Minding the Gap: Where do donors fit into the technical assistance landscape?

The world of support for social enterprises is full of diverse actors trying find their niche – incubators, accelerators, impact investors, specialized consultancies, business advisory firms, and of course, donors.

I’m part of that last group. As donors, we see the opportunity to provide non-financial assistance to grantees as a way to improve the efficacy of our support. We provide a broad perspective and help grantees avoid mistakes we have seen before through strategic advice and technical assistance. However, as the development community realizes the value and importance of acceleration support, it’s important for donors to take a step back and think about where our value added is: what kinds of assistance are we good at providing, what are we well-positioned to do, and most importantly, where are there opportunities to fill gaps and support our grantees where others are not able to?

Most support providers have a financial interest in the outcome of the business and an expected timeframe for returns - two factors that limit the types of support they will provide to businesses. Accelerators and many advisory firms want to push businesses to their next investment round as quickly as possible, where they will take a percentage of the capital raised as their fee. This means they’re often focused on the immediate next step for a business as opposed to a long-term strategy of support that will enable a business to scale over the course of several years. Impact investors are usually interested in longer-term outcomes but also want their money back fairly quickly. That means they are unlikely to put funding toward systems if they won’t see a return until many years later. Specialized consultancies and firms that provide business development services often use a fixed fee structure for service, but this fee can be beyond the reach of many small and growing businesses, especially those in developing countries.

With so many options for support, it is a wonder that there are gaps in assistance; however, we have seen many grantees get stuck after working with service providers. There can be a significant gap in support available, especially after incubators or accelerator programs are engaged but before substantial investor buy-in, when many businesses hit a series of difficult trade-offs. How do they decide between having funds available for the working capital needed to grow their business or investing back into long-term organizational capacity that’s also needed to grow their business?

This is where donors should step in. Donors have a unique ability and opportunity to provide support with long-term benefits because there is no condition of a financial return. Our interest is in having a positive development impact, and we realize that impact will not happen overnight but rather as a product of long-term support to our grantees.

I’m proposing that donors embrace the boring, unattractive, and incredibly impactful things that others can’t do. Our grantees won’t be able to scale to new countries with outdated management systems, organizational inefficiencies, and an incomplete or inexperienced team. How will they know which products to make more of without an enterprise resource planning system, or which countries to enter next and how without strategic advice around market entry? Donors have the opportunity to think about long-term sustainability, long-term capacity building, and building the types of systems and efficiencies that enable businesses and revenue-generating non-profits to scale over the span of several years. When social enterprises scale, so do their impacts, and when impacts are maximized, that means our donor support is making a real difference for the people we serve.

We all seem to agree that just giving money to social enterprises isn’t enough – they need more support to find long-term success, and donors are in a great position to help if we focus on addressing areas that others cannot. By providing support that is often out of reach, we can save grantees time and money, as well as enable growth that makes them more attractive to investors.

Donors should not be trying to replicate what others are already doing well. In many cases, those services are difficult for us to deliver effectively because of our own constraints. Instead, donors should be looking for gaps in support and working to fill them in order to enable and accelerate sustainable solutions with long-term impacts.

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.