Why don’t more venture capital firms support “disruptive” technologies that create products for the world’s 2.6 billion poor people, asks Vivek Wadhwa in a recent issue of BusinessWeek.
For example, what if a Chinese company created a soft drink that was both sweet and nutritious, for 5 cents a bottle, rather than the 15 to 25 cents per bottle Coca-Cola charges in the Third World for essentially sugar water? These types of products have the potential to change both the developing and developed worlds.
Wadhwa cites other examples of disruptive technologies that first targeted the world’s poor, yet are now creating ripples throughout the developed world. Among them: compact, lower-priced portable medical imaging systems made by General Electric that are many times cheaper than systems used in Western hospitals. And there’s the Indian hospitals that have developed ways to perform complex eye and heart surgeries for one-tenth the cost of similar surgery in the U.S. And of course, there’s India’s Tata automobile, costing only $2,500, which will soon launch in Europe as well.
The case for funding disruptive technologies for the poor is being championed by a retired psychiatrist named Paul Polak, who has founded International Development Enterprises, a nonprofit group advising, investing, and helping to launch such ventures.
Polak travels the world spreading the message that innovation serving the bottom of the wealth pyramid not only helps humanity, but ends up benefitting wealthier countries, too.
Trouble is, most venture capital firms in the west prefer to back disruptive technologies that only serve mature markets. In other words, the latest Facebook-like or Groupon-like variation. Private equity and venture capital funds invested a total of $2.52 billion into social media startups in the first quarter of 2011, for example, according to data from the SMI Social Media Funding Guide. And philanthropic groups are unlikely to fill the gap, because they rarely fund for-profit ventures.
In other words, many venture capitalists today are sticking with what seems to be safer bets in existing technologies. But could they be missing out on simple but massively disruptive technologies that not only benefit the poor but potentially change the world?
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