Beyond Funding: How Acceleration Helps Social Enterprises Overcome Barriers to Scale

Every year, thousands of early-stage innovators seek support for work that leads to positive social change and lifts people out of poverty around the globe. A host of players come to their aid, providing financial support to help expand their work, improve products, and lead to greater impact. Until recently, funding was the key form of support social entrepreneurs received. Today, however, investors and donors alike are exploring the impact of non-financial support. They are looking at what prevents entrepreneurs from scaling their product or idea and how can they can help them overcome these barriers.

It’s not an easy problem to solve, which might explain why the landscape for non-financial or advisory support is so underdeveloped. Funding plays an undeniably important role in helping innovative solutions develop and grow, but it’s not always enough to help innovations reach scale.

Next month, USAID will release its Landscape Survey on Acceleration and Technical Assistance for Inclusive Business, which covers the myriad challenges social enterprises face as they grow. Here are just a few of the barriers it describes:

• Markets are hard to secure, or require transaction costs that cannot be supported;
• Business models that can scale need umpteen iterations;
• Policy and regulation constrain innovation growth;
• Talent is hard to secure and retain;

Recognition of the complexity of such challenges and that entrepreneurs need “more than money” underpins the emergence of non-financial support, to help speed or secure growth to sustainability and scale.

These barriers may be daunting, but donors and investors are experimenting with ways to help entrepreneurs overcome them. These services tend to fall into a few common categories:

1. Internally-facing business development services, such as financial management and HR support;
2. Externally-facing business development services, including business planning and marketing;
3. Investment facilitation, such as investor matchmaking, deal management, and legal due diligence;
4. Strengthening relationships across the ecosystem through partnership development, stakeholder engagement, and access to advisors; and
5. Strengthening inclusive and innovative business model components through supply chain development and management, inclusive business model development, product development, and impact evaluation.

Like many others, USAID’s U.S. Global Development Lab has been exploring the question of how to provide the most effective non-financial support. The Lab is an innovation hub within USAID that tests new ideas and helps the most promising ones increase their impact. To better understand the obstacles entrepreneurs face as they grow, we took a closer look at the innovators within several of our portfolios and analyzed where they fell short.

The Lab’s innovation programs, like Development Innovation Ventures, the Global Innovation Fund, and Grand Challenges for Development, have reviewed over 16,000 applications and supported over 900 innovations. After reviewing and supporting innovators from across all development sectors and regions of the world, the Lab gained insight into the types of barriers innovators typically confront. Below are the key barriers that we saw repeated across various sectors, types of innovation, and regions.

• Money: Innovators struggle to access sufficient financial capital, in the right form, to support growth. This can be especially challenging in developing and emerging market countries where capital markets are less developed.
• User Demand: It can be very difficult to build a customer base. Many innovators assume “if we build it, they will come” but this isn’t usually the case. Even the most impactful products and services won’t be able to reach scale unless beneficiaries can access, afford, and see the value in an innovation.
• Experienced Leadership: It’s hard to get the right leadership in place—people who know how to scale a business and who have the awareness, ability, and resources to access the right talent for expansion.
• Conducive Policy Environment: Navigating the political and economic environment can be a minefield, and entrepreneurs often struggle with business registration, intellectual property laws, tax schemes, and more.
• Proof the Solution Works: Innovators must be able to prove not just that their solution works, but that it is cost-effective and better than available alternatives.
• Viable Business Plan: The costs associated with delivering impact to beneficiaries must be balanced against sufficient revenue streams.
• Scalable Operations: Streamlining logistics and building the partnerships they need to grow their operations can be very difficult, especially in low-income contexts. This can make the costs of expansion prohibitively high.

To help innovators meet these challenges, the Lab has started experimenting with the provision of advisory support for some of our high-potential innovators. Through various mechanisms, we provide a range of services including customized business planning, organizational capacity building, communications and marketing, mentoring, and other business development support to innovators who demonstrate a need and whose participation could accelerate the scale of their innovation. Below is a list of the services we currently offer to our innovators and the barriers they address.

Though we are currently in the pilot stage for most of our acceleration experiments, we have already learned a few things that we believe are essential for advisory support to have a significant impact.

1. Innovators know best. They should have a strong say in identifying their top needs and determining what kind of support they receive to overcome their barriers to scale.  
2. Support should be designed to help meet core business objectives and it needs to be measurable.
3. We need to know our limits. Providers of acceleration support need to be self-aware, and focus on the barriers where we can make a difference.
4. Innovators’ time is valuable. We should always use it wisely and strategically.
5. Providing technical assistance and acceleration support is costly. It takes a lot of time, effort and money to find the most cost-effective approach that will lead to the desired result.

As we continue our experiments in advisory support, we will gather data and information along the way to guide our work and shape its evolution. For example, the insights we have gained from the Landscape Analysis will help us refine the types of non-financial support we provide to our innovators. The acceleration space is messy, exciting, and changing all the time. We hope to continue to share our findings as the field assesses the effectiveness of technical assistance, ensuring we can maximize the impact of the innovators we support.

This blog is a part of the June 2017 series on advisory support for inclusive businesses in partnership with USAID and the African Agricultural Fund’s Technical Assistance Facility, both of which deliver advisory support and have new analysis of it just launched (AAF’s TAF) and forthcoming (USAID).

Read the full series for more lessons from seven different providers of advisory support and stories of success from entrepreneurs.