Guest Articles

Thursday
July 9
2020

Gavin Krugel

From Cauliflower to Unicorns: Five Lessons from Five Years as a Startup

This July marks Digital Frontiers Institute’s fifth birthday. Our mission remains the same: to develop human capital in low-and-middle-income countries in sectors aligned with the sustainable development goals. But though we started with inclusive finance, we began broadening our focus once our model had been proven. Over these years we’ve built and launched courses and taught hundreds of thousands of instructional hours to thousands of students from at least 1,500 organisations in as many as 150 countries.

We’ve met all our targets, made our funders and stakeholders happy, and had a ton of fun. Most importantly, we’ve watched what our hard-working students have gone on to achieve – it has been tremendously rewarding to know we’ve had a role in their successes.

We recently announced a key decision that we hope will amplify this impact: Digital Frontiers Institute (DFI) is merging with CGAP’s Gateway Academy to form a stronger, more refined new identity at the frontier of capacity building. We have distinct yet complementary business models. Together, we will have greater reach and a richer offering at a lower cost base, making the business more impactful, effective and efficient. As one of three founders and the CEO, I’ve been responsible for establishing DFI’s operations and working with our team and partners on delivery. I’ve learned many things over these years about running a social enterprise. Here are five lessons I’d like to share with you – I hope they’ll serve you well in your own work.

 

If Cauliflower Can be Pizza, You Can be Anything

Did you know that some carb-conscious folks replace the traditional wheat flour-based pizza crust with a cauliflower crust? Crazy, right? But cauliflower achieving pizza status is precisely what DFI is about.

It’s one of the principles that drives our mission, and one that can motivate any enterprise or organisation: We will be more than what we are today.

We thought big when founding Digital Frontiers. The “s” in our name represents plurality in the social impact frontiers we pursue. We won’t stop at just one; we will continue to find new areas to create capacity and new ways to have an impact.

We started small, with a focus on inclusive finance and only one course. But we scaled quickly to numerous courses and countries, and then to multiple programs. We now have grand plans to repeat our impact story in the areas that matter most to us: building human capacity in healthcare by helping to formally establish a new digital health profession; stimulating systemic change from within organisations by skilling and supporting hundreds of gender equality champions; and creating sustainable jobs and economic opportunities by empowering excluded young entrepreneurs.

These are big bets – but the social impact sector is all about tackling big challenges to make a big difference in people’s lives. And we know that businesses and organisations across the sector can also maximize their impact, if they “think big, start small and scale fast.”

 

Hire Unicorns ­– And Say No to Org Charts

After five years, we still don’t have an org chart. Funders, H.R. consultants and even my board have asked me several times to produce an org chart, but it’s a challenging thing to do in a company like ours. Sure, we have folks that report to other people, but that’s more about administrative effectiveness than it is a hierarchy.

We all have two roles in DFI, one that we were hired for and one which changes depending on what the company needs at the time. My role in the company today depends on the project or team I’m working with: I report to whomever the team lead is for that specific task. So I have many bosses, and occasionally (though increasingly rarely) I am the boss too. If we had an org chart, it would look more like a doodle than a pyramid – concentric circles of interlocking teams and activities, each with their own hierarchy. So #saynotoorgcharts – it’s chaos, but it works.

This chaos isn’t planned; it is more an unintended consequence of who we hire. We tend to hire unicorns – folks who are far more versatile than they realise they are, and who can do more than their formal role would suggest. We hire them for what else they can do, rather than whether they can do the specific tasks we initially need them to do. Again, this wasn’t planned, it just came from being a lean startup that required team members to wear multiple hats. But it has now become the norm – and it’s a practice I’d recommend to other social impact organisations. Unicorns, like cauliflower, can be anything.

 

Values Come from Within – They are Earned, not Learned

Our company values didn’t emerge until our third year. It happened through a team exercise that encouraged us to reflect on the behaviours that made our team more productive and our company more robust, and that led to the most significant impact. We conducted the exercise during a time when we weren’t doing as well as we’d hoped in hiring, and a few less-motivated team members were falling short of our high-performance needs.

We had to ask ourselves – what values make DFI work well? I thought I’d burst with pride when I saw that the team came back with actual values they had observed within the organisation, rather than re-printing the kinds of generic values one might find on a corporate website. Avoiding generic mission statements and articulating our values as actual behaviour traits have helped us live these values, while also guiding our employee recruitment efforts.

The exercise made several core values clear: We value diversity in our skills, and encourage our team members to put their skills to use by supporting others who need those skills to succeed. We encourage creativity by challenging the status quo as a way to spark innovation in all that we do. We promote growth through embracing change, recognising and learning from our failures. We foster accountability by delivering on our promises, and being responsible with the charitable funds we are given by staying lean and being obsessive about efficiency. We inspire belief by having the passion and dedication to make a change, and the faith that we have the right team to do just that. And we generate an impact by facilitating outcomes that make a genuine difference in the world.

This process is important for any impact-focused enterprise or organisation to go through: By articulating what you are, instead of what the rest of the pack says you should be, your team will earn a set of core values that are an actual articulation of your culture. If the values come organically from your team, they’ll embrace them authentically and work toward them diligently.

 

Zebras are Just as Cool as Unicorns

From the start, my co-founders David Porteous, Ignacio Mas and I established our intention to be a non-profit – but also not to be reliant on donor funding alone. To us, sustainability meant we should generate revenue from our activities in a way that made us at least an equal partner to the funders in driving the impact we hoped to achieve. This founding principle has not changed.

We identified as an edtech company in the fintech space, improving financial inclusion by equipping finance professionals with skills they weren’t sure they needed. Most people don’t wake up wanting to be inclusive finance professionals, and employers don’t automatically see that staff need specialised skills to succeed in the inclusive finance space. So we worked not for profit but for revenue, and had a product-market fit that we could see, but our customers couldn’t. We were delivering a premium experience to professionals in low and middle-income markets at a higher cost than the market could afford (with our funders helping to subsidise the gap), but we knew that anything less would not be as impactful.

Like any early-stage startup, we had our highs, including reaching $1 million in earned income within our first full commercial year. We also had our lows, as we watched earned income drop by as much as 40% the next year – then another high as income rebounded the year after that. And now, like everyone, we’re dealing with the unforeseen lows of COVID-19.

These highs and lows – and the constant friction between the need for revenue and the need for impact – have led to trade-offs on both sides. Along the way, our board pushed us to envisage what our end-state would be, and what that meant for our business model. Would we become a for-profit and adapt our product to better suit what the market felt they needed? Would we become more reliant on donor funds to aid in reducing affordability issues and reaching higher student numbers and having a greater impact? Should we rapidly reduce costs to fit in with what the market can afford, knowing that it would compromise the quality of the educational experience we deliver?

All of these questions led us to define who we are and resist who we were expected to be. We’re for revenue to ensure we contribute financially to our missions. But we’re for impact, not for profit, and so as an organisation, we’re neither one nor the other.

  • We know the market needs our courses to achieve development objectives, but the market doesn’t see this as clearly as we do; so we’re camouflaged.
  • We need in-country partners and funding partners with similar missions to meet our objectives; so we’re part of a herd.
  • We compete for the same funding as organisations with similar missions, so we drink from the same waterhole and eat from the same grass plain, and these resources are scarce.
  • We’re a social enterprise – but for impact not for financial return, and the world needs a herd of those. We’re a zebra, not a unicorn. To other organisations struggling to balance the competing needs of impact and financial sustainability, I say: Embrace your dual nature. It’s possible, and often essential, to do both.

 

We are Stronger Together, Especially when Change is Perpetual

“Rapid prototyping” is an excellent way of describing the fast-paced and constant change we’ve seen in these five years – but “organised chaos” would be the more appropriate term (totally planned of course).

We’ve tested every possible business model, price and product angle, promotional and sales channel, engagement and operational model – you name it, we’ve tested it. This constant yet fast-paced change called for incredible resilience, as an organisation and as a team. It also called for patience from our funders and partners.

In these five years, I’ve learned that being the founding CEO didn’t mean I needed to deliver on my own. I didn’t need to have all the answers, my ideas didn’t need to be the ones we implemented, and I alone didn’t need to solve every problem.

My co-founders together provided our creative engine and sound reasoning; our initial advisors and then our board have always had my back; our funders Omidyar – and later Flourish, MasterCard Foundation, the Bill and Melinda Gates Foundation and FSD Africa – have challenged me while being hands-on partners to our success, offering support that went way beyond funding. Our partners, Rockefeller Philanthropy Advisors, The Fletcher School at Tufts University and our founding technology partner, BOnline, have all played their part in driving us forward. There have been many more since, along with our remarkable team.

The strength of these true partnerships, whether they involve co-founders, team members, funders or other supporters, is what builds resilience into a startup. I encourage the leaders of other social enterprises and organisations to invest the time it takes to build a strong team – and then to embrace their support as you navigate the challenges you’ll undoubtedly encounter. In the perpetually changing environment we all face, you’ll need all the help you can get, and there are many individuals and organisations out there that are willing to provide it.

As we wish a happy fifth birthday to Digital Frontiers and enter our next chapter with CGAP’s Gateway Academy, I’d like to say thank you to everyone who’s gotten us here. It has been an incredible journey so far, and we still have further to go.

 

Gavin Krugel is a co-founder and the Chief Executive Officer at Digital Frontiers.

 

Photo courtesy of Inês Pimentel.

 


 

 

Categories
Education, Finance
Tags
business development, capacity building, EdTech, entrepreneurs, financial inclusion, fintech, skills development, social enterprise, social entrepreneurship, startups