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Alex Lhéritier , Global Head of WorkingCapital Solutions at Kyriba , says: “Ensuring a two-way transparency and trust can prove essential to a leader in a constantly changing environment. EBRD has always been one of the leading innovators in the space of sustainable investing and also FinTech.
In 1973/4 I participated in an Overseas Fellowship at General Motors Institute (now Kettering University) in a work/study cooperative programme in Flint, Michigan, which was the birthplace of GM. This programme which moved me through all major departments (Engineering, Finance, Supply, Vehicle Assembly, IS&T etc.)
Once the $1 million revenue milestone is crossed, entrepreneurs find it easier to find additional customers, manage workingcapital, and access funding, whether it is credit or equity. In my roundtables, the vast majority of entrepreneurs I work with are in this rather vulnerable pre $1 million revenue stage.
If financing is offered by a bank, the terms are often too onerous. As a result, charities and social enterprises do not have the cushion of external financing to manage their various capital requirements. Like any small business, they need workingcapital to balance out the peaks and troughs of their business cycle.
As more people depended on him, he spent his workingcapital, and the business failed. When artisans have no understanding of their cash flows, they fail prey to spending a big percentage of their workingcapital, without meaning to, on non-business issues that usually cripple their operations.
Social entrepreneurs are stultified by traditional forms of financing. Donations and grants don't allow them to innovate and grow. They have virtually no access to capital markets and little flexibility to experiment at various stages of growth. Compare that to the world of venture capital.
There are basically four ways to create that value: (1) invest in projects that earn more than their cost of capital; (2) increase profits from existing capital investments; (3) reduce the assets devoted to activities that earn less than their cost of capital; and (4) reduce the cost of capital itself.
They need new executive talent, infusions of capital, and systems capable of supporting an expanding organization. For-profit companies in the same situation can turn to a robust venture capital community that is focused on providing the management, financing and strategy that innovative companies need to scale up quickly.
The opportunity may entail: 1) pioneering a truly innovative product; 2) devising a new business model; 3) creating a better or cheaper version of an existing product; or 4) targeting an existing product to new sets of customers. For example, a new venture might employ a new business model for an innovative product.
And providers want the flexibility to deliver outcomes in the best, most innovative, and most efficient way possible without being micromanaged by the customer. Finally, some companies have struggled to finance their activities without payment while they work on delivering the results, limiting their ability to innovate too.
We see ourselves as risk-takers and innovators. Over the last six years the federal government funded more than 50 new regional innovation “clusters,” and across America new accelerators and entrepreneurship boot camps are proliferating. In fact, we know a lot about what works from observing this recent experimentation.
To paraphrase from "The Music Man," I am a sadder but definitely a wiser girl after this first encounter with venture financing, as this experience has become a well of lessons from which I draw daily in my personal and professional life. And because my husband and I were the providers of workingcapital, I had the luxury of being cavalier.
Yet, despite the fact that all of our guests across our 18 sessions (and counting) have embraced these truths, the average result of such commitments to innovation seems to have been tenuous. But the corporate innovators we’ve talked to all know that. They’ve read Christensen’s book The Innovator’s Dilemma.
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