Venture capital as a development tool

The goal of the South North Development Initiative is to cultivate new sources and new vehicles for funding economic development and promoting entrepreneurship in developing countries. South North aims at reducing poverty and creating new jobs in these countries. Activities concentrate on locally interested and locally driven venture capital funds in Africa, Asia and Latin America. In co-operation with local or regional institutional partners in a developing country, a local venture capital fund (LVC) is created to mobilise the resources of the domestic and international private sector to make equity capital available to small- and medium-sized producers who have not previously had access to it. A LVC involves skills and techniques of successful business in the process of economic development for disadvantaged groups or populations. These mechanisms unleash creative economic energy, increase self-reliance, reduce dependence on grants and donations, and bring underserved populations into capital and market systems in sustainable ways. LVCs are structured and managed much like a traditional venture capital fund. The fundamental difference is, however, investment concentrates on areas and populations with little access to capital. For the creation of LVCs, South North pursues a five-step strategy. This includes the introduction and promotion of the concept, the identification of local partners, the preparation of an investment memorandum, leverage funding, and the implementation of the fund. South North's focus over the next four years is to strengthen its established local venture capital funds, to create new ones and to support those in development. The ultimate goal is to establish the venture capital tool as a widely used and accepted mechanism for social and human development longevity through reliance on established market mechanisms.