Since 2009, Village Capital has supported early-stage entrepreneurs developing critical agriculture, education, energy, financial services and health solutions for underserved populations worldwide. Village Capital is a venture development organization that finds, trains and funds entrepreneurs working to solve global challenges. Their track record is impressive. To date, Village Capital programs have supported over 500 entrepreneurs with individualized mentorship, access to investor and partner networks, and support through Village Capital's award-winning curriculum. And it is not just mentorship and programming: at the end of each venture development program, participating entrepreneurs evaluate each other across six indicators of investment readiness and direct at least $50,000 of investment capital to the top two, peer-selected entrepreneurs.
And Village Capital has just entered into an expanded global relationship to support entrepreneurs focused on democratizing access to financial services for low-wealth individuals, families and small businesses with global technology platform and payments leader, PayPal Holdings, Inc. (NASDAQ: PYPL).
So, why is a global corporate partnership newsworthy?
"The way we currently support entrepreneurs as a society unfortunately funnels a ton of dollars into the hands of a very small amount of people, who work in a few U.S. states, and went to a handful of schools, and they're investing in people who look like them. As a result, the innovations we're seeing aren't relevant to the majority of people. The average person in the US, Mexico, or India isn't worried about the problems that the venture capital industry is focused on solving, such as receiving a curated list of ingredients to make their dinner at home. They're worried about making their cash flow work so they can feed their kids, period. The entrepreneurs we're supporting with PayPal come from the background that understands these problems, and are solving them." - Ross Baird, Executive Director of Village Capital.
According to Ross, three things make this partnership unique:
- Inclusive entrepreneurship. Village Capital and PayPal are looking outside the usual ecosystems (Silicon Valley, Boston and New York) for innovative ideas. They are supporting people who are statistically over-performing and stereotypically overlooked.
- Not CSR. They are seeking to solve problems that will make a significant difference in for underserved communities.
- Disrupt or be disrupted. PayPal needs to be in the thick of the changing pace of FinTech or risk being overtaken by a post-blockchain tech upstart.
As Ross notes:
"this partnership works because PayPal understands that the nature of money is changing faster than institutions can comprehend-and entrepreneurs are leading the way. PayPal is playing for keeps with innovation: they view these entrepreneurs as core to what the future of their company will be, not just a great marketing campaign with no real relevance to the core business."
PayPal may be the first program partner to jump in deeper with Village Capital, and are likely will not be the last. As Dustin Shay, Global Manager, Partnerships at Village Capital explained to me, Village Capital partners fall into four categories:
- Corporations seeking the latest innovations to help them better reach underserved populations;
- Foundations seeking to make a quantifiable, scalable impact on low-wealth individuals, families, and small businesses;
- High net worth individuals seeking to enable entrepreneurship as a path for personal and economic growth; and
- Investors seeking incredible returns in both financial terms and social impact.
All of these partners are eager for solutions to big challenges--as well as patiently expecting a return. Problem solving, however, comes first and the problems Village Capital is tackling are overlooked by traditional financial institutions and venture investors. With the new PayPal partnership, Village Capital is turning it's FinTech problem solving skills first to Mexico, a country where over 74 million people lack access to finance, including many small businesses. Over 90% of small businesses throughout Mexico have no relationship with a traditional financial institution. In spite of these challenges, Mexico has been an incredible region for entrepreneurial innovation in financial services. Village Capital launched a financial-inclusion focused program in Mexico last year and discovered a very cohesive entrepreneurship community - all the necessary stakeholders came together (VC's, corporations, foundations), to provide honest feedback with these innovative entrepreneurs.
Village Capital has identified three primary challenges for underserved populations in Mexico--challenges which hopefully, innovators will solve:
- Credit scoring: One-quarter of rejections for credit card requests in the country are due to problems with the Credit Bureau. According to Dustin, credit scoring is outdated because innovations in credit services are outpacing the traditional credit scoring methods.
- User identity: In Mexico, Dustin informs me, there are no standards to verify one's identity. The closest parallel to the US's social security number or India's electronic Know-Your-Customer (eKYC) is a government-distributed voter ID card, only for those at least 18 years old. The databases that manage the information on these cards are fragmented, unstandardized, and difficult to access. This makes it extremely difficult for financial service providers to track users, share information, and deliver an overall smoother and safer experience for consumers.
- Channel access: Even though new technologies have been deployed in the country, it's not in the hands of those who need it. Why? Weak connectivity and few points of service. Though 90% of offline payments are routed through 13,000 OXXO convenience stores in Mexico, even OXXO doesn't reach many rural communities. Internet access is also restricted to more-developed areas, only reaching 41% of the total population, Dustin notes. 10% of the population-that's 12 million Mexicans-doesn't even have cell phones, completely excluding them from mobile finance.
The solutions Village Capital are seeing in Mexico are unique - utilizing the inherent strengths of communities, as well as addressing issues by sidestepping lack of infrastructure or other local areas in need of development. Whether it's using the rise of social media to do credit scoring like the company Credilikeme - or responding to the needs of small businesses to take credit card payments through mobile devices like the company BillPocket - entrepreneurs are leveraging new and interesting solutions in ways that we're eager to see emulated in other economies throughout the world.
Village Capital recognizes that one startup or a single innovative technology is not going to solve the problems of the world's unbanked. Dustin stressed in our interview that the point of a ventures like Village Capital, and partnerships with corporations like PayPal, is not to find a single silver bullet to the challenges of financial inclusion--rather, it is on finding and honing a large number of really good lead bullets to solve specific, targeted sub-issues within the greater problem of financial inclusion.
What can problem-solvers, game-changers and visionary investors learn from Village Capital's social impact entrepreneurs? Dustin Shay offers the following 3 suggestions:
- Social Good and Profit Are Not Mutually Exclusive. Some of the best solutions to critical problems are actually for-profit. There's a limit to the amount of philanthropic money in the world, and it won't be enough to solve every major problem. We need to leverage the power of entrepreneurship if we're going to create self-sustaining solutions that can grow and scale to move the needle in a meaningful way.
- The Best Solutions Don't Always Come From White Guys in Silicon Valley. The prevailing thought process is that Silicon Valley is the only place innovation happens (75% of venture capital is deployed in Boston, New York, and San Francisco). Further, venture capital has an inherent bias in favor of people who look like them. Entrepreneurial innovation is present everywhere (95% of the entrepreneurs Village Capital supports DON'T come from Boston, New York, or San Francisco) and to solve challenges for specific communities we need to find the entrepreneurs within those communities.
- Everyone Can Start Something That Can Make a Difference. "If not now, then when? If not us, then who?" If you approach problems from an entrepreneurial perspective and realize that these issues aren't going to solve themselves, you can make an incredible difference. Everyone's viewpoint is necessary when it comes to starting an organization - money is certainly not the only thing entrepreneurs need. If you're not starting something yourself, getting involved and offering honest, direct, actionable feedback is a great way to support many entrepreneurs solving critical issues.