“Last year the world spent $300B in international development and can you honestly say that the world is $300B better?...” And then we were off to the races. Last Tuesday, Dare to Innovate pitched at the 1776 Challenge Cup, a global startup competition for a chance at venture scale funding. After three cycles of watching our entrepreneurs pitching at the Dare to Innovate Competition, the tables were turned and we were the ones on stage trying in two minutes to convince a panel of strangers that our idea was better than the other 24 ideas pitching.
Spoiler alert: we did not win. Although our pitch was compelling, our user need great, and our market sizable, the judges decided to support other companies. Why I am publically sharing this defeat? Because first of all, we all need to be more open about our failures and secondly, this competition brought to the surface thoughts on funding in the for-benefit sector that have been percolating for some time.
Dare to Innovate is in the business of creating the conditions for West African entrepreneurs to succeed. So far we’ve done that primarily through a high touch model involving extensive recruiting, in-person training, and one-on-one mentorship of entrepreneurs. And it’s worked. 28 social enterprises owned by 78 youth have come through our program and these companies are projected to employ over 260 people by the end of the year. And we did all this with a remarkably tiny budget. So now it’s time to scale, and that’s where the trouble begins.
Our goals are primarily social, but our operating model (and philosophy) demands that we make a financial profit. We have several initiatives in-flight that we believe can get us there, but in the world of development funding experimentation is not encouraged and in the world of venture funding, profits need to be maximized. Social innovation is risky, takes time, and also takes money. So do we apply for grants or seek investors? What are we?
Let’s say you are a startup looking to create the next Faceboook (apologies for the somewhat dated cliché). You are able to recruit co-founders and early employees with the promise of an IPO and billion dollar valuation. You can take on credit card debt and live off ramen (or rice) for the promise of a great financial return. But let’s say that instead of a billion dollar valuation, you are looking to impact a billion lives. To get to that scale, it goes without saying that you’ve discovered a financially viable operating model, but you can’t pay the rent with lives changed.
This world has put a lot of hope in the for-benefit sector, but if we want this small, but growing group of daring social innovators to lead global change, we need to commensurately grow funding opportunities designed for this type of enterprise. Innovative solutions need to go hand-in-hand with innovative financing. According to the Rockefeller Foundation, innovative finance solutions have made significant contributions to development. But, only $10 billion dollars have flown through these mechanisms, representing less than 0.4% of the $2.5 trillion gap in funding needed to reach the Sustainable Development Goals. For our part, Dare to Innovate is experimenting with how we invest in our entrepreneurs so that we can fund more businesses and do so more aggressively. What would that model look like on a global scale?
If social entrepreneurs excel at one thing, it is designing for constraints, so we do not worry that we will find a way to finance our growth. In the meantime, let’s all get serious about designing funding models that work for entrepreneurs trying to design funding models for those who want to change the world with innovative organizations.
Tweet @daretoinnovate if you want to hear our pitch and if you are compelled to invest, shoot me an email at meghan@daretoinnovate.com. We are going to make development more effective, we are going to make you money, and we are going to prove the value of the for-benefit sector.