Stanford Seed II

Stanford, CA
Round
Spring-Summer 2019
Project Location
Stanford, CA
Project Type
Full team
Project Focus
Feasibility Study,
Finance
Organization Type
Education,
International Development or Microfinance

Organization

As a Stanford Graduate School of Business-led initiative, Stanford Seed (Stanford Institute for Innovation in Developing Economies) believes that business is one of the most powerful engines of change to move developing and emerging economies to greater prosperity. Since its founding in 2011, Seed has opened four regional centers (Ghana, Kenya, Botswana and India) through which it helps entrepreneurs from across Africa and India build thriving enterprises and robust communities. Seed provides Stanford undergraduate and graduate students with internships in which they may become globally engaged, and offers GSB alumni, and other business leaders, the opportunity to accelerate transformative change in companies participating in the Seed Transformation Program. Twenty-five Stanford professors and lecturers have taught at Seed centers, providing training to over 600 business owners and thousands of their senior managers; Stanford students have contributed 23,400 volunteer hours gaining work experience in developing and emerging economies; and GSB alumni and other global business executives have contributed 48,480 volunteer hours in support of Seed’s mission. The result of this combined effort, called The Seed Effect, is that 86% of participating business owners grow their customer base, 62% create new jobs and 63% increase their revenue.

Situation

Six-hundred and twenty companies have participated in the Seed Transformation Program, with an additional 180 companies added each year across the four regions. In the program the companies create a transformation plan to guide their growth in the coming years. In many cases the rate of transformation could be significantly improved with access to capital. Seed is considering whether it makes sense for it to set up an investment fund focused on Seed companies.

Project Objectives

Seed has asked ACT to conduct a study to determine the feasibility of creating a Seed investment fund that would provide financing for Seed (and possibly Seed-like) companies in emerging markets. The study will explore how the fund could be structured, including its investment thesis and objectives, and options to partner or co-invest with others in this space. The study also will explore other issues that might impact the success of a Seed fund such as size and management.

Project Overview

Understand Funding Needs and Sources

  • Document Review, Stakeholder Interviews, Seed Company Interviews, Funder Interviews, Review of Other Models (Innovative catalyst and funder models)

Analysis and Recommendations

  • Ways to improve Seed Company Investor Readiness
  • How to enable better Connections between Seed company and investors
  • How to harness Stanford alumni interest in investing in Seed companies

Key Recommendations

Near Term 

  • Expand Funding and Trade Finance as well as improve T-Plans by adding consistency and funding needs
  • Add searchable company profiles to Workplace 
  • Develop and promulgate an Investor Readiness Checklist
  • Adjust STP selection process - leave seats empty if not found 

Mid Term

  • Research and establish banking relationships for STN
  • Provide new STP content to STN at workshops/meetings
  • Establish (formalize) local advisory boards
  • Complete and promote the public facing company directory

Longer Term

  • Increase staff or build staff capabilities to better engage investor community
  • Set up a process for alumni investment opportunities

Key Conclusions

  • Seed companies are receiving financing but not in a manner that supports their goals for growth
  • Investors have low awareness of the Seed program and find many Seed companies to not be investment ready or not be investable
  • Seed company financing can be improved through a systematic (and mostly modest) series of changes spanning Selection, Investor Readiness, and Connections
  • Alumni investor interest can also be harnessed through a co-investing model to improve Seed company financing

Final Report Outline

  • Review of Project Seed
  • Summary of Key Findings
  • Recommendations
  1. Increase Investor Readiness
  2. Build Connections
  3. Harness Alumni Investing
  4. Improve Investability through Selection
  • Next Steps