Incubators Are Helping Impact Enterprises Grow, But Are They Making a Difference?
Market and enterprise-based solutions for development objectives are on the rise among actors both old and new. So why aren’t more problems being solved?
To tackle part of this question, we looked at the proliferation of impact enterprises, organizations that aim for financial and social returns from the systems in which they operate. As part of our Innovations in Accelerating Impact Enterprise project, and working with Monitor Deloitte, we focused on the growing field of accelerators and incubators supporting these organizations to better understand the barriers to sustained enterprise growth in achieving systemic change and impact at scale.
Effective accelerators play many roles—educator, mentor, and funder, among others—in helping impact enterprises solve complex social problems, and a recent University of Cambridge study suggested that successful accelerators also increase enterprise survivorship rates by 10-to-15 percent.
After scanning hundreds of successful models, The Rockefeller Foundation supported five high-performing accelerators to pilot different innovations in enterprise support. We took a deep look at the challenges and opportunities encountered by each, their strategies to grow enterprises, and insights into the advantages and disadvantages of the various models to share lessons with others in the field.
The full report, including in-depth case studies on our grantees is available for download, but here are some of the key findings:
- Localized and/or sector-specific accelerator models: A one-size-fits-all acceleration approach is ineffective because market dynamics differs across geographies and sectors.
- Supportive Infrastructure: Most entrepreneurs need help with fundraising or business pitching, but successful, scalable enterprises require supportive infrastructure. Accelerators need to partner with mentors, investors, and sector stakeholders—sometimes addressing governmental regulation—to create the supportive ecosystem where enterprises can thrive.
- Strong collaboration: Many enterprises are working to solve similar challenges and the best alternative to learning from one’s own experience is by learning from someone else’s. While the solutions differ, this approach enables these enterprises to solve larger systemic problems by working or learning together.
- Long-term enterprise engagement: Achieving and demonstrating sustainable growth requires time and many enterprises need long-term accelerator support to facilitate that growth. Because traditional accelerator programs are often short, some accelerators supplement their engagement through mentorship and investor support, or connections to later-stage accelerators for enterprises who need further incubation.
- Customized support for every enterprise: While each accelerator offers its own model or approach for enterprise growth, two enterprises are seldom identical. Accelerators must cater their solutions to each enterprise within the broader framework of their approach.
- Limited awareness around the value of accelerator support: In many ways, the impact enterprise landscape is nascent. This makes it challenging for accelerators to attract the right types of enterprises to their programs or to identify appropriate funders.
- Accelerator funding models, in their current state, are not sustainable: In addition to raising funds for their respective enterprises, accelerators also need to develop sustainable funding models for themselves. More creative funding models—including accelerators that take an equity stake in the enterprises—are becoming more common in addressing the issue of sustainable revenue.
- Balancing business with social impact: The dual goals of social and financial performance make planning for success more complex. Determining how to balance these objectives requires more upfront thinking from entrepreneurs and the right accelerator match based on this prioritization.
- Standardization vs customization: While the needs of enterprises differ, customizing an accelerator’s solutions for each impact enterprise is expensive. Some accelerators have identified a set of issues that nearly all impact enterprises experience, and have crafted a standard curriculum that addresses them. They then layer on tailored services in a more leveraged way by drawing on relevant case study examples or appropriate mentors from their network.
- Shortage of quantitative data to support insights on best practices: As with many new fields, quantitative data can help legitimize innovation, and attract more investors and stakeholders to new approaches or sectors. Without verifiable or case-based data on accelerator practices, it’s challenging to demonstrate an evidence base.
While there is no clear recipe for scale, we hope the lessons gleaned from our report encourage more innovation and scalable impact in the enterprise and accelerator space. This knowledge has already helped many actors rethink their strategies and we look forward to seeing positive change in the lives of poor and vulnerable people as a result.