Connector Organization: The Non-profit Model of the 21st Century

By Ali Ehsan

While I am sitting comfortably in my revolving chair, writing this article as an attempt to address my concerns for all the young discriminated scholars around the world, I can sense a potential world changing idea going down the drain this very instance dissolved in sour tears, somewhere in the developing world.

The third world countries have a formidable army of brain and brawn. Despite the eclectic approaches taken by disparate authorities, the world seems to have failed to properly harvest the potential of youths living in the third world countries. Our stereotypical views have forced us to underestimate the “economics of creativity” – a trait that comes as a factory default in every person.

The biggest challenge for a progressive young mind, dwelling in a third world country is the scarcity of resources, inadequate monetary support and an uninterested corporate society. Exalting the western domination in science and business, many find it difficult to accept the fact that ideas can also be molded in the Sahara and Kalahari.

For a while, I considered Venture Incubation as the non-profit model of the 21st century (or at least the model for Youth Empowerment), until I discovered some striking flaws in the concept, which makes it a liability for the unsophisticated demographics of the Third World countries.

To begin with, Venture Incubation is probably the first non-profit model that is aggressively pro-capitalist. Although I personally believe that their teachings are well within the border of Effective Altruism, but it is the motive of their affiliated investors – who often make a significant part of their governing body – that alarms me and raises the eyebrows of many others.

Capitalism is a widely feared and detested ‘phenomenon’ in the non-profit arena. This phobia has prevented the major non-profit organizations from practicing the idea and in the process has throttled its expansion and progress. So, the only feasible way to settle this feud is by introducing an intermediate: Connector Organization.

Connector Organization is the 21st century reincarnation of support groups. It works ancillary to various types of organizations – Government, NGOs, Venture Incubators, Angels Network, Angel Investors etc. – to build a global ecosystem of entrepreneurs and professionals.

Connector Organizations have a strong resemblance with Angels Network. Unlike Angels Network, it interacts with the angels and entrepreneurs physically and attract them from various fields. Connector Organizations have a much wider portfolio. They do not consider business as the only form of entrepreneurship and therefore invite talented young people from various fields, professions and communities. It also collaborates with organizations or

individuals who work to improve the pipeline quality, to meet the capacity constraint and to make up for the equity financial gap and advisory gap.

While the growth of Venture Incubation programs is not significant in the developing countries, the concepts are quite obsolete in the underdeveloped factions of the world. The private equity investors and venture capitalists often complain about the shortage of stellar ideas and insufficient business foresightedness. But, this is more of an assumption than reality, as anyone who has crunched the stats, delved the history books and disinterred the social aspect of the problem will realize that there is no shortage of fresh ideas but an agonizing shortage of investors.

The present day Angels Networks are affiliated with a very small number of investors. Micro-credit has not quite kicked off, due to the heightened acrimony between the two sides (as described earlier). Social Venture is still in its early days and the banks come much later into the investment scene. Unfortunately, the Venture Philanthropists are steadfast about investing in social enterprises and social innovations only. In some countries the government agencies offer “Innovation Fund” with blimpish support from USAID, UNDP, AGRA, ASN Bank, Shell Foundation, Rockefeller Foundation etc. (Source: Policy Research Working Paper 6827 – Non-Bank Financial Institution Unit, World Bank – April 2014).

Innovation Funds have limited portfolio, have a very complex selection procedure and are offered in very small numbers. Government fund is a complex system, with nepotism and corruption its natural corollary.

According to World Bank’s Policy Research Working Paper 6827 , the ratio of proposals to funds in the developing country is 2:125. Only about 5 to 10 percent of proposals graduate to the due diligence and deal structuring stages, and just 2 to 4 percent of proposals move forward to term sheets and agreements. Even the biggest of Venture Incubation programs like Y Combinator in USA offers seed capital to only 85 projects every year (Source: Y Combinator website).

Clearly the Venture Incubators have failed to produce a new line of investors. Rather than relying only on the billionaire investors, we have to attract the general crowd into the scene. This will not only lessen the burden on the professional investors, but will also create business opportunities in countries where there are no billionaires or big millionaires.

To solve this crisis we have to concentrate on Equity Crowd funding. Equity Crowd funding has never got the importance it deserves, clearly because it is practiced in places where investment is only dealt in seven digit figures. Equity Crowd funding or as I like to call it micro-investment can be a real game-changer in the developing economy. In Bangladesh, seed capital of $1500 is enough to start a small business. Sometimes 100 GB server space, costing less than $19 a month is enough to start a commercial website. I can say this so confidently because I have been there at the birth of the world’s first Bengali Social Network “nogorbalok.com” and the country’s largest content sharing website “dhakawap.com”. I have also very closely observed the assent of the largest online book store of Bangladesh “rokomari.com” and the country’s

first classified website “clickbd.com”. By the way, Nogorbalok is no longer in operation but the others in the list are happily making millions (of taka).

Fortunately, with its affiliates working on problems like advisory gap and equity financial gap, the Connector Organizations can shift its focus on convincing the general people to make seed investments. This will bring in a fresh group of investor and with them a fresh set of ideas and experience.

Before jumping to the third problem I would like to describe an interesting aspect of Connector Organizations. Connector Organizations have the wonderful ability of initiating the A-B-C Effect. This is an interesting Talent Empowerment Model – another one of my whimsical innovations – where A is a person with fresh idea, B is a person with skills and finally C is a person who has the seed capital. Anyone belonging to the start-up community will know that it is often very difficult to find a person having the qualities of two or more of these two people. This has been the case for YouTube, Apple, Alibaba, WhatsApp and if the movie “Social Network” portrays correctly, it has also been the case for Facebook.

As Connector Organizations get to interact with people from various fields and expertise, it becomes easier to assort this agglomeration and place them correctly in the three sets: A, B and C. This will most definitely prevent the loss of some amazing ideas. Analogous to Theoretical physics complementing Applied Physics, the A-B-C Effect will increase the stakes for people with anyone of the three assets, in the socio-economic development of his locality, country and even the world.

The third problem is quite intricate and alienating. The Venture Incubation programs operating in the third world countries have failed to establish a niche-based adaptive deal flow pattern. Most of the innovations here are driven by Economic Determinism. So, bulks of the business proposals reflect on business models that directly or indirectly sell consumer products.

The local Venture Incubators rely heavily on foreign investors. Most of these investors are players in IT and Healthcare sectors. They often choose to play in their own backyard, carelessly disposing off an array of promising business models. Once again, Connector organizations can solve this crisis as their investor pool extends to both local and foreign investors and comprises of people from diverse business backgrounds.

It is still five minutes till the fat lady sings. Please forgive my audacity, as I plan to conclude this article with a little introduction about myself and a synopsis of my experiences.

I am a Talent Empowerment activist from Bangladesh. I shifted to this avocation three years back after failing to find an investor for our venture: NogorBalok – the world’s first Bengali Social Network with a thriving community of over half a million members. This experience, twinned with my experience and the local entrepreneurs has forced me to reconsider the importance of a global network of entrepreneurs and professionals. Everyone deserves the “gift of opportunity”.

A version of this article appears in the DhakaInsider magazine on May 17, 2015 with the headline: Connector Organization: The Non-profit Model of the 21st Century