1

Global Entrepreneurship Trends * Growing SMEs * The Hague, 15 Nov 2012

Agenda: A Quick Summary of Global

Entrepreneurship

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• Global Entrepreneurship is Growing – Especially in Emerging Markets

• Three particularly “Hot” Sectors

• Social, Women, Youth

• Rise of new “Impact Investors”

• Moving from micro to small and growing…

• Still major challenges to entrepreneurial growth…but a growing number of efforts to address them

Emerging Markets Will Lead Global

Economic Growth

3

Africa will lead the pack

4

The Rise of Emerging Markets

5

No longer can established companies treat emerging markets as a sideshow….Global leadership will increasingly depend on winning in the emerging markets first, both for larger and smaller companies.

- McKinsey and Company,

The Power of Many, 2011

Incredible Opportunity for Emerging Market Entrepreneurs

Global Entrepreneurship

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• At least 388 Million entrepreneurs were actively engaged in

staring and running new businesses in in 2011.

• Global Entrepreneurship Monitor (GEM) survey of 54 Countries

• Total Early Stage Entrepreneurship

• In efficiency driven (middle income) economies: up 25% from 2010 to 2011

• In innovation-driven (higher income) economies : up 20% from 2010 to 2011

Source: Global

Entrepreneurship Monitor

Social Entrepreneurship

7

Economic

Crisis

New

Generational

Values

Connective

Technology

Boom in Social Entrepreneurship

Social Entrepreneurship

0

500

1000

1500

2000

2500

3000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Men

tio

ns in

th

e G

lob

al

Pre

ss

Year

Social Entrepreneurship Mentions in the Global Press

Source: Lexis-Nexis, 300 English Language Publications

Social Entrepreneurship

9

Bethlehem Tilahun Alemu

SoleRebels, Ethiopia

Youth Entrepreneurship

0

100

200

300

400

500

600

700

800

900

1000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Men

tio

ns in

th

e G

lob

al

Pre

ss

Year

Youth Entrepreneurship in the Global Press

Source: Lexis-Nexis, Global Entrepreneurship Monitor

165 Million Young Early Stage Entrepreneurs

Women’s Entrepreneurship

0

200

400

600

800

1000

1200

1400

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Men

tio

ns in

th

e G

lob

al

Pre

ss

Year

Women's Entrepreneurship in the Global Press

Source: Lexis-Nexis, Global Entrepreneurship Monitor

163 Million Female Early Stage Entrepreneurs

Impact Investing

13

Investments intended to create positive

impact beyond financial return

Source: JP Morgan, GIIN, Rockefeller Foundation

The Supply Side: Impact Investing

14

Source: Lexis-Nexis

0

100

200

300

400

500

600

700

800

900

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Men

tio

ns in

th

e G

lob

al

Pre

ss

Year

Impact Investing Mentions in the Global Press

Global Impact Investing Landscape

15 Source: ET Jackson & Associates, Accelerating Impact

Number of Impact Investments

16

Source: ET Jackson and Associates, from

Saltuk, Bouri and Leung, Insight

into the Impact Investment Market, 2011

Impact Investing Market: 2011

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Source: ET Jackson & Assoc from Saltuk, Bouri and Leung, Insight into the Impact

Investment Market, 2011

Total Market: $4.4B

SGB

Small and growing businesses (SGBs) are commercially

viable businesses, typically with 5 to 250 employees, that

have strong potential for growth -- and thus for creating

economic, social and environmental benefits

SGB

SGB

SGB

SGB SGB

From Micro to SGBs

MFIs Moving Upstream to Serve SGBs

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Financial Flow Schematic of SGB Sector

20

Social impact

investment

Commercial

investment

Grants for capacity

building

Blended capital

investment

Capacity building

only provider

Capital and

capacity building

provider

Capital only

provider

Small and growing

businesses

Livelihood

Businesses

SGB

Sector

Microfinance

$20k

$2m

Traditional

private equity

provider (or

bank)

Medium

businesses

Private

Equity

Microfinance

Provider

New SGB Investment Funds by

Vintage Year

21

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

3 4 5 3 8

11 18

15

7 7 4

10 9 8 7

9

25

35

30

21

32 31

SGB-Focused Funds

SGB-Inclusive Funds

Source: Dalberg analysis

New SGB Funds: Target Fundraising Size

22

2009 2010 2011

86.8 81.6

106.5 Average Fund Size ($M)

110

90

80 ($m

illions)

Source: Dalberg analysis

ANDE Member Impact: Accelerating

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$1.53B

$289.4M*

24,000 +

SGBs

Supported

Source: ANDE Annual Survey Data from 2009-2011; ANDE Analysis; * Over past three years only.

4143

Investments

2187

SGBs

22,000 SGBs

Capacity Development Support

Investment

To Date, ANDE Members have provided SGBs: In 2011: 1075 investments-

41% of total capital invested

by ANDE members

Comparing SGB Financing to

Private Equity and Microfinance

24

Microfinance gross loan portfolio 2010

$68bn

SGB 2001-2011

$20bn

Emerging Market

Private Equity 2001-2Q2011

$291.4bn

$100bn $200bn $300bn

$20k

$1m

$2m

Target

Fundraising

Targ

et

Invest

men

t Siz

e

Source: EMPEA, Mix Market, Dalberg analysis

Sector Challenges:

From an Investor Perspective

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Raising Capital

Finding Investible

Businesses

Doing Deals Achieving and

Measuring Impact

Exit

Sector Challenges:

Raising Investment Capital

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Issues:

• Lack of track record by SGB-focused

funds

• Quantity of capital available

• Limited number of potential limited

partners/funding sources

Responses:

• Increased interest and action by

development financial institutions

• Slow entry by more

commercial/institutional investors

• Emerging links to and opportunities for

retail investors

Raising Capital

Finding Investible

Businesses

Doing Deals Achieving and

Measuring Impact

Exit

Sector Challenges:

Finding Investible Businesses

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Raising Capital

Finding Investible

Businesses

Doing Deals Achieving and

Measuring Impact

Exit

Issues:

• A lack of investment-ready SGBs

• Finding the quality SGBs that do exist

Responses:

• Increased recognition by funders of the

need to link capacity development and

investment

• New and expanding capacity

development providers

• Multiple marketplaces and exchanges

have launched

Sector Challenges: Doing Deals

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Issues:

• Finding and maintaining skilled local investment

professionals

• Cost of due diligence

• Little access to local capital partners; early stage

funders for SGBs

• Deal structuring

Responses:

• Expanding academic and fellowship programs;

ANDE investment manager training and salary

survey

• Emerging initiatives aimed at supporting shared

due diligence

• More MFIs looking up; More commercial banks

looking down; networks forming

• Financial Innovation – the good kind

Raising Capital

Finding Investible

Businesses

Doing Deals Achieving and

Measuring Impact

Exit

Sector Challenges:

Achieving and Measuring Returns

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Issues:

• Cost/challenge of providing ongoing

support to firms

• Understanding true cost structure of

impact investing funds

• Assessing and comparing financial and

social impact

• Real outcomes data (not just outputs)

Responses:

• Recognition, but still insufficient funding

of CD

• New studies on fund economics in impact

investing

• IRIS, GIIRS, ANDE Research …significant

progress in driving standards

Raising Capital

Finding Investible

Businesses

Doing Deals Achieving and

Measuring Impact

Exit

Sector Challenges: Exits

30

Issues:

• Few local stock markets in emerging

markets; small local business sector to

support acquisitions

• Lack of international exchanges

• Need more success stories

Responses:

• Expansion of quasi-equity/royalty-based

finance; dreams of permanent capital

vehicles and exit facilities

• new (social) stock exchanges emerging

in multiple countries

• On the way…?!?

Raising Capital

Finding Investible

Businesses

Doing Deals

Achieving and Measuring

Impact

Exit

Concluding Thought

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Only by letting millions of entrepreneurs try new ideas, to innovate, to create businesses that put those ideas to work in a competitive and open way, only by doing those things are we going to be able to tackle the world’s big problems.

- Angel Cabrera, Chair, World Economic

Forum Council on Entrepreneurship

THANK YOU!

15 Nov 2012

Randall Kempner

www.aspeninst.org/ande