The Need for Capital Aggregation

From the perspective of small and growing business (SGB) growth, there is clear evidence of phased development in building SGB value. Enterprises in developing nations often start with a mission focused on social, economic, or environmental benefits.

Mission-based investors - such as foundations, philanthropic organizations, or local governments - support the development of enterprise infrastructure or capacity, which is critical to the SGB's mission. However, this support, through grants or "soft capital," usually does not result in a profitable, self-sustaining business.

A second development phase, supported by investment capital, concentrates on a cohesive business model, ability to scale, and subsequent growth and profitability. This new source of investment carries much different measures and priorities.

SGB management is often unable to adjust to these expectations without intercession by capacity development organizations. A third phase focuses on sustainable operations, predictable growth, and consistent free cash flow to make the enterprise "bankable" and ready for commercial debt sources to support its growth capital needs.

VCs have it easy

 


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