On February 17, Microlumbia presented the lecture Bottom of the Pyramid Investing with Alvaro Rodriguez Arregui. Arregui, co-founder and managing partner of IGNIA Partners, LLC, a $93 million venture capital fund, discussed how his organization supports the founding and expansion of high-growth social enterprises that serve the base of the socio-economic pyramid in Latin America.
When it comes to combating poverty, Alvaro Rodriguez Arregui argued to a group of Columbia Business School students, the key is scale. After all, 360 million of Latin America's 550 million people earn less than $3,000 per year. While those living in this "Base of the Pyramid" (BoP) market appear to have very little buying power as individuals, in aggregate they are a market of more than $510 billion. In Mexico alone, where IGNIA has its headquarters in Monterrey, the BoP market represents $130 billion and over 70 percent of the population.
With a problem that sizeable, it makes sense that only large-scale organizations can have a large-scale effect on poverty. But how can a venture capital fund address the underserved needs of low-income populations, both as consumers and as entrepreneurs? For Arregui, the answer is to create attractive financial returns for investors. "The traditional approach to attacking poverty is philanthropic capital," said Arregui. "In 2008, Americans gave $300 billion in philanthropy. The capital markets investment was one hundred times that. So, how do we get access to those capital markets? There is a very clear rule there: achieve profitability."