Weekly Roundup: Planting the SEED
As the impact investing landscape grows, we continue to hear the common complaint from social investors that there is a weak pipeline of social entrepreneurs. But with new, cash-starved social enterprises appearing across the world every day, why is it so hard for impact investors to find enterprises that that attract their excitement and their investments?
One, social enterprises face a number of extreme challenges that are difficult to surmount in the first few years, at the center of which is the challenge of creating viable, scalable business models around their social innovations (assuming that their innovations are appropriate for the market). After launching a social enterprise, entrepreneurs often spend months – even years – experimenting with various business models until they strike upon the one that will be robust and allow the enterprise to grow (or, until they give up.)
Two, major social impact investors in the marketplace today invest upwards of a half million to a million US dollars – for example, Acumen Fund’s investments range from US $300,000 to $2.5 million and Grassroots Business Fund invests between US $500,000 and US $2 million. Most young enterprises are not equipped and do not qualify to receive this quantity of capital. However, they need smaller amounts of capital to survive and grow to the point of being able to absorb these larger investments. With few seed investors in the marketplace (India’s Ankur Capital, the new Unitus Seed Fund, and Accion’s Venture Lab being some of them), entrepreneurs have little access to seed funding and lack the early-stage mentoring needed to surmount the many challenges to create a model suitable to receive even seed funding.
That’s why Villgro, a social enterprise incubator in Chennai, India, has created an intensive training program geared to speed up the business model refinement process for entrepreneurs who have not yet raised external investment, with the aim of helping them to raise their first rounds of funding. Called SEED, the program takes India-focused social entrepreneurs who have not yet raised any external investment through a 6 month, high-touch journey of first, identifying the roadblocks in their business models that are preventing them from accessing capital, and then, innovating on their models to address those issues. In contrast to similar training programs, SEED focuses on helping entrepreneurs solve underlying issues based on guidance from seed investors (who are involved right from the beginning in the selection panel) and hands-on support from mentors, rather than focusing solely on high-level strategy and pitching.
Some of SEED’s partners include Global Social Benefit Incubator at Santa Clara University, Altis Business School in Milan, and Loyola Institute of Business in Chennai. GSBI, Intuit, D-Rev, Innovation Alchemy, Impact Law Ventures, and Elevar Equity are among those contributing to curriculum development for the program.
“This is not just for people who have ideas. It is for people who have tested their ideas and failed, and who have sufficient learning so that they won’t fail again the second time,” say Paul Basil, founder and CEO of Villgro, in an Economic Times interview.
A training program to the end of helping entrepreneurs to raise seed investment, if successful and scaled and replicated over a few years, has the potential to create a surge of new, investable social entrepreneurs for seed investors and beyond, and may make it less risky for larger funds to allocate a portion of their capital to seed-stage entrepreneurs.
And, after a program like this, if a frustrated social entrepreneur who would have given up on her idea ends up scaling her social impact? Well, then that’s a seed worth planting.