Emerging Markets on the Rise

Equity for Emerging Markets

Equity for New Emerging Markets is HOT. 40% of the professional investors in the US are already investing in the new economies of Africa. Their main motivation is a) good risk/return ratio's and b) improving economic performance. The new emerging markets are typical pioneering markets. The financial infrastructure is basic, but functional and the entrepreneurs are focused but have to get used to working with investors. This means that deals need some work, but the benefits are generally worth it. Competition in the SME market is low. Since entrepreneurs do not have a lot of direct competition in their markets, when they are able to get equity, they can make nice margins. As the investors do not meet a lot of competition, they can make some nice margins as well. Especially for experienced Angel Investors the new emerging markets offer some challenging opportunities and adventure. BiD Network provides entrepreneurs in the developing countries access to the international capital market. It is up to them to make good use of that.

BiD Network

By origin BiD Network is an Amsterdam based foundation focused on relieving poverty in developing countries by stimulating new businesses in the SME sector. Why the SME sector? Simply because the SME sector is grossly under developed and lacks access to equity. In developed countries about 80% of the total workforce is employed in small and medium sized companies. In most developing countries only 10% of the workforce is employed in this sector.
If we consider access to capital, we see that the Micro Finance Institutions do very well. Most of these institutions make a profit and they serve a real need. Most of their investments however are under $ 5,000 in size and have to be paid back within a year. Therefore these funds are mostly used to create self employment. A very important goal, but not the same as fast growing SME's, which have the potential to generate substantial employment. Serious Venture Capital and private equity funds are also very active in the emerging markets. They concentrate on large capital intensive enterprises like mining, energy, telecom en large scale agriculture. All of which are important issues, but again not serving the needs of fast growing SME's. Equity for SME's is very scarce. It is called "the missing middle".
BiD Network has just one goal: Stimulate new business in the SME sector. Entrepreneurs from all DAC listed countries, or entrepreneurs with a focus on these countries can write and submit their business plan in the BiD Network, after which a thorough assessment procedure starts.
In 9 countries entrepreneurs can also enter in local business plan competitions, so-called BiD Challenges, and win prize money.
Once a year the finalists from local competitions are invited to compete in the international finals in the Netherlands. Last year 3500 entrepreneurs entered into the competition, making BiD Challenge the biggest online business plan competition in the world.
Through the Challenge activities, a local network is being built up in 9 countries: Colombia, Bolivia, Ecuador, Peru and Argentina in South America; Tanzania, Kenya and Uganda in Africa and the Philippines in Asia. Our partners in these countries are now being educated in the fine art of equity matchmaking and business support for entrepreneurs. Next to our local partners, BiD Network employs three professional matchmakers in Amsterdam and three traveling regional managers to coordinate local activities. All these activities result in a continuous stream of well prepared business proposals. As the level of expertise of our partners increases, so will the quality of the entrepreneurs and their proposals.
Through the BiD Network community website the entrepreneurs can find coaches and investors. Over the past three years some 100 entrepreneurs have either received some serious price money or finance in some other way.
The BiD Network as an online desk for entrepreneurs to submit their plan, enforced with the BiD Challenge competitions, constitutes the basis of the sourcing process for the BiD Network matchmaking activities.

BiD Network Matchmaking and Equity Services

The matchmaking service of BiD Network brings together entrepreneurs from the emerging markets and investors from Northern Europe. On the investors' side BiD network focuses on Angel Investors who will not only bring money to the table but also experience and their network. We will serve a limited number of investors directly and charge them a success fee, however we have a preference for working through established Business Angels Networks.

Propositions are assessed by local partners and the BiD Approval Committee. When approved, the propositions are processed into a fact sheet and entered into the deal flow management system. We use Angelsoft to manage our deal flow. Registered investors and business angels networks have access to all propositions. They can communicate with the entrepreneurs and with other investors. Once serious interest is expressed, the negotiations are taken off-line and the investor and entrepreneur communicate directly.

What may an investor expect from Bid Network? Depending on the service level agreement between BiD Network and the investor, the following services are available:
1. Our knowledge and the knowledge of our local partner surrounding entrepreneur and business and details on the local business environment.
2. Basic assessment of entrepreneur and business, such as verified copy of passport or birth certificate, local registration in the chamber of commerce, a certified annual account (if available), a quick check on credit history, criminal records and outstanding tax liabilities.
3. Second opinion. When an investor needs a second opinion concerning product, market, management, financials, legal or local issues, BiD Network and her local partner(s) can arrange such on behalf of the investor.
BiD Network will not make any recommendations towards or investment decisions for the investor.

Once the investor and entrepreneur agree on the terms of the investment (term sheet), BiD Network Equity Services, can supply all professional and business services to close the deal and manage the investment.

Varying by country, Equity Services can supply:
1. Basic and full due diligence
2. Contracts
3. Payment and collection
4. Share holding (trust services)
5. Shareholder representation
6. Investment management
7. Business coaching and monitoring of entrepreneurs

All services are optional and paid for by the investor.

In short; the investor makes the investment decision and remains responsible for the end result, but BiD network and her local partners supply all services necessary to manage investments over long distances.

The most sustainable thing is profit. There is no future for initiatives that do not make money. So although our underlying motivation is eradication of poverty, we believe the only way to go is creating profitable business.