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HTTP://LEGATUM.MIT.EDU
Bottom-Up Entrepreneurship
Professor Iqbal Z.
Quadir
Institute of International and European Affairs (IIEA)
Dublin
May 23, 2012
Founder and Director
Legatum Center for Development & Entrepreneurship at
MIT
HTTP://LEGATUM.MIT.EDU
Developing countries are the 75%
world:
• 75% of the world population is in developing
countries
• 75% of the world’s growth over last decade is in
developing countries
• 75% of the flow of funds (remittances + aid) is
remittances
• 75% of the world’s mobile phones are in
developing countries
• 75% of the world’s GDP could be in
developing countries by 2050
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1B
mobiles 0.6B
mobiles 0.6B
mobiles
Distribution of powerful, connected
computers in low-income regions
85% of the world’s youth (10-25 years old) live in
developing countries …we have to see the world in a new way
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Promoting the creation of technology-
based, for-profit enterprises in low-income
countries
Legatum Center at MIT
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Legatum Fellows
• MIT students launching innovative, for-profit
enterprises in low-income countries
• 90 Fellows since 2008
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The Legatum Fellowship
• Financial support
• Entrepreneurship ecology • LCDE network, speakers
(conferences/lectures/seminars),
staff, alumni, current Fellows
• Investors, entrepreneurs, potential
partners, new technologies
• Help students overcome their
individual inventory of needs
• Academic course: Entrepreneurship
and Prosperity in Low-income
Countries
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Bilikiss Adebiyi Legatum Fellow 2010-2011
2012 MBA, MIT Sloan School of
Management
Founder and CEO, Delman Recycling
Solutions
• Scrap recycling startup in Nigeria
• Reclaims scrap metal marring the
landscape while strengthening
Nigeria’s steel industry • Nigeria imported $2.4B iron/steel
in 2009
• Plans to set up scrap processing
plant in 2012
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Javier Lozano Legatum Fellow 2009-2010
2010 MBA, MIT Sloan School of
Management
Founder and CEO, Clinicas del Azúcar
• Low-cost diabetes clinic chain in
Mexico • Innovative, evidence-based, low-cost
diagnostics technology
• Unlimited consultations for annual
fixed fee
• Addressing the problem of >10 million
diabetes patients in Mexico, 90% with
poor or no healthcare
• Returned to Mexico post-graduation
and received financing
• Opened first clinic in September 2011
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Karan Singh Legatum Fellow 2010-2011
2011 MBA, MIT Sloan School of
Management
Co-Founder, Ginger.io
• Mobile phone-based platform for
patients, health care providers
researchers
• Tracks behavior to gain health
insights
• Closed successful first round of
financing
• Novel idea capitalizing on India’s
large market
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Ph
oto
by C
hristo
pher
Ha
rtin
g
I went to the U.S. from Bangladesh in 1976 and
realized…
…good U.S. universities are
not concentrated in
Washington, D.C.
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Mainframe
computer
Personal computers
1980s-90s:
Dispersion was happening in front of my
eyes
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Cascading prices of digital
technologies allowed further
dispersion
Moore’s Law:
• Processing power per $ doubles
every 18 months & quadruples
every 3 years.
• Price of computers falls more than
10,000x in a single generation
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•1 phone for 500 people
• Virtually no phones in rural areas where 100
million people lived
Bangladesh in 1993
70%
20%
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Misconception #1
Poor countries are under-resourced
› Poor countries are extremely wasteful
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Misconception #2
Poor people lack buying power
› Productivity tools create buying power
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Misconception #3
You need to start with money to make money
› Shared-access breaks that vicious cycle
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Demand side Supply side
Connectivity is
productivity;
productivity translates
to purchasing power
Prices cascading
down
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Problem: Lack of Other Infrastructures
• No credit checks
• A few bank branches to collect bills
• Contact points for customer service
• Branches/offices throughout the rural areas
• Each has 2-3 million borrowers
• Excellent repayment records
• About 95% borrowers are women
Concentration of resources stood in my
way
Solution: Partner with Microcredit Grameen Bank
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March 1994
Encouragement from Grameen Bank, but no
funding commitment
May 1994
With angel funding, created Gonofone (“phones for the
masses”)
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Telenor: know-how
Grameen:
distribution
Creation of Grameenphone
$120 million
Total Initial Funding:
2 / 93: Connectivity is Productivity
5 / 93: Met with Muhammad Yunus
5 / 94: Gonofone established
9 / 95: Telenor shows interest
11/95: Telenor and Grameen Bank make
commitment
11/ 96: Grameenphone receives cellular
license
3 / 97: Grameenphone services launched
12 / 99: IFC funding
12 / 00: Move to Harvard to teach
2 / 94: Cellphone is a cow
3 / 94: Grameen Bank encouraged
12 / 04: Gonofone exits
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Grameenphone success in
Bangladesh • 300,000 retail entrepreneurs, giving access to 100
million(at one time)
• 35 million subscribers
• 80 million cell phones in Bangladesh (including phones from other providers)
• 1 of 2 people have a phone
• Over $4 billion in revenues for industry
• Over $1 billion in profits
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Productivity tool
Company profits
$ billions in infrastructure
Mobile phone success is a global
phenomenon Countries’ GDP
People’s ability to pay
People’s productivity
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This success can be
generalized to other
technologies
Company profits
$ billions in infrastructure
Countries’ GDP
People’s ability to pay
People’s productivity
Productivity tool
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A win-win-win paradigm
Tools make people more productive,
then:
• Businesses win by selling tools
• People win by earning more
• Countries win when citizens have
more earnings
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2
Adam Smith
1723-1790
Western thinkers can help us understand
how economies develop
David Ricardo
1772-1823
Friedrich Hayek
1899-1992
Ronald Coase
1910-
Joseph Schumpeter
1883-1950
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4 Their knowledge of their native countries
gave them “home field advantage”
Azim Premji, founded Wipro
Mo Ibrahim,
founded Celtel
Miko Rwayitare, founded Telecel
Ayisi Makatiani,
founded Africa Online
Robin Li, founded Baidu
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These entrepreneurs were trained in
Western universities
Azim Premji, founded Wipro
Mo Ibrahim,
founded Celtel
Miko Rwayitare, founded Telecel
Ayisi Makatiani,
founded Africa Online
Robin Li, founded Baidu
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Government
Neglects People
Impoverishe
d People
Externally-
empowered
governments
may not take
care of people
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Economically-
empowered
people create
checks and
balances
Government
Addresses Needs
of People
Empowerme
nt of People
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A New Approach to Rural
Electrification Tens of millions of small dairy farms exist across
South Asia and Africa producing milk
What if with some additional capital investment, you could triple the economic returns on cattle and provide reliable access to electricity?
Milk
Cattle Revenues
42
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Emergence BioEnergy Utility Station
• Generate reliable electricity and create new
economic value from cattle
• Additional revenues keep the price of electricity
reasonable despite small-scale generation
Refrigeration
Cattle Revenues
EBUS Electricity Fertilizer Methane
Credits
Milk
Commercial Space
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Core Technology
• Micro-Combined-Heat-and-Power
(micro-CHP) Cogeneration System
• External combustion
– Can run off biogas / natural gas
• Continuous Operation
• 70,000 hour lifetime (compared to
5,000 hours for diesel generator)
• No noise
• Low Maintenance
• 3 kW electric + 6 kW heat
– Heat can be used for cooling
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micro-CHP
Mini Dairy Farm
Biodigester
Gro
un
d L
evel
Unde
rgro
un
d
Top F
loor
Electrified
Commercial
Space
Fertilizer
Pit
Biogas
Man
ure
Commercial
Space 1
2
3
4
5
6
Milk
Refrigeration
Electricity
Fertilizer
Carbon Credits
Refrigerator
EBUS
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Heat
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EBUS Model
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Electrified second
level can be used as
retail space
Cold storage
reduces milk
spoilage
Passive cooling
shed design
improves milk
production
2
1
3
4 Run-off from manure
can be sold as organic
fertilizer
5
6
Potential for carbon credits
Sale of electricity;
potentially produce up
to 72 kWh per day
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Triples Economic Productivity of
Cattle
• Cold storage reduces 20-
30% milk loss due to
spoilage
• Processed manure can be
sold as high-value organic
fertilizer
• Electricity can be retailed to
local consumers /
businesses
• Potential for methane credits
• Electrified commercial space
can receive premium rents
Electrified village from initial
experiment
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Renewable Alternatives • 1 kW installation of solar PV currently costs more than a
1 kw micro-CHP engine
• Solar can produce electricity for no more than 6-7 hours
per day
• Micro-CHP can produce electricity 24/7
– No additional capital cost to produce power all day
long
• Value of fertilizer makes cost of fuel free, similar to solar
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Market Potential • South Asia - Total population of 1.5 billion
people, 80% without reliable access to electricity
• Rural Areas:
– 600+ million people with no access to electricity,
those with access suffer from unreliable service
• Urban Areas:
– 9 to 12 hours of load shedding every day in major
urban areas of 7+ million residents, growing middle
class
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Key Partners • Infinia Corporation: Exclusive
distribution relationship for micro-
CHP technology in South Asia and
Africa
• BRAC : Signed MOU to support
deployment of initial prototypes and
scale project across country. BRAC
is the largest NGO in Bangladesh
• EBI will establish similar
partnerships in India / Pakistan
once model is proven
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