Christian Pirzer

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Propelling inclusive growth: types and tools of non-financial advisory support

Impact Investing
18. Sep 2018

By Christian Pirzer and Aline Menden, Endeva

“Do cohort events have the highest value for money?”, or “Is it worth spending a hundred thousand dollars on an expert input for just one investee?” …these are some of the challenging questions that program and fund managers have been asking us again and again over the last couple of years. 

Incubators, accelerators, technical assistance (TA) facilities and programs, impact investors and consultancies – all provide non-financial advisory support to inclusive businesses. How they provide it varies widely. Most of them agree that advisory support can be critical for enterprise success and should complement financial support such as grants, loans or equity. But how does this support need to be structured and delivered to be most effective? What works best for whom and at what lifecycle stage? 

In our recent review for a soon to be released USAID report, we examined over 40 programs and organisations providing non-financial advisory support to inclusive businesses. From our research, we mapped five main topics of support and identified three core tools and six secondary tools that organisations use to deliver the service.

Topics covered in advisory support

The value and effectiveness of non-financial advisory support strongly depends on the topics covered. Does the content fit the enterprise needs? And how do these needs vary at different lifecycle stages?

We found that content varied widely with most providers focusing heavily on core business development services (BDS). Core BDS can include topics like business operations (e.g. HR or financial management) as well as interactions with markets or clients (e.g. business strategy or marketing and distribution). Some providers go beyond core BDS offering investment facilitation, linkages to other ecosystem stakeholders or more specialised issues around innovation and inclusivity.

While core BDS is especially important for idea stage and prototype stage enterprises, more tailored BDS can be crucial for post-revenue stage or replication stage enterprises. Topics that go beyond core BDS are relevant at all lifecycle stages. 

 

Tools used to deliver advisory support

Effectiveness depends of course not only on what is covered, but also on how it is provided. The three core tools used to provide non-financial advisory support include:

  1. One-on-one support

Technical experts (typically consultants) provide advisory support to the inclusive businesses on-site for a few weeks or months. Mentors or coaches offer remote guidance over months or years through regular check-in calls.

One-on-one support is effective, because it is tailored to individual enterprise needs; however, it requires a high commitment of time and financial resources by the provider and effort to design the scope of work by both provider and entrepreneur. This type of support is most relevant for more mature enterprises that face specific organisational or business strategy challenges. 

  1. Cohort events

Cohort events are traditionally used by incubators and accelerators; however, impact investors and other organisations also make use of this more cost-effective tool. There is a clear trend to shift from classical, two-week classroom trainings to shorter, more applied and interactive co-creation sessions, where entrepreneurs work on their own business models. An increasing emphasis is given to peer-learning and networking elements.

Although they are less tailored to the individual needs of enterprises, cohort events are a much cheaper way to reach several enterprises and can efficiently cover core business skills that most entrepreneurs need. Cohort events are a good option if participants have a common denominator, whether that is geographic location, business model, sector or business stage.  For the entrepreneur, time away from the business needs to be worth it, so quality and relevance matter.

  1. Online courses and seminars

Online-based support services, like Massive Open Online Courses (MOOCs), are being used to cover some of the basics of enterprise development, or to share some of the more specialised training in inclusive business.

Online courses can reach a high number of enterprises for reasonably low costs and are easily replicable. They can be done without screening participants, and serve as a useful way for providers to identify new potential clients for follow-up support. They are most effective for the enterprise if combined with some degree of in-person or peer-to-peer support. Their relevance is usually highest for early-stage or pre-investment enterprises that require core BDS training. In addition, online courses can be used effectively for match-making or brokering services.

Other common service delivery tools include board membership, alumni networks, learning journeys and site visits, physical networking events and co-creation spaces, staff secondment and prizes or awards.  These are shown as secondary tools in the figure below.

 

Similar as for the topics covered in advisory support, the tools used have some correlation with enterprise stage, as the figure below shows. This is for two reasons. Firstly, early stage businesses have greater need for core BDS that can be easily covered in online courses or cohort training. Secondly, providers are less likely to want to risk expensive one-to-one expert input into an early stage business that is yet unproven.

These trends and lessons learnt reflect one of the wider themes of the overall report: the landscape of advisory support is evolving, with players going beyond their traditional remit and testing new offers and combinations to try to maximise effectiveness of non-financial business support.

For more insights into the recent trends and landscape of advisory support read this blog post. If you want to read about five cross-cutting lessons learned that can help guide fund and program managers on designing their portfolio of services click 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.