Major donors launch new fund to support innovation

Participants and attendees at the USAID’s Frontiers in Development Innovation Marketplace. A new fund to support innovation was launched on Sept. 23. Photo by: USAID / CC BY-NC

For some time now, major bilateral donors have been working independently to fund innovations and support startups, but a group of them announced Tuesday a new fund where they will pool capital to spur creative, pioneering interventions to tackle global development challenges.

The instrument is the $200 million Global Innovation Fund launched in New York by the U.S. Agency for International Development, the U.K. Department for International Development, Swedish aid agency SIDA, the Australian Department of Foreign Affairs and Trade and the Omidyar Network.

“[We] simply have to find more ways of doing development better, cheaper, faster and subsequently at scale,” British Secretary of State for International Development Justine Greening said during the event. “That will mean we need innovative approaches for reaching vulnerable girls and women who remain locked out of progress in too many places and we also need to develop more innovative responses to natural disasters … finally I think we’ll need innovative approaches to driving economic growth and jobs.”

The breadth of the challenges she listed will be reflected in the new nonprofit innovation fund’s mandate, which is to invest in innovative solutions to global development challenges in any sector that demonstrate a potential to scale.

New approach to aid delivery

Headquartered in London, the Global Innovation Fund will distribute money through grants, loans and equity investments ranging from $50,000 to $15 million.

Social enterprises, for-profit businesses, researchers, government agencies, nonprofits, researchers, government agencies and others are all eligible to apply to one of three stages of financing: piloting, testing and scaling with the largest funding amounts reserved for innovations that have proven success and potential to work in multiple countries.

For one, Australia’s DFAT believes its role in the fund fits into a broader shift in strategy, noted foreign affairs minister Julie Bishop.

“If we are to fund the development solutions for the future we have to be looking to new ideas,” she said. “This is just the beginning of a new approach to the delivery of aid. We are embracing what I call the new aid paradigm by opening up the Australian aid program to greater innovation and creativity.”

Lessons learned

The new fund draws on some of the lessons learned from past experience with programs at the various agencies, including USAID’s Development Innovation Ventures and SIDA’s Innovation Against Poverty. The event showcased some of the innovations and enterprises that have been supported by those organizations thus far — from clean cookstoves to toilets and girls education.

One of the key lessons learned, according to SIDA chief Charlotte Petri Gornitzka, is that technical assistance must be part of the package.

Many potential innovators and entrepreneurs — especially those from the developing world — need help creating solid business plans, particularly around how to scale, and that expertise helped them put forward stronger applications, Gornitzka told Devex, adding that another key challenge the fund must consider is how to support the scaling stage of a company, which is “where good innovations often fail.”

Helping those who can best support innovation

The instrument has been intentionally set up independently of all these aid agencies, with a board comprising public and private sector leaders and chaired by venture capitalist and entrepreneur Russell Siegelman.

According to Gornitzka, it’s not just about creating a more nimble mechanism outside the bureaucracy of donor agencies, but about a realization that perhaps others are better suited to identify and support innovators.

“The skill set that it takes to really test ideas. Are they ready? Are they marketable? Are they bankable? It’s not necessarily the knowledge that we have in-house,” she explained.

The $200 million announced is part of a five-year partnership, and the fund is open for business and seeking applicants, noted USAID Administrator Rajiv Shah.

“We now believe that by joining hands with so many others and really upgrading the capabilities of our community to support innovative new ventures we will be able to use this $200 milion more effectively and creatively to inspire a whole generation of entrepreneurs to do more together,” Shah said during the launch.

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About the author

  • Adva Saldinger

    Adva Saldinger is a Senior Reporter at Devex, where she covers the intersection of business and international development, as well as U.S. foreign aid policy. From partnerships to trade and social entrepreneurship to impact investing, Adva explores the role the private sector and private capital play in development. A journalist with more than 10 years of experience, she has worked at several newspapers in the U.S. and lived in both Ghana and South Africa.