Impact Investing accelerators and incubators providing support to very early stage (often pre-revenue) impact ventures play a critical role in the development of the sector. Most importantly they help ensure that downstream social venture capital funds and other investors have access to a good deal-flow of investment-ready opportunities. The Rockefeller Foundation’s report ‘Exploring Best Practices, Challenges, and Innovations in Impact Enterprise Acceleration‘ provides a perfect introduction to this segment.
“The challenge is that many impact enterprises are successful at a small scale, within a local context, but cannot increase the size of their operations to expand their impact. As they attempt to scale, they often struggle to reach more customers, attract talented human capital, obtain the right types of funding, and access the technical expertise that can help them adapt their business models at each stage of development. Impact investors are interested in supporting these enterprises, but often have trouble finding investment-ready impact enterprises that do not need significant business support.
The Rockefeller Foundation recognised the struggle enterprises face when trying to scale and chose to support intermediaries that could help enterprises expand their impact and increase the positive benefits for poor and vulnerable populations. These intermediaries are often called impact accelerators.”
After surveying eight established impact accelerators, 54 impact entrepreneurs, and 18 impact investors I-DEV International found three main industry trends as reported in ‘Measuring Value by Impact Incubators & Accelerators‘:
- Early stage ventures find greater value in accelerators than growth stage ones
- Incubees & investors have been disappointed by capital raised and investment readiness support
- The most valuable services are business plan or strategy development and peer mentoring
One of the major challenges for these accelerators is ensuring a sustainable funding model. The ventures they work with are usually pre-revenue, and there can be too high a degree of risk for institutional donors. The exact model chosen depends on where the accelerator falls on the impact/return spectrum, and some firms such as Agora growth use a blended approach to combine an Inter-American Development Bank grant with private capital from a priority investment network.
Working at an accelerator requires significant entrepreneurial experience, preferably from helping entrepreneurs scale to a level where they would approach investors for funding. Being able to demonstrate mentorship skills is also very important, as well as local language ability.