There are tons of accelerators and incubators that nurture startups. But who helps the helpers with financing? It is especially urgent for young entities run by people who may not have much experience or contacts with the granting organizations that are likely to be sources of funding.
That’s the problem Village capitalan impact accelerator pioneer running multiple social enterprise programs worldwide aims to address this with a new tool that helps such entities, known as entrepreneurial support organizations (ESOs), speak the same language as grant-granting organizations.
A framework for founders
The tool is based on a framework for early stage founders seeking venture capital investments that Village Capital introduced about 10 years ago. The premise is that many startup entrepreneurs trying to attract venture capital funding don’t really speak VC. That is, they don’t know exactly what investors are looking for or even what they mean when they say certain things. (Think of “call me when you’re a product-market fit.”)
So Village Capital developed a tool called Abaca, which presents eight categories or areas and nine levels or growth stages, along with the type of financing that is best for that stage. “It gives entrepreneurs, especially those not exposed to investors in the VC world, a framework they can draw on to have productive conversations,” says Crawford.
Crawford and her colleagues, used by thousands of entrepreneurs, realized they could create a similar framework to help accelerators, bootcamps and others connect with foundations and other groups that provide grants. “People who know the language of the grant world have better access to funding from those organizations,” says Crawford.
With that in mind, about five years ago, they embarked on what became a lengthy process to identify the growth stages that ENOs typically go through and the concerns of potential funders at those various stages of development, along with the right type of funding to seek. Crawford describes the current iteration as “version six or seven”, although she expects this to be the kind of project that will never stop evolving.
Specifically, the framework has eight focus areas for funders, including the team, problem and vision, services and programs, pipeline and selection, ecosystem, operations, financial model and impact. Then there are nine growth stages: setting up the organization, defining the vision, the value proposition, validating the market, proving impact, demonstrating a path to sustainability, performance, scaling and market leadership. There are suitable forms of financing for each growth phase.
For an ESO in, say, the earliest phase, the tool shows that the main team-related concern to address is that it “has a strong founding team — at least two people with differentiated skills.” And the type of funding most likely to seek is pilot grants.
According to Crawford, the tool is especially useful for identifying an ESO’s weaknesses – areas that a potential financier would normally question the most. “Those may be the issues holding you back,” Crawford says. “You can identify the perceived risks in your plan and how to mitigate those risks.”
Village Capital, which runs accelerator programs for ESOs, will have an analyst who can help cohort members learn how to use the tool. But everyone will be able to access it online.
A crucial insight Crawford and others at Village Capital learned in developing the tool was the ultimate yardstick that financiers were likely to use when determining whether or not an ESO would provide a grant. “They are looking for organizations that are closely connected to and support the entrepreneurial ecosystem, as opposed to investments that give them returns,” says Crawford.