/ 3 June 2009

The fellowship of the fund

Last year Nishant Lalla graduated top of his class at the University of Cape Town with an honours in business information systems.

He could easily get a job in the corporate sector if he had the inclination to apply. Instead, he chose to spend this year developing software, working on a business plan to commercialise it and helping to set up better management systems at a children’s shelter in his hometown Lenasia.

He says the catalyst to start his career differently -— despite pressure from his family “to go out and get a job” —- is a unique experiment in entrepreneurial development: the Allan Gray Orbis Foundation.

Lalla is one of the first eight students to graduate from the foundation’s fellowship programme, an ambitious project created by Allan Gray himself.

The idea is to identify the best entrepreneurial candidates among South Africa’s students, groom, nurture, mentor and guide them towards entrepreneurship, and then provide them with access to a venture capital fund meant for the business projects of successful candidates, known as Allan Gray Fellows.

The project aims to nurture 500 schoolchildren, called Allan Gray Scholars, and the same number of Allan Gray Fellows studying either science, engineering or commerce at university. That the foundation is still building up to those numbers a few years after its launch is an indication of its strict selection criteria.

Foundation chief executive Anthony Farr says 7 000 applications were received for the Scholar programme this year and 45 were accepted. Part of the reason why they didn’t reach their target of 60 Scholars was their principle of matching the racial demographics of the country.

Of the 182 university students on the programme, about 62% are black, 13% coloured, 12% white, 11% Indian and 3% Asian.

The Allan Gray Scholars, who are funded to attend better schools, do not automatically become Fellows when they go to university.
They have to shine academically and show entrepreneurial potential.

When accepted as Fellows their fees are paid, including accommodation, stipends and books. In return, they are expected to maintain a high academic performance, and to attend ongoing weekend and holiday training sessions in entrepreneurship.

Farr describes the programme as a “personal incubation” as opposed to the common model of incubating a business idea. Apart from the study of role models and real businesses to foster an awareness of entrepreneurship, the emphasis of the programme is on experiential learning. During the four-year programme they practice running a retail business and consult and analyse businesses, among other things.

An unexpected spin-off of the programme is the strong network the Fellows form, especially during their first year when they gather in regional groups almost every weekend for work sessions, says Farr.

Allan Gray Fellows do not have to repay loans to the foundation, nor make any commitment to pursue a career in business creation, but they certainly seem to be conscientised.

“At the end of the programme you realise there is actually a greater responsibility which rests on you. It is to fulfil the vision of the foundation, which sees a link between entrepreneurship and job creation and poverty alleviation. So this is what I need to give back, not only to the foundation, but to the country as well,” Lalla says.

What if a fellow decides that the business world is not for him or her?

“As much as our selection process is designed to find entrepreneurial individuals, we realise that we cannot and we shouldn’t tell someone at the age of 17 that the only way we’re going to see you as a success is if you start a business enterprise. For us success would be achieved if someone made a significant impact and led in any particular industry, whether that meant starting a business or not,” says Farr.

The other extreme is also problematic; conscientised youths may be tempted to venture out on their own too early. Although there are few hard and fast rules when it comes to success in entrepreneurship, solid work experience usually seems to be part of the recipe.

Farr says that the programme emphasises the importance of work experience. “I suppose we are influenced by our founder. Allan [Gray’s] model was getting the best education, which included his qualification as a CA, doing his MBA at Harvard, then getting the best work experience that he could.

“He specifically chose what he identified as the best asset manager in the world at that time, which was Fidelity. He worked at Fidelity for eight years and then he was ready to start his business.

“That’s how we feel there’s the highest probability of having sustainable, high-growth, innovative, solid businesses.”

So the E2 venture capital fund that funds the business ventures of the Allan Gray Fellows may have to wait a few years before their first investment. But not so if it were up to Lalla. He is determined to commercialise the project-management software he started working on as a student. The fellowship gave him the confidence to try something other than plunging straight into a corporate career.

“If you get into a corporate job you get comfortable. You get a car and then you have to keep the job to finance the car. I weighed up all those factors and I decided against it.”

It’s early days for the foundation, which is a long-term project. Will Lalla’s business plan, if it is accepted and funded by E2, succeed more easily than those hatched in less incubated environments?

Should E2 recommend that Lalla work for a few years in middle management before funding him?

The answers to these questions, as well as the real worth of the Allan Gray Orbis Foundation in transforming South Africa, will become known only in 20 years or so.

But right now there is a children’s shelter in Lenasia grateful that someone is doing something differently.