Two days ago, I had the chance to meet Premal Shah, the CEO of Kiva.org (http://www.kiva.org/) and ex-Mercer consultant. My thoughts after his presentation on Kiva, how he got involved, and its impact on the developing world:
1. The Internet is game changing in that it brings micro-investing to the average person by creating an accessible and (relatively) transparent channel. It does this through (1) accessibility, as the Internet is ubiquitous, (2) aggregation, allowing a single user to donate a smaller amount and aggregating donations across multiple users, and (3) experience, making it fun for the users to give money through tools such as social networking, blogs, etc. Like eBay in auctions or Kiva in micro-lending, I don't see why the model can't be extended to things like funding projects (a typical AID project required $3000; that's 200 people donating $15 each), micro-VC, or any application that can benefit from the power of masses.
2. Internet development companies are fragile and heavily dependent on press and perception. More specifically, there is a high risk associated with bad press, which on the Internet spreads like wildfire. I experienced this AID, when (during the tsunami relief effort) accusations of donor money being used to fund extremist organizations such as the DYFI and RSS started appearing on blogs and web forums. As chapter coordinator of a highly decentralized organization, it was incredibly difficult to do anything to stop it; only time and repeated public statements quenched that fire. While the Internet can bring people together en masse, it can also turn them away as dramatically; all it could take is one account of fraud, laundering, or a major washout.
3. It's incredibly difficult to make the jump from non-profit to for-profit, so companies should make this call early on. And there are benefits to both... being a non-profit gets you 501(c) status, lets you play the "social good" card with donors, and draws less scrutiny from your investors / users, while being a for-profit makes you (hopefully) financially self-sustainable, increases the scalability of your work, and attracts a larger set of investors who invest in you for returns. But by switching from a non-profit to a for-profit you stand the risk of confusing and alienating your existing user / donor base (which aligned with your social mission) and destroying brand equity.
4. There is tremendous untapped potential in individuals. Kiva itself has over $11 million in loans and 100k lenders to date, and I realized the bottleneck here is the current lack of outlets to connect people with causes they care about. Microlending is just one thing; there are also ways to buy micro equivalent of carbon credits (see Terrapass, http://www.terrapass.com/), among other important causes. What would be nice is if a branded player, such as Google, could create a consolidated forum to connect people with their passions with at least some level of ROI.
5. As stated in Premal's presentation, "Consulting is excellent preparation for the challenges of startup life". I'm loving it.
Sunday, September 9, 2007
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