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The Business in Development Challenge
Robert Katz, 3 Oct 06

BiD%20Challenge%20Logo.JPG The Business in Development Challenge, the world’s first international business plan competition for poverty reduction and profit, took place last week in Amsterdam. Hundreds of entrepreneurs, investors, NGOs, and government representatives gathered for a competition and awards ceremony, during which a 150,000 Euro prize pool was divided among 16 winners.

The BiD Challenge is the product of a partnership between a government-funded Dutch NGO, NCDO, and another local NGO named Fair Ventures. Their goal is simple: generate jobs and incomes by boosting small enterprises in developing countries. What’s unique about the BiD Challenge is that it combines a business plan competition with a charitable award – a hybrid financing scheme that attracts both corporate and NGO interest.

Of 903 initial applicants, the pool was whittled down to 25 finalists; the 16 winners ultimately received between 5,000 and 15,000 Euros each to start up their business. Prior to the awards ceremony, finalists had the chance to pitch their business plans to investors during a large venture fair.

The BiD Challenge is the ultimate partnership – it bridges the government, NGO, and corporate worlds relatively seamlessly. Each participant has a clearly defined role, and acts in its own best interests: government funds projects that have been vetted by experts; NGOs highlight the importance of small-scale enterprise; corporations and investors see the next wave of BOP innovations and invest in the best models. Everyone wins, right?

To a point, yes – everyone is a winner. But 150,000 euros divided among 16 businesses – that’s less than 10,000 euros per business (on average). Even after you factor in exchange rates, that’s a drop in the bucket compared to what an actual small business needs to scale up operations.

The development and corporate communities tend to forget that the finalists are entrepreneurs or actually running businesses – to expect that they can just up and go off to Amsterdam for a week is a bit much. BiD Challenge is hardly the only one of these competitions, which is a good thing, but each application takes quite a bit of time to complete. How can we expect entrepreneurs to spend time applying for a series of 10,000 euro grants when they need that time to run their businesses or secure real (venture capital) funding?

Finally, all such competitions suffer from some selection bias. The application process is run online – only those entrepreneurs with some access to the Internet can apply. Applications are written in English, and require applicants to adhere to a series of complicated guidelines that I had trouble understanding. This type of over-regulation is the ultimate irony – NCDO and other multilaterals talk about reducing red tape. I wonder what Doing Business thinks of the steps to register a business plan for the BiD Challenge!

Flaws aside, the Challenge is a leading example of how government can do private sector led development well. They are not sending high-paid consultants to local communities to write business plans and then leave – this is a bottom-up affair, with entrepreneurs submitting their own business plans and then receiving mentoring. All applicants have the opportunity to participate in the BiD Network, an online community for entrepreneurship and development in developing countries; some ultimately secure venture capital at the event. No one loses – but with a few modifications, the BiD challenge could make winning an even bigger deal.

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While it is true that 10,000 Euros is not much to get a business going, the whole approach is a creative way to leverage 150,000 Euros. The winners get some attention, which is likely worth more than the Euros. Even the also-rans get some attention. Given that you acknowledge that some get VC money at the event (and I'll be some others get money later), my recommendation would be that if there were more money in the kitty, that this activity should be done more often with more winners, and not more money per winner. Kudos to the conceivers.

Posted by: Curt Beckmann on 3 Oct 06



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