Where should early-stage businesses in developing countries look to secure the growth capital and support services they need to get to scale? This was a theme at an event hosted by the Business Innovation Facility (BIF) in London today.
BIF provides practical, hands-on advice and technical expertise, to support companies to develop or scale up inclusive business models. After three years BIF is showing some impressive results, but also hitting some of the constraints that are familiar to entrepreneurs in frontier markets.
A key constraint is access to finance, especially for firms who are too large for microfinance and grant programmes, but are not yet mature enough to attract interest from development finance institutions (DFIs) or private equity. It's the problem of the "missing middle" or, as panellist Chris West from the Shell Foundation memorably put it, the "Valley of Death".
Targeting fully commercial returns at the early stages of a business' development, given the pioneering nature of what they do in difficult markets, is often unrealistic. More needs to be done to find ways of blending traditional aid, DFI finance and commercial capital in ways that can buy down start-up costs and risks, to help SMEs navigate the Valley of Death.
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