May 30th, 2006
IPEG event with Bowman Cutter of Warburg Pincus
IPEG will be hosting Bowman Cutter, the Managing Director of Warburg Pincus on June 1st, Thursday at Columbia Business School. As many of you know already, besides his role at Warburg Pincus, Bo is also the chair of Microvest and serves on the board of CARE. He also served in both the Clinton and Carter administrations. The full coordinates for the event are below:
Speaker: Bowman Cutter, Managing Director of Warburg Pincus.
Topic: The role of private capital, capital markets and the private sector in fostering economic development.
When: June 1st, Thursday, at 6:15 pm.
Venue: Venue: Warren Hall, Room 208 (second floor). Warren Hall is located on Amsterdam Avenue, between 115th and 116th Streets.
Mr Cutter has an event to go to at 7:30 pm, so we will start on time, so we have some amount of time factored in for discussions as well. Please make sure you are at the venue by 6:15 so we can start without delays.
As anyone who has attended these events earlier know, they tend to be very informal and more in discussion mode than just a person speaking. We also tend to catch a few beers/dinner after the event, so please work that into your schedules as well, since that’s where a lot of the great connections are made among IPEG members.
As always, feel free to bring along anyone you think might be interested in the subject matter or in interacting with IPEG members after the event. RSVPs will be appreciated, since we need to know how many people to expect.
May 9th, 2006
Yet Another Bio-Fuels Op-Ed
I have been making several posts in the last month on alternative fuels and energy. As crude oil prices shoot through the roof, this space becomes more and more attractive. Specifically, I have been following Vinod Khosla’s interest in the space, including his investment in Praj. Khosla has clearly become the leading proponent of bio-fuels in the United States and his op-ed today in the New York Times, with ex-senator Tom Daschle, is yet another example of his advocacy for bio-fuels.
The CAFE standard does nothing to encourage that change. It requires American automakers to build cars and trucks that meet a minimum standard of average mileage traveled per gallon of gasoline. But the current standard for minimum mileage traveled per gallon of gas consumed is both too low and focused on the wrong challenge. We need to upgrade to a new CAFE: Carbon Alternative Fuel Equivalent. This new CAFE will measure “petroleum mileage” and give automakers incentives and credits for increasing ethanol consumption as a percentage of fuel use of their vehicles, not least by promoting flex-fuel vehicles, which can run on either gasoline or E85 fuel, a blend of 85 percent ethanol and 15 percent gasoline. This approach promises several significant benefits.
First, it could set America free from its dependence on foreign oil. As Brazil’s “energy independence miracle” proves, an aggressive strategy of investing in petroleum substitutes like ethanol can end dependence on imported oil. Second, switching from gasoline to ethanol produced from perennial energy crops like switch grass can slash our carbon dioxide emissions. Third, it could build on a comparative advantage of American automakers. American auto manufacturers are churning out hundreds of thousands of flex-fuel vehicles. Their foreign competitors make far fewer. Promoting these vehicles will help our automakers build on their already strong market share. And fourth, by encouraging the production of ethanol and new renewable fuel technologies, this new CAFE standard could invigorate rural communities in America’s heartland and innovation and research centers along its coasts.
That said, here are sobering statistics from CERA, courtesy of The Economist.
No, it doesn’t look that good, does it? Well, as the fine print says, the cost of bio-diesel in there does not take into account tax credits and subsidies, which you can almost automatically assume when it comes to bio-fuels. And I suspect that the initial subsidy (land, water, power etc) will allow the business to scale to a point where the business becomes truly attractive. The question then is what OPEC will do, because if they can drop the prices to $30 a barrel, bio-fuels are a non-starter. However, I somehow suspect oil prices aren’t going below $50 ever again because if OPEC could drop prices, they would have before the idea of bio-fuels got so much currency.
May 8th, 2006
VC/PE Funds for Development
I was browsing the World Bank bookstore in Washington D.C. last week when I came across a little book called Venture Capital and Private Equity Funds for Development. Here’s what the blurb says.
Entrepreneurs face a multitude of challenges when setting up and growing their business venture. This is even more so for entrepreneurs in emerging markets and developing countries. Access to finance is often the main challenge. The Venture Capital and Private Equity for Development Index gives access to the major funds financing business in Latin America, Asia, and Africa. This practical guide has an easy to use index with funds listed by key fund attributes such as regions, sectors and company size financed. It lists over 270 funds investing in developing countries. The Index is compiled by the Business in Development program of Dutch National Committee for International Cooperation and Sustainable Development (NCDO) in cooperation with the Adapppt Foundation in The Netherlands.
The index, in particular, looked like a useful tool for those of us interested in the role of private capital in economic development.
In addition, the folks who put this book out also have a very interesting website up called the Bid Network. The Bid Network is an online community which lets entrepreneurs submit business plans, which are then routed to investors and partners. I have no idea how efficient or successful the network is, but a web-based model could certainly remove a lot of the transaction costs. Have a look.
May 4th, 2006
Morgan Stanley Issues MicroFinance Bonds
Is Wall Street waking up to the promise of Microfinance?
Tom Marshall of the WSJ writes.
BlueOrchard Finance SA, a Swiss investment-management boutique, has teamed up with Morgan Stanley to turn these loans — called microfinance — into bonds, using the capital markets to provide small business in the developing world with long-term financing.
The five-year deal raised almost $100 million from bond investors through BOLD 2006-1, a special-purpose finance vehicle backed by loans to 21 microfinance institutions. While it’s not a huge transaction by bond-market standards, it’s the first time investors have been able to buy into microfinance through a bond issue. It could be the first step in a revolution in how money is raised to pay for development in the third world — and it could also give yield-hungry bond investors a whole new asset class to put their money to work in.