Sunday, February 12, 2012

Unreasonable Crowdfunding

Teju Ravilochan is a co-founder of the Unreasonable Institute, which accelerates entrepreneurs tackling global challenges with 6 weeks of mentorship, access to capital, and a worldwide network of support. This is his second guest post on BOPreneur (here's his first). As my bleeps know, I am a believer in network building and open source innovation. As this post shows, however, it is much easier to say than to do, and this is a challenge to making the social enterprise sector more inclusive globally. What unreasonable steps can you take to help? What unreasonable changes could they make to the Marketplace?

The Trouble with Unreasonable Crowdfunding

Here at the Unreasonable Institute, we believe in militant transparency. It’s a value coined by our founder, Daniel Epstein, and it means being honest about the good, the bad, and the ugly. This blog post involves all three.

The Good

When we began the Unreasonable Institute, we did a lot of research about selection methodology. We asked investors how they picked the entrepreneurs they invested in. We researched hiring practices. We even looked at the Med School admissions processes. We discovered that most of the time, written applications and interviews are poor predictors of performance. What matters most is testing a candidate’s ability to do the job you want them to do.

In addition to picking the best possible entrepreneurs, we also wanted to generate revenue without asking our participants to pay to attend the Institute. We didn’t want to make the program inaccessible to deserving entrepreneurs who couldn’t afford it.

So we came up with the Unreasonable Marketplace, where we challenge our 50ish finalists to raise the $10,000 it costs to attend the Institute. The first 25 to do so are the entrepreneurs we accept. The best part? They are not allowed to pay it themselves. They raise it from others in small increments (to avoid the “Rich Uncle Problem” of a wealthy connection giving you all the money at once). Hypothetically, it was the perfect solution. Candidates prove their ability to galvanize, mobilize, and raise capital, they don’t pay for the program, and we generate revenue.

And surprisingly enough, it works. Over the past two years, the 48 entrepreneurs that have attended Unreasonable have raised a cumulative total $370,500 from more than 7,000 people in 50 countries.

But isn’t this unfair to entrepreneurs from developing countries? It certainly appears that way if you take a look at, for example, 2011 Fellow Moses Sanga. He didn’t have shoes until age 13. He hadn’t seen a computer until he was 15. He is the first person from his village to get a high school diploma. The nearest place to access internet is 17 kilometers from where he lives, and he started his company with $500. But while it would seem impossible for him to do so, Moses succeeded on the Marketplace. He attended our 2011 Summer Institute, raised $60,000 and became a TED Fellow

And It’s not just Moses: we’ve also had a former child soldier from Liberia, a Pakistani woman from a remote tribal region, and a Nigerian farmer succeed on the Marketplace.

How did this happen? Even we were surprised. 

First, these entrepreneurs worked hard. Khalida, from Pakistan, went door to door in her village collecting cash contributions (which our Marketplace can accept and verify). Moses visited CEOs of local businesses in Kampala to ask for their help.

We also went to work for them. We formed a partnership with HP in 2011, who generously contributes $42,500 each year into a fund that the entrepreneurs on the Marketplace allocate amongst themselves. The stated intention of the fund is to support entrepreneurs from the developing world. We reached out to our mentor network and asked them to support entrepreneurs from developing countries who they believed deserved a spot. We reached out to press and landed stories in Forbes, the Wall Street Journal blog, and even HP’s blog, aiming to drive traffic to the Marketplace. 

The Bad

But despite all these efforts, we’ve observed that 85% of donations on the Marketplace come from people who know the entrepreneur they’re supporting. Some US-based entrepreneurs have still failed to succeed on the Marketplace and I by no means seek to downplay the incredible accomplishment of raising $10,000 nor the creative approaches that some of our entrepreneurs have employed. But this means that ultimately, the Marketplace becomes a test of the size of your network, more than it does your entrepreneurial ability.

The Ugly

So what does that mean? It means our Marketplace, which we’ve spent thousands of dollars and hundreds of hours building, is unfair. Entrepreneurs without large networks are flat out disadvantaged in this process. And this unfairness is visible even on our current Marketplace.

Take a look at 2012 Finalist Narcisse Mbunzama. He’s a former child soldier from the Democratic Republic of the Congo. He’s started an incredible company called Mobile Agribusiness. It currently reaches 500 farmers, providing them information about weather, how much to sell their crops for at the market, and information about how to better grow their crops. Not only is it targeting a need for 80% of Congo’s population (who are farmers), but Narcisse and his team built this company despite living in a country where 5.4 million people were killed in the last decade in what has been the called the bloodiest civil war of our time. And while three entrepreneurs from Brazil and the United States have raised their $10,000 in 15 days, he’s only raised $70.

Don’t get me wrong. I love our Marketplace. I believe in it. It selects entrepreneurs that are a perfect fit for our program: those that are willing to take on the seemingly impossible task of raising $10,000 in small increments from hundreds of people. And when they show up in Boulder, they knock it out of the park.

But it pains me deeply to see that by the merit of his work and effort alone, Narcisse is unable to get more support. We’ve matched him with an Unreasonable alumnus to help him strategize and shared his story with the press. But he, and other deserving finalists in the same position, continue to struggle.

The reason we exist is to create a world where no one is limited by their circumstances. We believe coming to the 2012 Unreasonable Institute could change the lives of the entrepreneurs on the Marketplace. It did for Moses. Our team now knows that we must find a new solution next year to select our 25 entrepreneurs. And we will.

For now, we need help. The Marketplace, which lasts 50 days, is just past its halfway point. If you believe in entrepreneurs like Narcisse and in their work, join us. Help us bring them to the Unreasonable Institute. Help us help them to serve people who desperately need their unrelenting drive, who need their determination to transform their world. They just might define progress in our time.