VilCap: Entrepreneurial investment beyond just cash

Investment is often conceived as simply an application of capital toward future gains, but it can also materialize in other forms, such as time, information, or people. Village microfinance groups are one example of how an investment can be more effective when it’s accompanied by peers who care about an investment’s use and work together to make it successful.

VilCap is an organization that helps seed-stage entrepreneurs through building peer support organizations that provide accountability and business strategy, making for a more investable enterprise. Inspired by the village microfinance model, VilCap partners with local incubators around the world to organize entrepreneurs into groups that mutually assess, refine, and improve each others’ ventures.

RS: How did you identify the need for what VilCap does? 
Ross Baird, Executive Director: VilCap is a pilot project that has come out of First Light Ventures, where I was working. One of the things we saw at First Light was an unbelievable number of really compelling concepts that had great teams backing them but very little seed capital. At the same time there are investors out there who are having a hard time finding investable companies; 250,000 were found through a survey we did.

So we were looking for ways to bridge that gap, and we decided to build on the model of peer groups being used in rural microfinance schemes. We thought that pulling entrepreneurs together would help build their companies. We took a bit of a gamble in doing this by putting more power into the entrepreneurs’ hands.

Does something about this entrepreneur network model make investors more comfortable with putting up their money?
Every startup has risks. Investors by default are looking for reasons to say no. But being backed up by peers is a compelling reason for investors to say yes to entrepreneurs. We want to promote the idea that peer cohort networks, because they are educational programs, are a strong model for the entire social enterprise field. So we’re putting a lot of resources into developing this peer support process.

How do the peer support groups work?
Face-to-face meetings are a core component. It’s really critical, and we’ve seen entrepreneurs really thrive in that setting. We’re also starting to experiment with online technology for entrepreneurs that can’t do in-person meetings.

Is there a specific structure to these peer groups, in terms of how they share information and govern themselves?
VilCap sets the rules for a 12-week curriculum. There are certain things that entrepreneurs need to know going in and certain things they’ll learn while doing the program. One of the things we aim to do is overcome the gap in expectations between what investors want to see and what entrepreneurs think they should pitch.

For example?
For example, investors look for exit opportunities: how will an enterprise go public or become acquired by a major company. Many entrepreneurs don’t know what that is, and this is frustrating to investors. So we run an entire session on exits.

We also have local investors and local industry players engaged with the cohort. This benefits investors because it’s a low-cost way for them to do diligence on potential investment opportunities.

What do you look for in a potential partner enterprise; how do you know it will successfully work within your model?
We want to see someone who really feels invested in their idea, who is working full-time investing time, money, and reputation. We want companies that have social value in their core missions, which we define as contributing to the well-being of people living in poverty or making a direct contribution to environmental sustainability. We’re also looking for companies that are looking to scale, and are raising at least $500,000 in the next 18 months. We also have a group interview as part of our application process because we want companies that will be good teammates.

What’s something challenging about the work you do?
An important question to ask, that I don’t have the answer to, is really how well in the long run does crowdsourcing work?

But it’s hard to know this, because it’s a challenge to evaluate companies’ performance. To know how effective we are as an organization, we need to know how our companies are doing. It’s hard to get time-strapped entrepreneurs who are just starting-out to report how they’re doing. We’re trying to build operational impact-reporting into our program to deal with this; we need companies to produce data that is more valuable to the industry.

Interview has been edited and condensed.

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