Indeed, both Endeavor Global and Catalyst are designed to create a compounding, self-sustaining dynamic in each of the regions in which they invest. In the case of Endeavor Global, entrepreneurs who participate are required to give Endeavor between $5,000 and $10,000 per year and 2% of the equity if they sell the business, which provides funds for other entrepreneurs. In the case of Catalyst, returns on investments will be put back to work in the same way.
The organization also notes that there is a more organic compounding effect at work in its program, in which some of its entrepreneurs become mentors themselves, or develop the careers of employees who go on to become entrepreneurs who start the process all over again.
Endeavor estimates that a $1 million donation will in 20 years result in about $9.6 million in direct investments to emerging market entrepreneurs and $5 million to Endeavor operations.
Endeavor notes that its formula has been a success so far, with 13 of its entrepreneurs growing as quickly as the fastest-growing companies on the Inc. 500 list in the U.S. Endeavor has regional offices in 16 areas, including Latin America, the Middle East, Indonesia, Southeast Asia, Greece and South Africa. It has global offices in New York City, San Francisco, Singapore and Dubai.
"One of our goals is to provide added capital into the marketplace to support these up-and-coming emerging market entrepreneurs," Rottenberg says. "For people who are looking to do philanthropic work, you can see the value of your original donation compounded."
Another goal, she added, is to invest in a way that preserves the entrepreneur's incentive to grow. Under Endeavor Catalyst's rules, it can only make an investment as a co-investor with at least one other party, and it cannot be the lead investor. Its equity stake is capped at 10%.
In one of its first deals, for example, Endeavor Catalyst teamed with Intel Capital-Intel's global investment organization-for an investment in Minha Vida, a health and wellness Web portal based in Sao Paulo, Brazil.
Endeavor Catalyst's investment committee will decide on when to cash in on the equity it holds in each of its entrepreneurial investments, according to Endeavor spokesman David Wachtel. Such returns could come in the form of dividends or when a company goes public, he says.
"The idea would be that we would deploy the gains back into new early stage opportunities with the next generation of Endeavor entrepreneurs," he says.
Catalyst's first investment was a $2 million funding deal in February with Globant, a technology outsourcing company in Argentina that was selected as an Endeavor Entrepreneur seven years ago.