Funding is critical when it comes to identifying and scaling innovative social solutions. However, funding alone is not enough to keep social purpose organizations (SPOs) alive and well.
Despite increasing sources of capital for SPOs, their life expectancy remains low. To illustrate this point, according to the Failure Institute, only around 16 per cent of social enterprises in Mexico will survive beyond four years. These organizations operate in challenging environments that require them to develop new markets, build the necessary infrastructure, and develop their own organizational resilience, therefore, limiting their ability to generate social and environmental impact.
It’s no wonder that according to a survey conducted by EVPA, 73 per cent of European donors and social investors feel that non-financial support is just as important as financial support, and 23 per cent say it is even more important. In the words of Patricio Mayr from Fundación Mustakis, a Chilean foundation, ‘financial support is not enough in and of itself. Organizations usually lack the networks and experience that a large organization can provide them’.
For the above reasons, Latimpacto and Red de Impacto, two Latin American impact ecosystem builders, decided to identify trends, best practices, and case studies on the effective ways for providers to structure, deliver and measure the non-financial support delivered to social purpose organizations. This research builds on the great work of other organizations, including EVPA, and includes insights from more than 60 practitioners that were consulted via interviews or workshops. Additionally, we asked both providers and receivers of non-financial support to complete a survey in order to identify existing gaps. The results of this research culminated in an interactive toolkit available in English, Spanish and Portuguese.
Interestingly, our first finding reveals that many foundations and social investors provide non-financial support, but their services are not structured formally within their organization. To this end, we provide nine archetypes of how non-financial support can be structured. The archetypes vary according to the use of internal and external resources, the scalability, and the scope of the non-financial support to be provided.
While some providers deliver services via their staff and board of directors, others leverage their partners, networks, and peers. While some programs use technology to reach a large number of social purpose organizations, others focus on just a few to better tailor their support. Moreover, some even decide to support leaders rather than the organization itself. This is because they believe that leaders need special skills in order to create systemic change.
Some providers, particularly those with an investment fund and an acceleration program, use non-financial support as a risk management tool. By providing non-financial support, social investors are able to get better acquainted with social purpose organizations before making an investment. This not only allows them to assess if an organization is investment-ready but also helps them to develop trust and assess the needs of the future investee.
For what and for whom?
The success of any non-financial support program will depend on providers being able to answer two fundamental questions.
- For what purpose is the non-financial support being provided?
- At whom is the support aimed?
The ‘for what’ requires that the purpose of the non-financial support be made clear at the beginning of any engagement in order to measure its success. The four purposes we found are: talent and skills, social and environmental impact, resilience, and access.
The ‘at whom’, refers to the focus level of the service. This can be at the individual, organization, or ecosystem level. It can push organizations to think beyond their own organization.
We found that many providers in Latin America offer support in strategy and impact management and measurement. However, when asked what services they thought were critical for ensuring the resiliency of social purpose organizations, they identify access to markets and financial skills as the most critical – services that are rarely provided.
This calls for more service providers to specialize their service offering (after all, a lot of training material on topics such as lean startup is available for free online), and to start using market insights and data to better guide social purpose organizations.
For example, we came across a support organization called LUUM, which helps social entrepreneurs by connecting them with global markets, assisting them in optimizing their inventory, and using data to identify market opportunities. LUUM also has its own brand which serves as a trial-and-error innovation laboratory used to fine-tune its support.
Non-financial support is a key component for any organization working towards greater impact. Although the concept is not new, it is evolving to be more strategic in terms of selecting which services are offered and how they are offered. More interestingly, it is now being viewed not just as a way to create more sustainable organizations, but as a way to scale impact. This new thinking requires services to be directed not only at the organization but also at the ecosystem level.
Alan Wagenberg is Knowledge Management Director at Latimpacto and Fernanda Achá works at VIVA Idea, a think action tank, as an impact project leader.