Can USAID afford a 90 percent ‘failure’ rate?

The U.S. government on Wednesday (Feb. 8) rolled out an impressive series of initiatives to harness science, technology and innovation for global development.

To engage the research community, the U.S. Agency for International Development is offering more than $5 million to universities and other institutions tackling global challenges as part of the planned Higher Education Solutions Network.

To create market incentives for anti-poverty work, the patent office promises up to 50 patent holders and licensees expedited processing if they can prove a history of addressing humanitarian needs with their patented technology.

To help scale up promising global health business, USAID launched the Center for Accelerating Innovation and Impact.

U.S. officials are clearly excited about these and other new public and private initiatives to address global challenges — and rightly so. Here’s proof that the Obama administration’s promise of a more agile U.S. aid program was more than just rhetoric.

President Barack Obama, in fact, was apparently so taken by USAID’s plans to engage universities that he offered to deliver the first selection of grants personally — a notion his schedulers quickly dismissed, USAID Administrator Rajiv Shah joked at Wednesday’s packed, invitation-only gathering at the Eisenhower Executive Office Building in Washington.

But while such initiatives may boost innovation for global development, they are no silver bullet for aid organizations and social entrepreneurs eager to scale up promising interventions.

No wonder, then, that at Wednesday’s event, corporate and nonprofit leaders returned again and again to, essentially, this question: What exactly can — or should — the role of governments, insurers, financial institutions, companies, foundations and other stakeholders be in reducing risk, encouraging investment, improving delivery channels and helping to scale up innovative social business?

Speaking of risk: Providing seed funding to entrepreneurs can be risky. Remember Republican Congressman Don Manzullo of Illiois slamming US aid last year for awarding a Development Innovation Ventures grant to the U.S. maker of a hydrogen fuel-cell bicycle that may provide power and mobility to people in the developing world? USAID stood by the grantee.

But USAID officials also acknowledge that however rigorous their selection of grantees, failure is always possible. Some of the agency’s grant challenges, after all, was inspired by the Bill & Melinda Gates Foundation, which, according to a USAID official, assumes that only 10 percent of funded innovations will be successfully scaled up.

Can USAID — or any donor — accept a 90 percent failure rate?

“We can’t quite put it in that way,” one USAID official said Wednesday. But the agency expects to help scale up only a few of the innovations it grants seed money.

How much risk can bilateral donors shoulder before fiscally conservative lawmakers pull the purse strings? How can government and the private sector work together to de-risk, scale up and deliver innovative solutions in the areas of health care, governance and access to food? How can we build capacity and reduce regulatory burden in crisis regions, to increase access for humanitarian aid groups and businesses alike?

We’ll be hearing a lot about these issues, and I’d be interested in your take. Please share your thoughts by leaving a comment below!

Read more:

• Innovation in development: Latest US push targets universities, patent holders

• USAID, partners open competition for innovative education ideas

• Mashing economists and venture capitalists to innovate in development assistance

• USAID’s new IDEA: Open for business (partnerships)

• USAID and partners launch new funding mechanism for global development innovators

Read last week’s Development Buzz.