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Getting Global Social Entrepreneurs to the Next Level

April 13, 2016

By Min Pease - Echoing Green

Echoing Green provides seed funding and technical assistance to emerging social entrepreneurs. Over the last few years we’ve seen a significant increase in innovative enterprises making social change through for-profit business models. This year, 45 percent of applicants to our social entrepreneurship Fellowship program proposed for-profit and hybrid business models, a 30 percent increase since 2006.

When looking at trends in this applicant pool, we noticed more than a third of the applications proposed work in Africa, and more than half of those were for-profit and hybrid organizations. Kenya, Uganda, and Nigeria were among the top five countries of focus for the third year in a row.

From last year’s Global Entrepreneurship Summit in Kenya to the upcoming Skoll World Forum, international attention and energy is focused on entrepreneurship in Africa. Kenya, Uganda, and Nigeria are becoming social innovation hubs—with social entrepreneurs connecting, innovating new business models, and learning from each other. And increasingly they are using for-profit or hybrid structures to achieve their impact.

Some successful examples from Echoing Green Fellows running for-profit enterprises in Africa include:

Emerging leaders like these will continue to need additional funding, partnerships, and ecosystem-level support as they grow their businesses. However, when it comes to attracting investment to fuel their growth, there’s frequently a disconnect: emerging social entrepreneurs may see themselves as investment-ready, but the other side of the table may not agree.

Investors often indicate that social entrepreneurs need more support—whether that’s education, additional sources of funding, or a more robust proof of concept. These entrepreneurs’ ambition and passion for impact need to be complemented by business acumen and organizational systems.

On the other side, impact investors should be more transparent about their expectations and what “investment readiness” means to them. Otherwise, emerging leaders in social enterprise and impact investing won’t be able to scale their businesses—and their collective impact.

We’re addressing these challenges by helping our Fellows access experts and experienced entrepreneurs, and connecting them to prospective impact investors and donors who may fit their timeline, projected rate of return, or desired blend of capital, in order to take their businesses to the next level.

But we saw a need to go further. Our Fellows work on companies at different stages—generally from inception to two years of operations—and have a broad range of needs and business skill levels. Traditional accelerator curricula and “boot camps” that focus on a particular growth stage or topic don’t make sense for this diverse group, so we’re creating our own impact investment-readiness tools to help them accelerate their business development and impact.

For example, we’ve been piloting a process to quickly diagnose our Fellows’ stage of organizational growth and then offer targeted support to help them build the fundraising skills they need to get investment. They complete a checklist that asks them about major topics—everything from business planning and theories of change to the elements of a term sheet. Once we’ve identified areas needing additional work, we provide information, resources like pro bono legal support, and tools such as pitch decks and due diligence checklists that are crowdsourced from Fellows and other successful social entrepreneurs.

Since 2011 we have also offered recoverable grants to all of our for-profit Fellows, which are designed to be risk-tolerant and inexpensive capital for emerging social entrepreneurs. As Fellows’ for-profit businesses achieve certain valuation or revenue thresholds, it triggers payback of their Fellowship stipend. If the company does not hit the thresholds, then they do not pay us back. Recoverable grants allow us to recycle funding from financially-successful for-profit organizations to fund future Fellows.

To harness the energy of social entrepreneurs and drive their progress further, faster, we’re creating a healthy testing ground to listen to Fellows and find what works. Early feedback has validated this direction—Fellows appreciate that they can configure our tools and resources to fit their needs. From our perspective, it’s been an efficient way to provide investment-readiness support outside of a cookie cutter model or time-intensive customization.

We’ll be evaluating the effectiveness of this support model over the next year and after we know what works and where the gaps are, we’ll be able to share our tools with the field. By not only investing in entrepreneurs, but by building an ecosystem that learns from social innovation hubs in Africa and beyond, we can make it possible for emerging leaders—no matter their circumstances—to change the world for the better.

Eric Cooperström, Skoll Foundation

Social entrepreneurship is Skoll’s theory of change, and we realize that social entrepreneurs come in a myriad of shapes, sizes, and—importantly—organizational structures. This is why we have started to more systematically integrate our program-related investment (PRI) efforts into the follow-on investing we provide to our portfolio of social entrepreneurs.

For example, in 2015 Skoll invested in Water.org’s WaterCredit Investment Fund that seeks to provide debt capital to Indian microfinance institutions who then on-lend to poor borrowers to improve their water and sanitation access.

We also provided subordinated debt to Root Capital to promote sustainability in their capital structure, expand frontier market lending, and provide the basis for additional market-building initiatives like the LAFCO African agriculture lending initiative.

In both cases, Skoll strategically deployed PRIs to support the next iterations of time-tested impact models, with the view that proving the ability to repay capital will lead to even more sustainable sources of financing—and impact scale—in the future. Moving forward, we recognize the important role of these for-profit enterprises, and those supported by Echoing Green. As such, Skoll will seek to build on our track record of providing flexible funding solutions to the most impactful social entrepreneurs on the planet.

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