By Amparo de San José and Ignacio Fernandez Admetlla
Amparo de San Jose is the Director of the Network of Private Investors and Family Offices of IESE. She also conducts research in the field of financing startups, venture capital, and entrepreneurship in developing countries. Papers published recently include "Accelerator models for social entrepreneurship: Three cases for learning," "The cycle of private equity in Europe: Management and acquisition". Before joining IESE Network, she worked for the Inter-American Development Bank , the Centre for European Policy Studies, and the European Commission (DG Enterprise).
The drive some have to solve a social or environmental problem while creating their own personal project is the seed of all social entrepreneurship. However, in order to channel entrepreneurial spirit and aspirations, and foster a culture that facilitates and promotes them, there are different actors playing instrumental roles: public agencies, universities, incubators, financing intermediaries for entrepreneurs and, more recently, accelerators.
The services social enterprises accelerators usually provide are: i) support for conceiving ideas and developing business plans; ii) research and market intelligence; iii) product definition; iv) support in market entry to access customers and distribution channels; v) advice and assistance in leveraging funding; and vi) advice on protecting intellectual property if necessary. Acceleration programs have an average length of approximately six months, and tend to be costly, since the available data indicates that the cost of each accelerated startup tends to vary between US$ 10,000 and US$ 20,000, depending on the intensity of the program.
The study "Accelerators for social entrepreneurship: Acceleration models and entrepreneur ecosystems in Latin America and the Caribbean," prepared by IESE Business School in 2016, analyzes some of the different models of social enterprise acceleration of that have emerged, a phenomenon that it is still fairly recent and not as widespread in the Latin America and Caribbean region compared to other parts of the world. However, across the region there are several entities that offer acceleration to companies with high impact potential, such as New Ventures, Agora Partnerships, Corporación Ventures, NESsT, Village Capital and Socialab, pioneers in their activity and with important and exciting challenges for the future.
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Most of the region's accelerators are newly created entities (with less than five years of experience) so most of them are currently implementing their first or second year of acceleration services for entrepreneurs. In this sense, one can say that most accelerators are early-stage entrepreneurs themselves, still immersed in a process of searching, testing, and improving their own business models and striving for sustainability.
Accelerators devote a great amount of time to developing their social capital. They are aware of the need to work in collaboration and network with different types of agents in the ecosystem to cover the entire entrepreneurship spectrum. They collaborate to generate deal flow and identify interesting initiatives, to get support and develop mentoring networks, to facilitate access to markets and to connect entrepreneurs to potential sources of funding. Some accelerator programs, such as Socialab, Corporación Ventures, New Ventures, and Agora Partnerships are true focal points around which a broad number of actors in the social entrepreneurship ecosystem connect.
Accelerators operating in Latin America and the Caribbean with a focus on social enterprises deploy business models that most often pursue sustainability through sponsorship agreements, public fundraising, revenue from acceleration services to large corporations, or consulting revenue from public or private organizations. The study from IESE Business School found that, with a few exceptions, the business model of social enterprise accelerators differs from that of other accelerators focused on technology ventures with high growth potential and scalability, often centered on ICTs, where it is common to find models that seek profitability through direct investment in accelerated enterprises.
One of the main challenges for social accelerators in Latin America in the Caribbean is demonstrating their impact. Generally, accelerators are not very thorough in measuring the social impact of their programs. It is important to keep in mind that accelerators do not directly generate social impact, but rather they have impact through the enterprises they support. This makes impact measurement twice as difficult for these organizations because they depend on the cooperation of the businesses themselves to obtain relevant and meaningful data. In most cases, the performance metrics used for accelerators are the usual parameters for measuring business growth (for example, survival rate of businesses, job creation, or leverage of private investment).
The growth of social enterprise accelerators will be strongly linked to the achievement of results, therefore, measuring using the enterprise's own indicators and looking at impact investment in terms of the target population and the kinds of benefits achieved will be key.
Ignacio Fernandez Admetlla
Ignacio Fernandez works in the Multilateral Investment Fund's Inclusive Cities area. He holds a bachelor's in Economics and a master's in International Development Cooperation and Humanitarian Aid. He has also worked in monitoring and evaluation in the NGO AIDA in Madrid, and in local economic development for AECID in Honduras.
From the Multilateral Investment Fund Trends blog