Marking the 10 year anniversary of Development Marketplace in 2011, the World Bank launched the Development Marketplace Investment Platform (DMIP) program.
The intent is to seek to help a pilot group of 30 selected social enterprises that have received prize money from DM, and that have been successful in their project, to attain a second or further round of financing from impact investors and foundations, in order to build up or replicate their project success.
A second purpose is to help respond to a familiar complaint of social enterprise funding organizations, that they do not see enough good projects to evaluate. In this context, the Asian Venture Philanthropy Network published the following article on its website highlighting the results achieved so far by DMIP and the prospects for the future of this program.
In 2011 the World Bank Institute marked the 10th anniversary of the Development Marketplace. The programme was set up to provide early-stage funding to innovative social enterprises through a range of annual global and national-level competitions. Over 300 global winners have won US$200,000 each in grant funding.
But what happens to the winners beyond the life of the award? How many go on to the next stage of development? The tenth anniversary furnished an occasion to ask these questions. The answers suggest a significant new direction for the programme.
The main motive for the review was, ‘to move away from the traditional “fund and forget” model,’ as the DM’s Virginia Ziulu explains.
Some of the supported ventures have found subsequent funders, but this was largely outside the programme’s mandate. In 2011, the program shifted its focus to engage with past winners and discover how the World Bank could provide follow-on assistance.
‘Their response was unanimous,’ says Virginia, ‘they needed help to engage potential capital providers.’ The DM support is in effect seed-funding and much of it goes towards proof of concept. To leverage this seed funding, social enterprises need multi-year financing in the form of grants, loans and equity In response, the DM created the Development Marketplace Investment Platform (DMIP) a pilot initiative to link entrepreneurs with capital providers.
To date, the DMIP has worked with thirty past winners who had successful projects at the time their grant funding was fully disbursed, and had gone on to further develop their enterprise. The DMIP provided follow-on technical assistance to help these social enterprises review and prepare their business plans, financial information and social impact data. On a trial basis, DMIP has introduced these organizations to potential sources of funding.
In order to map all the key players in the space and make sound introductions, DMIP has spent the last year talking to foundations, social investors and intermediaries to review their needs and priorities, their investment preferences, risk-return tolerance and due diligence requirements. Many have expressed an interest in collaborating with the DM to develop funding mechanisms and platforms to systematically tap its pipeline, increase volumes of scalable projects, identify and support viable business models, and minimize the costs of due diligence.
Initial results of the pilot stage work with the first 30 winners, which began in November 2011, have been positive, so much so that DM is considering scaling the platform, both through increased internal commitment, and by seeking to leverage strategic partnerships with existing platforms and networks. The goal of the DMIP is to help bridge the gap between social enterprises with funding needs and funders seeking good and replicable initiatives in which they can invest.
To complement learning from the DMIP, and as part of a broader initiative, the DM is considering providing DM winners and finalists specific technical assistance funding to address deficiencies that funders perceive in the social enterprises.
The DM team has come to appreciate that the entrepreneurs are only one side of the equation.
From the other side, the social and impact investment sector has changed drastically over the life of the DM program. There has been substantial growth in impact investors seeking enterprise solutions to social and development challenges.
But transaction costs for search and due diligence processes tend to be high because of limitations such as readily available financial data, remoteness of the enterprise and absence of standardized performance metrics. These factors have limited deal-flow for the expanded impact investor community, and as a result, would-be investors have been fishing in a relatively small pool of social enterprises limiting the potential scale of the required social impact.
Drew von Glahn of the World Bank’s DM team says, ‘We are looking at a broader view to challenges in the social enterprise ecosystem.’ With this perspective, the DM is implementing a three-stage approach. The first is the use of its annual DM competitions to uncover innovative social enterprises. The second will be to provide increased focus and commitment to the technical assistance infrastructure needed to support testing and development of these enterprises; and the third will offer the DM Investment Platform to assist in moving these organizations to greater scale and impact.
According to von Glahn, the goal of this integrated approach is to reduce the hurdles that limit the effective partnership between social enterprises and impact investors.
For the original article visit the AVPN site.