More than money matters! The rise and range of non-financial support to inclusive business
If you ask an entrepreneur what they need to scale, the first answer you get might be 'money'. But entrepreneurs and their backers alike are increasingly looking beyond the cash. A huge array of non-financial support has emerged for businesses that deliver social impact. It's an array that is booming, busting out of conventional silos, innovating, and increasingly is seen as fundamental to success at scale.
So, this month we are able to share findings from a USAID review of the landscape of advisory support, reflections from an in-depth review of the first five years of the African Agricultural Fund’s Technical Assistance Facility (AAF TAF), blogs and lessons from seven different providers of advisory support, stories of success from entrepreneurs who put their technical support to good use, and reflections on key trends in this space. I'm glad to have worked on both reports alongside colleagues from Ashley Insight and Endeva, so I know just how extensive the analysis is, and how much they help fill gaps in our knowledge.
Understanding the landscape: who, what and why?
One of the most exciting things about our blogs, is that we get many answers on 'what works' for effective advisory support. There are few published documents on that, so it feels like a huge step forward. But before we get to the lessons, we need to delineate the space. Our blog on Mapping the landscape of advisory support for inclusive business shares the categorisation developed in the USAID research, grouping support providers into five types are explained: incubators, accelerators, donor funded programmes and facilities, investors, and consultancies.
And what do they provide? Some provide one-to-one technical support to specific enterprises. Others put on cohort events for whole groups or portfolios of entrepreneurs. Some add online support too. Types and tools explains more on the mechanisms, and the diverse topics covered from human resources management to market strategy.
Why is advisory support provided by so many organisations and used by so many entrepreneurs? The answer is actually very simple and pretty much unanimous - to help entrepreneurs succeed and scale. It is no longer assumed that finance alone is enough to straddle the pioneer gap. Getting the business model right and being able to scale in Base of Pyramid markets is tougher than any of us probably thought ten years ago. This conviction that advisory support is needed to get to scale is well explained by Courtney Miller Calardo from USAID, assessing the top seven barriers to scale experienced by their 900 innovators and the different non-financial support that can be used to address each.
Most providers of advisory support are seeking some combination of commercial and social goals. The AAF Technical Assistance Facility, focused on agribusiness in Africa, provides a great example of clear purpose with unusual structure: the purpose is greater social impact via commercial investments. Achieving that requires something unusual - an insider/outsider facility, sitting alongside two equity funds and their portfolio businesses. Karen Smith and Carolin Schramm depict this unusual beast in more detail.
What works for effective support?
We have more answers to that question that you might expect, from a range of voices:
- Drawing on analysis of scores of providers, and over 20 interviews for the USAID report, Carolin Schramm argues there is no blueprint, but every support provider needs to find the right solution to five key operational issues, from sourcing enterprises and providers of support, to working out who pays.
- We can't say that one tool is better than another, says Christian Pirzer, but five lessons on how to make support tools more effective include ensuring honing in on business needs, blending tools, and helping entrepreneurs make new linkages
- Brokering linkages is flagged by Karen Clune, explaining how USAID’s Saving Lives at Birth (SL@B) sets up over 300 personalised partnering and mentoring meetings for their innovators at XChange events, as well as providing on-going Xcelerator support
- A combination of brain and brawn is key to adding value, argues Benjamin Cousin. AAF TAF deploys brain to add the big picture that the business might not be seeing, and brawn to get stuck in on the ground. His colleague Andrew Kouderis, explains how this is done with SMEs, getting into nitty-gritty to work effectively with pressurised African CEOs and lift SMEs to the next growth phase.
- It's not just about what you do but how you do it. 'Do it with them not for them' and provide a fresh perspective, says MDF in Ghana, drawing on a poultry business example and echoing advice from Anthony about the need to be empathetic not prescriptive. Secondment of qualified staff into the management team is the top tip from Loew. Open Capital Advisors find this is a way to help African businesses thrive despite the talent gap.
- Consider B2E models, says Alexandra Knezovich of the Toilet Board. Multinationals can provide valuable technical advice to smaller enterprises, so long as roles and expectations are clear.
- Don't just assume good quality. Rest Kanju and Jona Liebl, of SEED Adelphi point out that not all technical support is good, so minimum professional standards for quality assurance are being developed in South Africa.
Needs and views of entrepreneurs
But what do the entrepreneurs who receive this support really think? We know little. We know that quality varies and not every advisory package is worth the entrepreneur's precious time. But two entrepreneurs who have turned support to very good use share their stories:
- Claire Reid explains how technical assistance from Saving Water for Food Helped Me Reach My Goals, and grow her seed business despite lacking a formal business background.
- Muhammad H. Zaman and Katie Clifford share how PharmaChk was able to tackle the considerable barriers to scale in the health sector, as accelerator support from SL@B helped him to develop new business models and partnerships, rethink scaling strategy.
There is some dispute whether businesses operating at the Base of Pyramid, or with intentional social impact need any different support to 'conventional businesses'. The risk of overlooking boring core business needs with well-intentioned but fluffy social input is flagged in the forthcoming USAID report. But Eugenia Rosca shares findings from a GIZ survey of inclusive entrepreneurs, concluding that they do have different needs as they balance commercial and social objectives, and the support they need to do this varies by stage. The review also finds that the landscape of hubs, networks and programmes that support inclusive business is crowded and could benefit from more specialisation.
Dual objectives, blended finance, hybrid mechanisms, and a role for donors.
A theme of duality runs throughout our contributions this month. Indeed, the report and blogs on AAF TAF depicts six dualities that run through the unusual beast - analytical yet practical; independent yet integrated, and of course, commercial and social.
We hear from three donor-funded initiatives about how they balance commercial and social goals:
- Abigail Thomson, Director of the Technical Assistance Facility, tackles head on the question of whether and why donor money should be used to subsidise technical assistance for established companies. Her answer is robust. AAF's TAF's experience shows it can be used not so much to minimise risk, as to help them push boundaries which help deliver development objectives through commercial means.
- Tom Schumacher discusses the challenge of deciding how to allocate resources between innovators, and the principles USAID uses to optimise impact. If the venture is already on a path for success or failure, added value is low. Amy Sticklor from USAID proposes that donors embrace the boring, unattractive, and incredibly impactful things that others can’t do: filling gaps in support, particularly for internal business development.
- Sarah Marchand, describes CDC’s Technical Assistance facility, supporting two CDC impact-oriented funds. They allocated DFID-funded TA, focusing on making support both additional and sustainable.
We hear from several initiatives where development and business sector players work together, including from Melanie Machingawuta of AAF TAF, who brokers relationships between them, and Mark Ingram, from B4D, which deploys technical support to companies funded with commercial fees and donor input.
Putting together our theme this month on non-financial support, it feels like a topic whose time has come. Even just 10 years ago, there were a few accelerators and incubators, but few actors and even less information. In early 2010, I remember the launch of the Business Innovation Facility and associated founding of this Hub: the BIF pilot was testing the idea that providing only technical support to inclusive business would be useful. We knew it was innovative but not for sure that it would be useful.
Today, many organisations that provide finance to inclusive businesses also provide technical support. And a host of new organisations focusing on advisory support, have evolved. As activity increased, the first attempt to document the space was launched as the Global Accelerator Learning Initiative (GALI), collecting data on incubators and accelerators. Their second report, based on data from over 2,000 ventures is our Editor's Choice this month. When we started looking for material on 'what works' in delivering advisory support, last year for a report for USAID, we thought there would be thin pickings. But in fact, as we have scratched at the surface, we find a wealth of lessons have been learnt already. There seems to be pent up demand - to share and to hear what others are learning. Technical assistance providers are innovating and reflecting. Next stop, let's hear more about how businesses make use - or not- of the support on offer.
Five years of AAF’s Technical Assistance Facility is a report on the first 5 years of the Technical Assistance Facility. More detail including links to all the blogs that relate to AAF TAF is here.
USAID will be publishing a landscape review of non-financial support to impact enterprises in the coming month. More detail including links to all the blogs that share findings from the forthcoming report, from USAID and its clients, are here.
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.