Micro-equity 2

Micro-equity is a combining of micro-credit, which has done wonderful things in the world, with venture capital, which creates new economies.

The transaction size can be bigger, up to US$10,000, but the micro-finance firm retains a 50% stake in the recipient firm. The concept has two advantages over micro-loans:

1) The Micro-equity firm is highly motivated to assist in the success of the investee.

2) The Micro-equity firm earns a profit through capital gains at exit, which profits can be used to launch the dreams of even more entrepreneurs.

Downside:

1) The transaction size is so small that the Micro-equity firm is de-motivated to analyze business plans.

2) The cost per transaction, particularly for fixed costs of the fund and for sourcing potential deals, is extreme.

Comments

[Lexi]

Ummmm....like, post?!