NextBillion - A WDI Publication

I have spent the last 25 years soliciting philanthropic and investment capital.

I’ve spent the last 15 years making grants and investing in social innovators on the African continent.

In these decades of engagement with the social innovation ecosystem, I’ve seen plenty of good practices, and plenty of bad ones. But there’s one thing that continues to shock me: how wasteful some of the funding world is with the ecosystem’s time.

For social entrepreneurs and civil society innovators, time is one of the most precious resources they have. The dreamers and the doers that are developing more efficient, affordable ways to address priorities like housing, education, healthcare, energy, environmental protection and water access never have enough of it. The mountain of social and ecological issues they are confronting globally never seems to attract the talent and resources necessary for sustained progress. As a result, these innovators must spend practically every waking moment planning, creating and building their solutions — and despite their dedication, they never get it all done.

Social innovators accept this reality: It’s part of the job — and indeed, part of the entrepreneurial lifestyle. But when time is precious, those who provide the financial resources that help power these businesses and innovations should do their best to help conserve it. Yet that is not typically the case, and many funders seem not to understand the time demands imposed by the systems they’ve created.

A System Built on Millions of Wasted Hours

This disconnect is particularly acute in Africa. In just the four countries with the largest populations and economic activity (Nigeria, South Africa, Kenya and Egypt) there are over 570,000 active NGOs. These NGOs, along with many of the estimated 2 million social enterprises in sub-Saharan Africa, are all likely to seek philanthropic and impact investment support at some point in their organisational journey. In my rough estimation, these organisations collectively waste millions of hours every year soliciting this funding unsuccessfully — a huge time burden imposed on people whose attention is better focused on solving critical social and environmental problems.

What is this time wasted on, specifically? For the most part, it’s spent navigating the cumbersome processes involved in writing grants, applying for investment and responding to requests for proposals (RFPs) as service providers. While some evolution has occurred, all of these processes have not changed materially in my 25 years working in this sector.

For most grant applications and impact investment solicitations, in the first round of the process, the requirements typically include:

• Organisational Background
• Accomplishments to-date
• Problem/solution being addressed
• Targeted beneficiaries
• Access and methods of reaching beneficiaries
• Annual budget and project proposed budget
• Financial statements (audited)
• Registration documentation
• Policies and procedures
• References
• Proof of previous grants and investments received

Applying for investment is often even more burdensome than seeking grants. Though the process is very similar in the early stages, as the enterprise get closer to investment the due diligence gets more intense. A common industry claim (which does not have solid research to back it up) is that impact investors look at 100 potential deals for every one actual deal they make.

Whether it’s a grant, investment or project proposal, articulating this coherently and assembling all the requested background information and supporting documentation takes a lot of time, with no guarantee of success. In my experience in the African market, for any given grant, investment or RFP available, there will likely be between 200 and 5,000 applicants. Within the calls for applications we have managed directly at Impact Amplifier, a social and environmental impact-focused accelerator and capital advisory firm, this number ranges from 300 to 700 applicants. However, within our funding network we have heard of calls that draw far more than 5,000.

For the sake of argument, let’s assume there’s an average of 500 applicants for every one grant, investment or RFP.  That means 499 organisations will have spent anywhere from 10 to upwards of 40 hours preparing applications or proposals which will not lead to any funding whatsoever.

For the vast majority who are not successful in securing the grant, contract or investment, this is time that could be utilised productively to address the issues that really matter.

A Better Way for Funders to Support Social Innovators

My intention here is not merely to complain (though it’s a worthy complaint). Instead, I want to offer some simple alternatives to the current norms among funders, based on my own experience allocating funding to social innovators.

After becoming a funder and investor and mimicking what others were doing, I quickly started experimenting with alternative approaches to the standard practices I described above. The first iteration of these experiments involved breaking Impact Amplifier’s grant application process into three stages:

• The first stage of the process is simple and principally focused on what the organisation is proposing, why they are motivated to create their solution, and who will benefit from it. At this stage we don’t require any compliance documentation, like proof of organisational registration, policies, reference letters, financial statements or detailed plans — just the basics. From this stage we shortlist the applicants, based solely on what they plan to do and why.
• In the second stage we ask for more details, but still do not ask for all the budget and financial data and other compliance information (company registration, tax returns, annual financials, policies) that most funders request, as highlighted in the section above. After reviewing this round of information, we narrow the group to twice the number we will ultimately fund.
• In the third stage, we ask only these final applicants for all their compliance-related documentation. After reviewing this compliance-related content, between 25-40% of the applicants are disqualified, and then we are left with a final, much smaller group to decide from.

Although this multi-stage process may sound cumbersome, it represents much less of a cumulative time burden than making all 200-5,000 applicants submit a more thorough application and reviewing all their detailed documents. Limiting this review to a smaller number of “finalists” saves us a great deal of time. And more importantly, it saves hundreds if not thousands of organisations from wasting their own valuable time completing detailed applications for grants, investments or contracts they have only a small chance of receiving.

Other donors and investors have adopted similar practices, breaking their calls for applications into multiple stages with varying levels of complexity. But in many cases, what these funders require from applicants at each stage is far more complicated than what they actually need to move a decision-making process forward. Funders who are interested in exploring these practices should remember that the ultimate goal is to save social innovators time, keeping their effort level low in the early stages of the process.

The second innovation we have developed involves introducing a learning management system to assist all applicants in the second round of the process, enabling them to create a better application. This learning management system helps applicants with each of the core elements of the application, clarifying their responses to questions like:

• What is the problem you’re trying to solve?
• Why does it matter?
• How does your solution work, and why is it superior to solutions that are already available to your beneficiaries?

Each core element of the application is designed as a learning module. When the module is completed, so too is that section of the application.

This process transfers the skills needed to learn how to write an organisation’s “ideal” grant application. Both the skills and the template organisations create for our applications can be used again for other grants they apply to, as the majority of these modules apply to common grant requirements. Not only does this build the applicant’s skill base, it also creates a higher quality of applications for us to review, thus serving both the funders and the innovators.

This process also shifts the power dynamics between the two sides: Instead of organisations striving to find the right combination of words to gain the favour of a distant, opaque decision-maker, the process becomes more collaborative, transparent and mutually beneficial. Both parties are acknowledged as critical in the ecosystem, both parties are giving and receiving value in the application process, and both gain from their respective journey together.

We as funders have an obligation to be effective stewards of the resources we use to advance solutions to the social and ecological challenges we care about. But we also must be effective stewards of the entire ecosystem that enables those solutions to exist. It is incumbent upon us all to think at the micro and macro systems level to enable the social innovation community to thrive — and part of that effort must involve preserving innovators’ most valuable asset: their time.

Tanner Methvin is a partner at Impact Amplifier.

Photo credit: AndreyPopov