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Hub-Village Capital: Seed Funding of, by, and for social entrepreneurs
Hub-Village Capital, a partnership between Hub-Bay Area and First Light Ventures,will provide critical financial and human capital, sourced from and allocated by the community, to accelerate the development of early-stage social enterprises. Participating entrepreneurs will be part of the global Village Capital network, which has already invested $900,000 in 12 peer-selected enterprises.

Over the next two years, Hub Village Capital will facilitate three 12-week entrepreneur cohorts, hosted at Hub Bay Area, which are designed to accelerate the development of early stage social enterprises through workshops, mentoring, networking, and peer review. The initiative will invest a total of $750,000 in up to 10 organizations that are chosen through a peer-selection process that puts investment decisions directly into the hands of the entrepreneurs participating in the program. Investment capital will be sourced from First Light Ventures, other private investor capital, and also an innovative program that enables tax-deductible contributions as small as $100.

Last year, a 24-enterprise pilot took place at the Hub-Berkeley, also managed by Sean Foote and April Newman. Peer-selected enterprises included:

TerViva Bioenergy, who uses tree-based feedstock to supply the biofuel market. TerViva will use VilCap funding to develop their first plantation.

Rainsaucers, who produces containers that collect rainwater for individual households. The technology has applications in household farming/gardening in US markets, and slum housing in emerging markets.

New Avenue develops affordable housing units that can be places in peoples’ backyards in highly dense urban real estate.

Cooler, Inc. allows individuals to track their own carbon footprint through purchases, similar to Mint.com.

For more information, contact Ross Baird at rbaird@grayghostventures.com or Kevin Jones at jones@goodcap.net.

 

What is Village Capital?

A gap in seed-stage finance is killing the development of world-saving ideas.

What’s stunting the growth of the social enterprise space is not a lack of dollars or a lack of promising ideas. Investors collectively sit on millions of dollars because relatively few social enterprises, at this point, are “investment ready,” and hundreds of promising entrepreneurs are chasing the same few dollars offered by business plan competitions like the Global Social Venture Competition and fellowships like Echoing Green.

Too often, seed-stage social enterprises struggle to find investment dollars unless they are self-funded, lucky, or well-connected. Because it is somewhat time-intensive and costly to make any investment, few impact investors will invest below $250,000 per deal. Yet many entrepreneurs need a small amount of capital, between $50,000 and $100,000, to seed their idea, run a pilot, conduct a market test, and secure their first customers to prove that they are worthy of a greater investment.

We’ve been developing out-of-the-box solutions to address this gap. How do we get relatively small dollar amounts of investment to entrepreneurs in a cost-effective way? Gray Ghost Ventures’ background in microfinance offered some clues. Some early versions of microfinance addressed a similar problem through “self-help groups,” where mostly women entrepreneurs would form small peer groups. Banks lent to these groups in bulk, and the group would not be eligible for another loan until every woman repaid. This method, known as “village banking,” sourced traditional loan officer functions to the entrepreneurs themselves.

This year, we launched what we call “Village Capital”, or VilCap, as a way to take the lessons of village banking and apply them to the social venture capital industry. We have launched pilots with Dasra in Mumbai, the Idea Village in New Orleans, the Hub in the Bay Area, and the Unreasonable Institute in Boulder. In each, entrepreneurs have gone through a peer-support process, vetted and scrutinized one anothers’ ideas, and sharpened each others’ pitches, strategies, and financial models. At the end of the process, entrepreneurs picked from among their peers to receive investment dollars. We were testing whether smart, hungry entrepreneurs could make investment decisions as well as professional investors like us could—and we’re really encouraged by the results.

The experiment showed signs of how catalytic seed financing can be in the sector. The number of quality enterprises is sizable: we received over 500 applications for approximately 75 spots. In the end, we’ve invested almost $900,000 in 9 seed-stage enterprises. Moreover, we are seeing early results that suggest that the peer support process truly accelerates enterprises and supports entrepreneurs. Even entrepreneurs who didn’t receive capital found value in the program—98% of participants have recommended it to their peers. And professional investors observing the process have noted how much the companies have accelerated as a result of facing the scrutiny of their peers. One partner at a Silicon Valley VC firm noted after observing the enterprises: “at the beginning of WCVC, I wouldn’t have invested in any of these enterprises. Now, I’d consider 10-12 of them!”

West Coast Village Capital entrepreneurs vet one anothers’ businesses.
After our four pilots have ended, we have invested roughly $1 million in seed-stage enterprises: stay tuned to this blog as we’d love to share the results. VilCap is taking encouraging steps forward as we continue to experiment with ways to grow the sector.