If this post is a little wonky, then my apologies. But I spent many years working overseas on development projects, specifically in microcredit. One of the reasons I stuck with it for so long was because in my experience, microcredit for small business owners works – it’s credit, people repay with interest, and there are consequences for nonpayment. For decades, the average repayment rate globally has been well over 90% on these tiny business loans, which average around a couple hundred bucks.
In a recent article, however, a USAID official stated, that when it comes to grant funding small businesses overseas (i.e. giving away taxpayer money), USAID expects a 90% failure rate. The article asks, “Is this failure rate acceptable for donor funded projects?”
Well, here’s the “acceptable” failure rate for venture capital funded projects: 33%.
Yeah, I’m no mathematician but even I can tell there’s a big difference between 33% and 90%. Venture capitalists, of course, care about returns and profit. The government, of course doesn’t. And though USAID didn’t fund Solyndra, I suspect the “who-cares-if-it’s-a-failure” attitude permeates the entire US bureaucracy.