Why We Didn’t Fund Your Scaling Plan
A summary of the Standford Social Innovation Review article, read in full here.
This article presents the common problems identified by funders when analysing funding applications for scaling up impact organisations. The aim is to provide a clearer understanding of what funders want, and what will make the difference for you.
The Center for the Advancement of Social Entrepreneurship (CASE1), which funds positive impact projects, has been closely examining the selection process for organisations applying for funding to scale up their social impact solution. Based on this experience, and their extensive work with major funders in the sector, CASE has developed a list of questions that are useful to answer before submitting a funding application.
1. Define the problem you are addressing
CASE has received many requests for funding in the past on global issues such as hunger and climate change. In conversations with social entrepreneur and business advisor Ayla Schlosser, she described the difficulty some organisations have in defining the 'part' of the problem they are targeting within a more macro issue:
"If climate change is the global problem, what part of the problem does the social enterprise aim to solve? Being able to answer this question clearly will guide your decisions about solutions, identifying bottlenecks and partners, and more."
For example, when ServeMinnesota, a US-based non-profit, applied for the Kirby Prize to develop its Math Corps programme, it began by highlighting the general problem of educational inequality, and then demonstrated how success in maths could relate to individuals' educational outcomes, earnings and professional careers. The social enterprise then described the part of the problem it sought to address: students from marginalised backgrounds are less likely to have access to extra support in maths, and the education system does not provide maths tutoring to all students who need it. The Math Corps programme therefore aims to fill this specific gap by offering proven and accessible maths support, i.e. free tutoring integrated into the students' school day.
Any social entrepreneur will be on the right track when, like Math Corps, their part of the problem is evidence-based, helps them make strategic trade-offs and allows them to quantify the market they are addressing.
2. Think about your development strategy beyond just growth
"Scale is not determined by the size or budget of an organisation, but by the change it helps to bring about." 2
Too often, candidates try to demonstrate that they will be able to quickly grow their organisation to reach more beneficiaries against the backdrop of a problem that is several orders of magnitude larger and impossible for them to solve alone. The candidates who stand out are those who talk about how to scale beyond organisational growth.
Building partnerships to reach more beneficiaries, fostering government ownership, getting other NGOs to replicate your concept, ... could lead to behavioural change, create new markets or advocate for a more global impact. Funders want to see that you have thought through scenarios that focus on maximising your impact (your goals) rather than just the economic growth of the organisation (and that you have tested these scenarios).
For example, Healthy Learners, a non-profit organisation based in Zambia, is developing a solution to the lack of care for children over the age of five. Its aim is to provide access points to care where children are most likely to be found, i.e. in schools. In its application for scale-up funding, the organisation demonstrated that its model of training teachers as community health workers and linking schools to the health system had very good results, such as reducing stunting.
3. Keep it simple
If your model is too complex, it will be harder to achieve economies of scale and make another project owner want to replicate it.
The non-profit organisation Living Goods, which aims to save lives by supporting community health workers with digital capabilities, was closely monitoring its workers when it came to testing and iterating the solution. But when it came to scaling up with partners and government, the organisation had to learn to be less controlling and flexible in some respects. In order to have a model that was simple enough to replicate and affordable, Living Goods had to define the non-negotiable elements of its model: ensuring that workers had digital skills, were paid and had access to medicines. On the rest, such as the willingness of some to sell other products to increase their income, Living Goods had to be flexible in order to adapt to the different local contexts and to the different partners.
It is therefore important to define the non-negotiable points that are necessary for your model to work, and the points on which you can make concessions and allow variations.
4. Demonstrate that you have learned from your experiences/mistakes
Organisations that scale up have found that the path to success is not linear. It is winding, with new challenges that require adaptation along the way. Questioning, improving, iterating and adapting are key when scaling up. Although talking about your failures can be scary, it is important to show funders that you are aware of the difficulties you encountered, the impact they had on your model and that you have adapted.
For example, Harambee Youth Employment Accelerator, a South African company focused on tackling unemployment among disadvantaged youth, achieved all its targets in its first year of operation in Rwanda, and took time to reflect on why this was so: it asked frontline workers and beneficiaries to help interpret the results and data collected. The conclusion was that the people who had found jobs through Harambee were not experiencing any real problems in their search for work, unlike the population that Harambee had originally targeted, which was experiencing more obstacles. This led to changes in their programme and in the data that the organisation was tracking, and demonstrated that Harambee was in a learning process that allowed them to identify and adapt to the issues they were facing as the solution scaled up.
It is therefore important to regularly interrogate its data, celebrate its failures and move from a mode of "I am the data to account for" to "I am the data to learn and adapt".
5. Surround yourself well
Chris Walker, former advisor to Mercy Corps Ventures, spoke about the importance of surrounding yourself with the right people to make decisions, especially about the organisation's investments:
"We saw a B2B scaling up that did not include the recruitment of a business development manager. If only the CEO focuses on business development, then it is likely that the targets set will be difficult to achieve. Every business needs a strong bench of experts with the right skills for the scale-up approach being considered."
Experienced impact entrepreneurs will always mention the centrality of people to the success of their scaling. Ella Gudwin, CEO of the not-for-profit organisation VisionSpring, says: "Our people are who we are. It started with a "small team of doers", but as we grew, the talent gap became apparent. When the company started selling to multiple customers (direct to consumer, business to business), it became essential to hire more experienced sales and marketing professionals. As the company expanded to other regions, the need to track the real-time performance of its salespeople and gain insight into the operational side of the business became more apparent. That's when a technical director was recruited. Recognising the importance of and investing in talent has enabled VisionSpring to scale successfully, including a recent $15 million donation from MacKenzie Scott.
As an organisation rolls out its scaling strategy, it is important that it assesses its current and future talent needs and has a clear plan for aligning the skills and experience of its people with its strategy. Addressing this in your funding applications shows the evaluators that you were aware of the importance of human resources and that you are making it a priority.
6. Structure your budget
It is not uncommon for organisations applying for funding to present clearly the impact of their solution but not their economic situation. However, it is essential to be very clear and honest about this aspect, which determines the viability and sustainability of your model. What are your main sources of revenue and costs today, and what will they look like as you grow? How will you reduce these costs as your organisation grows? How will your future locations impact your unit costs?
As evaluators, we appreciated, for example, how the Healthy Learners team had thought very carefully about the costs of their school intervention model, moving from a model for densely populated urban areas to rural and remote areas. The organisation recognised that the costs and numbers of people reached would be different, but that this was part of the overall project. Understanding unit costs and predicting how they will change during scaling up is part of the scaling up journey. Telling the story of impact without 'showing the money' is likely to be rejected by funders.
7. Stay focused on the issue at hand
One of the things that funders pay particular attention to is the proximity or link between the management team and the beneficiaries they are targeting. If the management team is too far removed from the realities associated with the problem(s) it is addressing, this is likely to be reflected in the intervention and performance monitoring. Finding ways to stay close to the problem as the organisation scales up is essential to ensure that your solutions continue to meet the needs of your beneficiaries.
Donors often look for organisations that invest in recruiting and developing local talent, prioritise local people at both staff and board level, with fair and inclusive data processes, and beneficiary-centred solutions.
For example, Lwala Community Health Alliance, a Kenyan company whose mission is to strengthen rural communities for wellbeing, believes that no one is better placed to create change in their community than the people who live there. Lwala is scaling up a process that enables local community committees to identify their own health care resources and needs, integrating traditional birth attendants with more professional health professionals and using data to better meet the needs of communities at all levels of government. By ensuring that solutions come from those closest to the problems and empowering staff with local experience, Lwala creates a development process with locally appropriate solutions.
1 : The Center for the Advancement of Social Entrepreneurship (CASE) prepares leaders and organizations with the business skills needed to achieve lasting social change. It is also a funding centre that selects and awards some of these enterprises each year.
2 : Sally Osberg and Roger Martin in “Getting Beyond Better”