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More emerging-market investors focus on smaller deals, but finance gap persists

ImpactAlpha’s three-part “Fellow Travelers” series highlighted the gap in early-stage capital for small and growing businesses in emerging markets. That gap persists, according to the annual “State of the Small and Growing Business Sector” report from the Aspen Network of Development Entrepreneurs.

In 2016 capital invested in emerging market deals under $2 million fell to $278 million, down 9% from the previous year.

But interest in smaller deals appears to be increasing. ANDE said early-stage deals last year represented 28% of all deals (up from 13% in 2011). And 53 new investment vehicles launched in 2016, with $2.7 billion in capital targeting emerging market small businesses. Newer vehicles are more likely to be open to seed stage deals (42%, compared to 18% for vehicles launched between 2007 to 2011).

And the difficulties in getting really small deals done persists. The median minimum deal size for new funds in emerging markets remains $250,000.

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