P R Ganapathy | November 11, 2016

Global trends in social enterprise and what they mean for us

I recently had the good fortune to attend two conferences related to social entrepreneurship – Social Capital Markets, or SOCAP and the Annual Conference of the Aspen Network of Development Entrepreneurs, or ANDE. Some major themes that I found at these conferences that I think that we should all take notice of:

A focus on measuring results and impact in a disciplined way: I’ve been seen this trend over time, and this year the sentiment was stronger than ever. It is necessary to rigorously document one’s theory of change, identify metrics that reflect that, and capture and report data along those metrics. Donors and investors alike are less likely to accept anecdotal evidence of impact, with pretty picture of smiling beneficiaries; they also want hard data. Ideally independently sourced and verified, but not necessarily so. Acumen’s lean data initiative provided an interesting and rigorous way by which social enterprises can capture, report and use data to make better business decisions. It is no longer a trade off where capturing and reporting impact is a distraction from your business – it should be a fundamental part of the way you work and the culture you create.

This is also true of incubators and accelerators. Emory University’s Global Accelerator Learning Initiative (GALI) has been to show some early results. It appears that (at the very least), Accelerators are good at selecting better companies, especially on parameters such as revenue growth and follow-on investment raised. Incubators and accelerators who are not part of GALI are going to miss the boat, because big donors like USAID are putting their weight behind GALI. At Villgro we’ve often asked ourselves how we can do a better job of measuring our own impact on incubatees, and we joined GALI last year.

The panel I moderated at SOCAP had some fireworks between two of the panelists – one of whom believed that just having a social enterprise in a remote underserved community was impactful enough, while the other emphatically believed that measuring that impact was imperative. You can watch the entire panel here.

A renewed focus on talent and capacity. At both conferences, I saw a renewed focus on, and recognition of the importance of, attracting and retaining good talent into social enterprises in particular and development in general. For quite a while, social enterprises have struggled to attract good talent, and this has constrained their growth, scale and effectiveness. If more money is going to enter the sector and there’s a glut of early stage enterprises, we’re not going to be able to have impact unless we attract the next level of talent to execute on, and scale, proven models. Donors are funding experiments and interventions to increase the flow of talent into the sector, which is a great thing.

Developmental institutions recognize the power of social enterprise. We expanded Villgro’s presence to Kenya a few years ago, and we were recently awarded a USAID PACE grant to scale Kenya and expand into Vietnam. I was fascinated by how major developmental institutions like the UN and the World Bank are recognizing the power of social enterprise and the role that incubators and early stage impact funds can play in development in Low Income countries. Their design of how to jumpstart the innovation and entrepreneurship ecosystem in countries where it is underdeveloped looked uncannily like Villgro’s vision of how an incubator/accelerator/fund can make a difference. It’s great that we’re seeing some really large and impactful institutions join the movement and I look forward to seeing their influence on the ground.

Debt vs Equity dichotomy. One thing that surprised me was how common debt financing for social enterprises was in other parts of the world (Africa, Latin America), as opposed to India, where partially due to ECB regulation, debt is much less prevalent. Debt offers much more realistic chances of returns for investors, which in turns leads to a flow of capital. I wish we could extend the ECB waiver given to MFIs to social enterprises in India, so that we see much more flow of investable capital into the sector.

As always it was great to see what people are doing around the world. For the rest of the year, one is like a frog in a well, with head down, nose to the grindstone. These conferences offer an opportunity to pop up, look around, and learn from the mistakes and successes of others, as well as to share our own learning.