Author: Louise Skärvall, Acceleration Lead, Innovation team at UNDP Europe and Central Asia
In recent years, there has been a strong shift from investing in traditional businesses to investing in impact ventures, i.e. companies that aim to create positive social and environmental impact alongside financial returns. The Global Impact Investing Network, an international think tank on impact investing, recently released a study that estimated that the private impact market grew to approximately US$1.2 trillion at the end of 2021 – up 63% since 2019 (Forbes 2022). This shift reflects a growing recognition that the private sector can play a significant role in addressing social and environmental challenges, and that impact investing can be a powerful tool for promoting sustainable and inclusive economic growth.
BOOST acceleration programmes for startups, nonprofits and academic institutions
In this context, the Innovation team at UNDP Europe and Central Asia set out to develop BOOST – a bespoke acceleration programme, targeting impact-oriented organizations. Acceleration programmes are typically a type of capacity development initiative that provide intensive training, mentorship, and networking opportunities to entrepreneurs, with the goal of helping them develop the skills and knowledge needed to build successful and sustainable businesses. However, recognizing the power of the entrepreneurial creative mindset to solve pressing problems and drive impact, we saw the need to take a broader approach and apply this type of thinking to the work of non-profits and academic institutions.
As part of this journey, UNDP engaged both private and public actors – such as Koç Holding, the Ministry of Finance of the Slovak Republic and the Ministry of Foreign Affairs of the Polish Republic – to co-design and jointly launch open calls for innovations that tackle specific development challenges. To execute the programmes, we partnered with Startup Grind, KWORKS, ImpactAIM to craft training and mentorship sessions at the intersection of innovation, impact, and business thinking. The initial vision was to help impact-oriented organizations rethink, develop, and scale their innovations, and in this way mitigate the impacts of the Covid-19 pandemic whilst also accelerate the implementation of the Sustainable Development Goals (SDGs).
Since its creation in 2020, six regional and national innovation challenges have been implemented as part of the BOOST umbrella, with more than 110 organizations successfully graduating from the programme, out of which 39 received a total of US$715,000 in equity-free grants.
The methodology has also been adopted by Tadamon, a community and a platform for civil society organizations (CSOs) in member countries of the Organization of Islamic Cooperation (OIC). Together with the Islamic Solidarity Fund for Development and the Islamic Development Bank, an emergency response accelerator for social impact innovators was implemented in 2022, resulting in 44 new graduates from 28 OIC member countries, out of which 25 received a total of US$460,000 in grant funding.
What we learnt so far and what we aim to do next
Here are three things we learnt that will influence the next generation of UNDP’s entrepreneurship interventions.
Strengthening impact entrepreneurship ecosystems by applying systems thinking
Entrepreneurship ecosystems are complex and dynamic networks of people, resources, and institutions that support the development and growth of new ventures. Building a strong entrepreneurship ecosystem requires a coordinated effort from a diverse group of actors. Simply put, entrepreneurs, financial institutions, service providers, educational institutions, workers, policy makers, etc. need to work together to create an environment that fosters innovation, economic development, and social and environmental impact.
Several methodologies and frameworks have been developed over the last decades to analyze, understand and strengthen entrepreneurship ecosystems. What they all conclude is that when a key actor or element in an entrepreneurship ecosystem is missing, the ability of entrepreneurs to start and grow successful businesses is negatively impacted. For example, if entrepreneurs lack access to capital, they may be unable to get their business off the ground, or invest in research and development, hire employees, or acquire the resources they need to up-scale. Smilary, absence of supportive policies can discourage entrepreneurship by creating a less favourable environment for innovation and risk-taking.
Applying systems thinking and a portfolio approach to entrepreneurship ecosystem development can help stakeholders better understand complex interdependencies and relationships. This allows stakeholders to identify areas of strength and weakness, and to develop strategies that will make the ecosystem more resilient and adaptive to changing conditions and emerging opportunities. Systems thinking also enables stakeholders to see how changes in one part of the system can impact other parts of the ecosystem, including how business tactics can be applied to solving social/environmental challenges and how SDG-aligned models can deliver long-term value for all actors within the ecosystem such as by adopting social and environmentally-friendly business practices. To make this a reality, we need to put ecosystem builders at the centre of our interventions, viewing ecosystem building as a profession rather than a temporary activity. Examples of such interventions can include but are not limited to acceleration programmes for entrepreneurship ecosystem initiatives and peer-to-peer exchanges across ecosystems to promote good practices, collaboration and cooperation.
Promoting women-led businesses to drive innovation, economic development and gender equality
Being a female founder is trendy, and a growing number of resources and support systems are being developed and made available to women entrepreneurs to help them grow their business. However, women continue to be underrepresented among both venture-backed entrepreneurs and venture capital (VC) investors. On a global scale, about 2% of all venture capital investments go to all-female founders, this despite the fact that female-founded startups represent about 20% of all startups (PitchBook data). Women also remain highly underrepresented in business in the Europe and Central Asia region, partly driven by limited access to financial services (World Bank, 2022).
This disparity is often referred to as the “financial gender gap” and persists across countries and sectors. There are several reasons for the gender funding gap. One is that there are simply fewer women in entrepreneurship and venture capital overall. Another is that there may be unconscious biases among investors that lead them to favour male-led businesses over women-led ones. For example, women founders in the US raised 1.9% of VC funds in 2022, compared to mixed-gender teams who raised 17.2% (PitchBook data). Women entrepreneurs in developing and rural contexts may also face unique challenges, such as the double burden of domestic and professional work, lack of access to training opportunities, networks and mentors, and pressure to conform to gender roles, making it more difficult for them to secure VC funding.
Focusing on overcoming these challenges can help address these disparities and at the same time promote gender equality. For example, running acceleration programmes for women-led ventures can help forge new types of networks, connect female founders with strong mentors and role models, and facilitate match-making with investors known for supporting women-led businesses. BOOST: Women Innovators, Women’s Startup Lab, and Women Entrepreneurs Finance Initiative are a few examples. In parallel, initiatives like Female invest are leading the way to ensure that more women become investors themselves. This will help boost the number of female fund managers and decision-makers in venture capital funds, and – if we are to believe recent research – increase the likelihood of female founders raising VC funding.
Nurturing entrepreneurial mindsets to address our most pressing development challenges and scale impact
CSOs and social ventures continue to play a critical role in advancing social and environmental causes, not least in development contexts. Yet, many struggle to achieve their objectives due to limited resources, including financial ones. To sustain and amplify their impact and achieve greater results, there is a growing need for CSOs to adopt a business-like approach to its operations, with a focus on sustainability and scalability.
To bridge the gap in knowledge, mindset and application, capacity development initiatives focused on helping CSOs, including acceleration programmes, should explore ways to provide trainings on business thinking. Moreover, they need to include opportunities for participants to work with experienced business mentors, who can provide guidance and support as they navigate the challenges of building, transforming and scaling their operations. This will help CSOs and social ventures to increase their financial sustainability, improve their operational efficiency and effectiveness, scale their impact through innovation and creativity, and build partnerships and collaborations.
With more than 50% of global impact investment capital going to developing nations (Global Impact Investor Network’s 2020 survey), not least in relation to the green transition, we see a huge need and opportunity to work with our partner countries to improve business environments and promote sustainable business practices. To brace ourselves for what’s to come, UNDP will continue to co-design and implement incubation and acceleration programmes in support of changemakers – be they hybrid nonprofits or do-good startups. Nonetheless, to truly have an opportunity to influence and strengthen entrepreneurship ecosystems for positive SDG impact, our support will need to be mindful of all elements of the ecosystems and not only the startup founders themselves. This will require closer collaboration with governments, investors, business leaders, civil society, academic institutions, and other support programmes.
Want to learn more about our entrepreneurship ecosystem development work and how you can partner with BOOST, get in contact!