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Investing in the "Missing Middle"

John Lyman, Associate,

Today, along with the Soros Economic Development Fund (SEDF) and the Omidyar Network, announced they are collaborating to create a $17 million enterprise investment company in India. The company is expected to provide capital to small and medium-sized enterprises (SMEs) and by doing so, help create jobs.

In many developing countries, large businesses use formal, bank-based credit and capital markets for their financing needs, while households and micro-entrepreneurs have access to micro-loans. SMEs are often stuck in the middle without reliable access to either, and they are largely absent from the formal economies of many of these countries.

The investment company is designed to help address this "missing middle." Most existing SME funds make investments in the $3-$5 million range in India, which leaves out a significant portion of the market. This new company, in contrast, will target equity opportunities between $500,000 and $3.5 million. The company is also expected to work closely with the Base of the Pyramid Lab at the Indian School of Business in Hyderabad in order to leverage the school's SME experience.

During a recent trip to India, our SME team visited a number of businesses and financial organizations and saw firsthand that there is a "missing middle". We hope this investment company will help start to fill it in.

For more detail on our initiative to fuel the growth of small and medium-sized enterprises, watch this:

Update: We'd like to alert you to two job postings envisioned for the investment advisory company described below. The proposed Managing Director would oversee the growth of an expected portfolio of 10-15 investments, with representatives from the investors. Assisting would be an Investments Director who will help with analyzing prospective investments and preparing evaluations and reports. Both positions are planned for Hyderabad, India for Spring 2008, and require a strong understanding of rural Indian business opportunities and investment fundamentals. To apply, qualified applicants may send a cover letter and resume or C.V. to

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