Karen Kerrigan is the president & CEO of the Small Business & Entrepreneurship Council and a board member and former chair of CIPE. For more than twenty years Kerrigan’s leadership, advocacy and training work has helped foster U.S. entrepreneurship and global small business growth.She regularly testifies before the U.S. Congress on the key issues impacting entrepreneurs and the economy, and has been appointed to numerous federal advisory boards including the National Women’s Business Council, the U.S.-Iraq Business Dialog, the U.S. Treasury’s Taxpayer Advisory Panel, and the National Advisory Committee for Labor Provisions of U.S. Free Trade Agreements. Kerrigan regularly engages with the President’s cabinet and key advisors, and has participated in several White House economic summits, scores of events hosted by the U.S. SBA, U.S. Treasury Department and other federal government agencies and departments. She has written hundreds of Op-Eds and newspaper columns, and regularly appears on national television and talk radio programs.
Medhawi Giri interviewed Kerrigan for CIPE.
How did you get started in the path to entrepreneurship and what motivated you initially?
My path to entrepreneurship was a journey. Before starting out on my own, I had a variety of career experiences that helped me build critical skills that are necessary for successful entrepreneurship. These skills and experiences provided me with confidence and know-how. The motivation to start my own business came about when several factors aligned. I saw a need in the marketplace. I had a desire to work on my own terms and innovate and create with fewer restrictions. In addition, I wanted financial independence. Of course, I was passionate about my idea and business opportunity and felt confident in my ability to execute. The bottom line is I wanted more freedom, and entrepreneurship allowed for that.
When you were getting started, how difficult was it to bring your idea to life and to make a business out of it?
A shop in Hong Kong where people can receive money sent from abroad. Remittances accounted for more than 80 percent of foreign investment into mainland China from 1979 to 1995. (Photo: Wikimedia Commons)
“There is nothing more powerful than individuals motivated to invest in meaningful programs in their home countries,” said Eric-Vincent Guichard, the Founder and CEO of Homestrings, an online platform facilitating global diaspora investments. The son of a Guinean father and an American mother, Eric spent most of his formative years in Guinea attending primary and secondary school before moving to the United States. From his personal experience, he knows the challenges that diaspora communities face when trying to invest in their country of origin.
Remittances comprise a significant portion of the foreign directed investment (FDI) in many countries. According to the World Bank, global remittances consistently dwarf foreign assistance by a factor of three, with $414 billion projected this year alone. Even in countries that attract a lot of investment from global markets, the role of diaspora investment is substantial: between 1991 and 2001, the Indian diaspora was responsible for $2.8 billion of the $10 billion in foreign investment the flowed into the country. In China, diaspora investment accounted for the vast majority — 80 percent — of total FDI between 1979 and 1995.
Remittances have come to play this vital role as source of FDI despite various rules and regulations that make it difficult for individuals to invest in private companies back home. Traditionally, diaspora remittances have flowed mostly to family members, religious institutions, and non-governmental organizations.
These channels are invaluable when it comes to supporting charitable causes and small family businesses, but do not give investors much control over how the money is used or provide the opportunity to re-invest or make a profit. This significantly limits the potential of diaspora investment to develop larger, more productive businesses that can create jobs and economic growth back home.
This Saturday, April 5, marked the two-year anniversary of the signing of the Jumpstart Our Business Startup Act (JOBS Act), which paved the way for “equity crowdfunding” in the United States.
This year, the crowdfunding community celebrated that anniversary as Global Crowdfunding Day. While rules are still being drafted to make equity crowdfunding a reality in U.S., the broader crowdfunding world has already grown by leaps and bounds since that act was signed into law.
Simply put, crowdfunding allows anyone to invest in making an idea a reality — whether it’s a new product, a business, a book, movie, album, or video game, or a charitable project. By harnessing the power of the Internet and social media, crowdfunding platforms let people with innovative ideas harness donations as small as $1 from thousands or tens of thousands of people around the world who share their enthusiasm.
Someday, equity crowdfunding will allow these contributors to earn a return on their investment when they invest in a project like Oculus Rift, which was recently bought by Facebook for $2 billion. In the meantime, however, there is no shortage of creative ideas and potential in the crowdfunding community.
Facebook made headlines on Tuesday when it announced it would acquire Oculus Rift, a maker of virtual reality headsets, for $2 billion. Such acquisitions are not unusual in Silicon Valley — just last month, Facebook bought chat service WhatsApp for $19 billion. What’s unique about Oculus Rift is that it started as a project on the crowdfunding site Kickstarter.
Under the Kickstarter model, backers contribute to projects because they want to see them made. The most they can expect to receive is a copy of the finished product and a token of appreciation. The more than 2,000 backers who gave less than $275 to the Oculus project received only items like T-shirts and posters, along with the hope of one day being able to buy the VR headset in stores.
Some backers were outraged at the sale. If those who received a headset had instead received a share of the company, a $300 investment would result in a $20,000 payout (after accounting for subsequent venture capital funding.)
Last year Leen Sadder of Beruit, Lebanon had an idea to create an organic and biodegradable alternative to Western-style teeth cleansing. Called Miswak, this twig of the Salvadora persica tree has been used for teeth cleaning throughout the Middle East and Asia for millennia. Leen recognized the sustainability of eliminating both the toothbrush and paste and its application for the developing world. She created a crowdfunding campaign on Lebanon-based crowdfunding platform Zoomaal and within weeks raised over $18,000 from 301 backers — 104 percent of her target — along with 4,400 likes on Facebook and 573 tweets. This bought her money, market validation, and media attention. She is now in production. This idea that would never have seen “likes” or funding from banks or venture capitalists. Enter the alternative world of startup and small business financing, called crowdfunding.
Crowdfunding is a simple but transformative concept. An entrepreneur proposes a business, charitable, or creative project on a crowdfunding website. If convinced, tens, hundreds or even thousands of individuals commit relatively small amounts of capital to support the idea. Taken together, these contributions may be significant enough to turn the idea into a commercial reality. This industry is still in its infancy, but it topped $3 billion in transactions in 2012 and may top $5 billion by the end of this year.
Samriddhi Foundation, a Kathmandu based think tank, ran a crowdfunding campaign from April 30 to May 30, 2013, on Indiegogo to support a research and advocacy campaign that would conduct a study on Kirana Pasals – small mom and pop shops selling groceries and fast moving consumer goods, which are typical to Nepal and few other South Asian nations. Atlas Network agreed to match all donations dollar-for-dollar. Watch the video that Samriddhi created for this campaign here.
People who have lived in Nepal long enough have often noticed that these small enterprises, Kirana Pasals, rarely grow to become medium or large operations, like department stores or supermarkets. The study was designed to find out what prevented the growth of these independent businesses, which are run by entrepreneurial and hardworking people, and to conduct advocacy focused on recommendations formulated on the basis of this research.
By the end of May 30, 2013, the campaign had become successful and we were able to raise the target amount of $7,500 (matched with an additional $7,500 from Atlas Network). And during the month-long period, we learned a lot about this great tool that enabled us to take another step in promoting entrepreneurship and economic development in Nepal.
The great thing about a crowdfunding campaign is the easy interaction between the supporters and the organization which allows greater transparency for the supporters to see where their money is going and who will it benefit directly. The communication process is simple and flexible and promises more accountability. However, crowdfunding is not necessarily as easy as it seems. Some of the lessons we recall from the experience are: