Venture Capital for MicroFinance: Chris Brookfield (Part 1)

Chris Brookfield is the Investment Director at Unitus Investment Management Company. He has been a venture capital and private equity investor his entire professional career. In 2004 he co-founded Open Water Investors. Chris has also been an Associate at Redleaf Venture Management, a Silicon Valley seed stage venture investor, and is familiar with pure play technology venture capital.

Unitus is an interesting study in successful microfinance institution financing being conducted in a for-profit environment. I recently had the opportunity to discuss Unitus and microfinance with Chris.

Microfinance has gained momentum in the last 12 months, with a number of successive milestones.

Dr. Yunus won the Nobel Prize last year.

“In April of 2007, shareholders in the Mexican MFI Compartamos floated a hugely successful public offering of part of their shares. Mainstream international fund managers, not social investors, bought most of the shares, marking a milestone along the road toward mobilizing the virtually unlimited resources of private capital markets for the expansion of microfinance outreach.

The selling shareholders — a Mexican NGO, ACCION, the International Finance Corporation, and private Mexican individuals – made gains of over $400 million on the sale, without counting the increased value of the shares they retained. These gains were driven in substantial part by Compartamos’ history of very high profits, which resulted when Compartamos charged its borrowers interest rates that were a lot higher than was necessary to cover its costs. These circumstances have provoked discussion and concern within the microfinance community and elsewhere.” [CGAP report]

Sequoia Capital invested in SKS MicroFinance, also a Unitus portfolio company, 2 months back as well.

SM: Chris, I would like to start our interview by reviewing the past and getting a few details about Unitus’ background. CB: Unitus was formed in 2000 by Mike Murray who had been an executive at Apple and then was one of the top guys at Microsoft for 12 years. He was joined by Jeff Davis, an entrepreneur who had started his own MFI. The inspiration, as I understand it, was that Mike had gotten to meet Dr. Yunus at Microsoft a few years earlier and had always thought it was a neat idea. When he retired from Microsoft, he traveled to Bangladesh as he wanted to learn more about Grameen.

He came away with the thought that it was a fantastic model for doing social and community development, but that it could have a lot more reach and help many more people if it used modern and sophisticated management and business processes. He formed Unitus as a non-profit to help provide management consulting services for the microfinance industry. He went about hiring MBAs, mainly from Stanford and Harvard, with the notion of trying to give MFIs the skills and processes to grow and scale a lot faster. They focused on the IT, HR and basic processes within microfinance. Mike had been the head of HR and Operations for Microsoft, so he had a decent amount of experience building large scale management systems. They did that for a number of years and were happy with the success. One of the things Unitus publicizes is that its partners have grown 8 times faster than the average MFI.

[to be continued]

This segment is part 1 in the series : Venture Capital for MicroFinance: Chris Brookfield
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