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Crowding in funds for the next Steve Jobs from Africa

ImageSubmitted by Sam Raymond

On Fri, 10/25/2013

co-authors: Anthony Lambkin

When it comes to financing for entrepreneurs, this week marked a major event in the financial industry of the United States with immense potential ramifications for the developing world. This week, the US Securities and Exchange Commission’s unanimously approved rules for equity crowdfunding.

For context, equity crowdfunding allows entrepreneurs to sell equity shares of their company to a group of investors through an internet platform, and  is a distinct category of crowdfunding apart from micro-finance (Kiva), perks-based (Indiegogo), and debt (Lending Club). The most notable crowdfunding website is Kickstarter which since 2009 has raised more than $840 million, from more than 5 million people, funding 50,000 creative projects. This platform operates on a pre-sale, perks or donation model where funders contribute funds for a future product, reward, or in-kind. Shares or equity were, until the SEC ruling, not part of the deal.

If we hold true that this SEC measure represents a seismic shift in the way entrepreneurs can raise funds in the United States, the question remains, can emerging markets leap frog the developed world to democratize access to finance for entrepreneurs in their countries?

The answer, we believe, is yes.

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70 years of international development

BBI

This past Tuesday, along with my colleague Mark, I gave a presentation to YPFP‘s International Development Discussion Group. We briefly shot through some 7 decades of international development (tilted heavily towards the Western view of history, I must admit). We roughly categorized 4 periods, followed by a brief discussion of new alternative approaches:

  1. Bretton Woods (post WWII through late 60s)– The international community would attempt to bring down national barriers and invest in rebuilding Europe through funding infrastructure and institutions, such that economic growth would take root and lift people out of poverty. Keynesians dominated the dialogue, showing that governments themselves could drive markets in important and desirable ways, as the International Bank for Reconstruction and Development (formed at Bretton Woods and precursor to the World Bank) lent money to countries like France and Germany to the tune of 2+% of GDP.
  2. Bottom up approaches (mid-60s-80s)– When it became clear that the…

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