The question for many social entrepreneurs is not whether to work with government, but how.
Partnering with government offers enormous potential to scale a product or service across regions or even nationwide. National, regional, and local governments are critical actors in almost any ecosystem. They offer networks and infrastructure that reach citizens at economies of scale. Social enterprises can provide innovative ideas, de-risk a new approach, expand capacity for implementation, and provide training and consulting expertise.
Sounds like a win-win partnership, but we know the path can be rocky. The latest contribution from the Scaling Pathways series — a collaboration between the Skoll Foundation, United States Agency for International Development, Mercy Corps, and CASE at Duke University — distills insights and advice from leading social entrepreneurs about how and when government partnerships work well and what pitfalls to avoid. Social entrepreneurs can check out the “no-checklist checklist” for engaging in government partnerships for patterns of behavior that can set you up for success.
How can funders and investors support the impact these partnerships can deliver?
More from SOCAP 2018:
The experiences of social entrepreneurs who are scaling through government partnerships brought to life three useful guideposts for funders who aim to support those driving large-scale change through government partnerships
1. Find the right partner.
Funders, of course, know that every good opportunity won’t necessarily be a perfect fit for the type of funding and partnership they can provide. So, what can we do to attract the right partners?
First, make transparent what you have to offer and how you can provide it. Is your statement of what you fund and how you fund it public and easy to find? A sharp social entrepreneur knows what type of capital they need to drive their target impact, but can they see without talking with you what products and services you offer, eligibility criteria, how to apply, how terms are structured?
If not, then we may be inflating the cost of discovery. This cost typically pulls from a social entrepreneur’s precious unrestricted funds, which could otherwise be put to higher impact use, such as innovation research and development. What if funders internalized this as our own transaction cost — would we be more motivated toward transparency? Make it easy for the right partners to find you, and treat a quick no for a bad fit as a gift.
Secondly, we can mobilize other funders and push out of your comfort zone and into the capital gaps. Once you and your partners are aligned around goals and investment approach, chart out the remaining capital needs together and mobilize your funder network to help fill the gaps.
If your funding tools and approaches are flexible, consider stepping into an empty space in the capital stack if another funder can more easily step into yours. This may look like taking on more risk up front with a large initial grant payment to give some runway, betting on the long-term outcomes with a revenue share agreement instead of debt, or offering a 5-year term instead of rolling 1-year grants. Challenge your own norms.
2. Partner, don’t buy.
It can be tempting for a funder to think about the financial exchange as one where you “buy” target impact your recipient will deliver — such as a purchase of a service. This is a transactional relationship: customer and supplier.
A true partnership has a goal to achieve impact together. Based on resources and capacity, each party contributes toward that objective. For funders, this will include more than money.
Use your connections and influence. Advocate and amplify where helpful. Tell your professional “friends and neighbors” what great work is getting done and make room for them to join the journey as learning partners long before additional funding is needed. At the right time, urge them to consider contributing financially and nonfinancially to take that work to the next level.
Another way to inspire new partners is to allow your funding to support things such as knowledge exchange visits with government representatives from countries where the approach could expand and scale. Funders can leverage their time and networks to cultivate a community of interested parties who can contribute to the further success of the partnership.
Use your expertise and knowledge. Funders often manage portfolios of activities in different geographies, sectors, or with different models. With this comes a wealth of case studies and insights about what works and why. Proactively share these insights with your partners — they don’t know what you know.
Funders can also help create space for social entrepreneurs to dream and pull up from daily operations on the ground. Set aside time not just to review work plans and reports but also to discuss strategy and scenario planning.
Define your role and contribution beyond the funding in your grant agreements or term sheets. Can we scope our nonfinancial contributions as milestones alongside those the social entrepreneur is responsible for? Agreeing what assets you will provide beyond funding at the outset will help establish the spirit of partnership and identify where there are critical nonfunding gaps.
3. Find the middle ground.
Government engagement is a long and winding road with known unknowns and extended timelines. Progress may seem to come in fits and starts and even the best-laid plans can fail altogether — but the upside of deeper ownership and sustainability of impact makes it worth the effort.
Fund with flexibility. Engaging with government often requires extended periods of soft support from the social enterprise, extended timelines — years, not months — for initial relationship development, capacity building, implementation, and transition. Can funders commit to the long game and provide a continuum of capital with different types of funding fit for each stage of this engagement?
During the initial co-creation stage, a one- or two-year unrestricted grant allows social entrepreneurs to build the relationship, secure buy-in, and prepare the necessary agreements to begin the work to scale.
If payment for results is more your thing, how about a performance-based grant with a simple milestone, such as securing a memorandum of understanding with the target partner? Social entrepreneurs tell us that funding is more readily available for pilots and initial scale but is scarce in this earlier stage. Periods of large scale and transition are also stages where funding can be scarce. Flexibility with timelines, milestones, and tools of your funding can go a very long way toward driving the target impact.
Loosen the reins and relinquish some control. Scaling through partnership — rather than through the direct reach of an organization — comes with an inherent tension between long-term sustainability, impact, and reach.
Be prepared to navigate tension around direct attribution of results and impact. An effective social entrepreneur understands the importance that credit goes to the government partner.
Funders can better support these partnerships by valuing contribution as much as attribution. Structure your funding with an openness to iterate along the way to stay on course for the target impact.