model

Grameen Bank


March 1994

Encouragement from Grameen Bank, but no

funding commitment

May 1994

With angel funding, created Gonofone (“phones for the

masses”)


Telenor: know-how

Grameen:

distribution

Creation of Grameenphone

$120 million

Total Initial Funding:

2 / 93: Connectivity is Productivity

5 / 93: Met with Muhammad Yunus

5 / 94: Gonofone established

9 / 95: Telenor shows interest

11/95: Telenor and Grameen Bank make

commitment

11/ 96: Grameenphone receives cellular

license

3 / 97: Grameenphone services launched

12 / 99: IFC funding

12 / 00: Move to Harvard to teach

2 / 94: Cellphone is a cow

3 / 94: Grameen Bank encouraged

12 / 04: Gonofone exits


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


Productivity tool

Company profits

$ billions in infrastructure

Mobile phone success is a global

phenomenon Countries’ GDP

People’s ability to pay

People’s productivity


This success can be

generalized to other

technologies

Company profits

$ billions in infrastructure

Countries’ GDP

People’s ability to pay

People’s productivity

Productivity tool


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


What are the tailwinds for this kind of

progress?


1 Western technologies can empower

individuals


2

Adam Smith

1723-1790

Western thinkers can help us understand

how economies develop

David Ricardo

1772-1823

Friedrich Hayek

1899-1992

Ronald Coase

1910-

Joseph Schumpeter

1883-1950


3 Angel funding/VC funding


4 Their knowledge of their native countries

gave them “home field advantage”

Azim Premji, founded Wipro

Mo Ibrahim,

founded Celtel

Miko Rwayitare, founded Telecel

Ayisi Makatiani,

founded Africa Online

Robin Li, founded Baidu


These entrepreneurs were trained in

Western universities

Azim Premji, founded Wipro

Mo Ibrahim,

founded Celtel

Miko Rwayitare, founded Telecel

Ayisi Makatiani,

founded Africa Online

Robin Li, founded Baidu


5 Western universities can train developing

country entrepreneurs


What are the headwinds?


What are the headwinds?

A lack of good governance


Government

Neglects People

Impoverishe

d People

Externally-

empowered

governments

may not take

care of people


Economically-

empowered

people create

checks and

balances

Government

Addresses Needs

of People

Empowerme

nt of People


Emergence BioEnergy

(or, More on Cows)


A New Approach to Rural

Electrification Tens of millions of small dairy farms exist across

South Asia and Africa producing milk

What if with some additional capital investment, you could triple the economic returns on cattle and provide reliable access to electricity?

Milk

Cattle Revenues

42


Emergence BioEnergy Utility Station

• Generate reliable electricity and create new

economic value from cattle

• Additional revenues keep the price of electricity

reasonable despite small-scale generation

Refrigeration

Cattle Revenues

EBUS Electricity Fertilizer Methane

Credits

Milk

Commercial Space

43


Core Technology

• Micro-Combined-Heat-and-Power

(micro-CHP) Cogeneration System

• External combustion

– Can run off biogas / natural gas

• Continuous Operation

• 70,000 hour lifetime (compared to

5,000 hours for diesel generator)

• No noise

• Low Maintenance

• 3 kW electric + 6 kW heat

– Heat can be used for cooling

44


micro-CHP

Mini Dairy Farm

Biodigester

Gro

un

d L

evel

Unde

rgro

un

d

Top F

loor

Electrified

Commercial

Space

Fertilizer

Pit

Biogas

Man

ure

Commercial

Space 1

2

3

4

5

6

Milk

Refrigeration

Electricity

Fertilizer

Carbon Credits

Refrigerator

EBUS

45

Heat


EBUS Model

46

Electrified second

level can be used as

retail space

Cold storage

reduces milk

spoilage

Passive cooling

shed design

improves milk

production

2

1

3

4 Run-off from manure

can be sold as organic

fertilizer

5

6

Potential for carbon credits

Sale of electricity;

potentially produce up

to 72 kWh per day


Triples Economic Productivity of

Cattle

• Cold storage reduces 20-

30% milk loss due to

spoilage

• Processed manure can be

sold as high-value organic

fertilizer

• Electricity can be retailed to

local consumers /

businesses

• Potential for methane credits

• Electrified commercial space

can receive premium rents

Electrified village from initial

experiment

47


Renewable Alternatives • 1 kW installation of solar PV currently costs more than a

1 kw micro-CHP engine

• Solar can produce electricity for no more than 6-7 hours

per day

• Micro-CHP can produce electricity 24/7

– No additional capital cost to produce power all day

long

• Value of fertilizer makes cost of fuel free, similar to solar

48


Market Potential • South Asia - Total population of 1.5 billion

people, 80% without reliable access to electricity

• Rural Areas:

– 600+ million people with no access to electricity,

those with access suffer from unreliable service

• Urban Areas:

– 9 to 12 hours of load shedding every day in major

urban areas of 7+ million residents, growing middle

class

49


Key Partners • Infinia Corporation: Exclusive

distribution relationship for micro-

CHP technology in South Asia and

Africa

• BRAC : Signed MOU to support

deployment of initial prototypes and

scale project across country. BRAC

is the largest NGO in Bangladesh

• EBI will establish similar

partnerships in India / Pakistan

once model is proven

50

Bottom-Up Entrepreneurship - Institute of …//LEGATUM.MIT.EDU Bottom-Up Entrepreneurship Professor Iqbal Z. Quadir Institute of International and European Affairs (IIEA) Dublin May

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