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Investing Early: Our roadmap for transforming ideas into impact

Posted By Mitch Millar, Innovation Edge, Monday, February 10, 2020
Updated: Monday, February 10, 2020

At Innovation Edge (IE) we invest early.

This is doubly true. For one, we invest in ideas that aim to transform the early life experiences of children, particularly those living in poverty. Furthermore, we frequently invest very early in the lifecycle of an innovation, sometimes as early as ideation.

We find ourselves at the intersection of early childhood development (ECD), social innovation and, increasingly, impact investing.

In this context, we are trying to encourage social entrepreneurs to consider the early years as a viable market opportunity, shift the mindsets of traditional ECD non-profits when it comes to thinking about scale and sustainability, stimulate the development of innovative ideas and appeal to an expanded pool of funding (beyond grant funders). Working at this nascent intersection in South Africa, we know the importance of investing early.

That being said, investing early does not mean we don’t think about the long term. We only invest in ideas with the potential to scale sustainably with consistent social impact. Upfront considerations around scale, sustainability and impact are made when we screen incoming applications and as we continue to assess the viability of an investment as it progresses through our pipeline.

We invest in for-profit and not-for-profit ventures in the form of products, services, platforms or tools.

Our pathways to scale and sustainability include building profitable or revenue-generating businesses, achieving platform integration (e.g. is embedded in the national footprint of retailers), enhancing government systems and driving change through intelligent, impactful insights. 

With all of the above in mind, and through our 5 years of successes and failures, we developed our Venture Progression Map (VPM). This was done in consultation with Harvard’s Center on the Developing Child. Their insights from building their Frontiers of Innovation portfolio was invaluable. 

The VPM is a tool for taking ventures from ideation to scale. A key element of our approach is how we have disaggregated the lifecycle of a venture. 

We have 7 progression stages:

 

As ventures move from ideation to scale, we ask questions around 10 progression categories:

  1. Increments of evidence
  2. Demand
  3. Value proposition
  4. Scale quantified
  5. Governance, legal and compliance
  6. People (including aspects of leadership)
  7. Sustainable resourcing
  8. Internal systems, tools and processes
  9. Ecosystem readiness
  10. Marketing and communications

These categories stem from a combination of literature and experience. These categories are not always mutually exclusive; they often intersect, but distinguishing between them is helpful as they identify key aspects for consideration as we move towards scale. 

Lastly, the journey is displayed as linear, but in reality that is not always the case. Through learnings and insights, we may need to go back to a ‘completed’ stage or rethink our conclusions about a category. This would be necessary if testing leads to challenging a previous assumption or if we test different pathways to scale and have to rethink the implications for sustainability etc.

 

You can access the full VPM here, and below are 7 insights for very early stage investors/funders working to create sustainable, scalable impact.

 

Keep it lean and agile

At IE we adopt a lean, iterative approach to the development of ideas. We encourage continuous reflection on key assumptions and aim to get investees ‘out of the building’ as quickly as possible to test with stakeholders. You’ll notice phrases like ‘based on testing’ at every stage of the VPM. 

Users, customers, not beneficiaries

The ECD sector is dominated by non-government organizations (NGOs) and development discourse. This means a language of ‘beneficiaries’ or ‘recipients’. At IE we want investees to think about users and customers instead. This encourages thinking about demand, value proposition and the market. 

Theories of change and scale

As with many a map, you can reach a destination via different routes. Sometimes the planned route is not the one you take in the end, but having a planned route is an essential starting point for the journey. By the end of our feasibility stage, we would expect a theory of change (TOC) and a theory of scale (T2S) to guide what assumptions are tested. 

Vertical alignment is important

In the innovation space, the idea of ‘leapfrogging’ is attractive. What we may find is that sometimes a venture is in stage 1 or 2 of our VPM overall, but is in stage 4, 5 or even 6 in some categories like ecosystem readiness (e.g. the government wants your solution) or sustainable resourcing (e.g. there’s a funder/investor buying into what you’re selling) or increments of evidence (e.g. your idea works and brings about positive change). 

While exciting, a sustainable, scalable and impactful venture requires all the categories to be aligned. Further down the line that alignment is not always possible if it is not managed incrementally e.g. don’t get too far down the road with an idea that works, but that doesn’t have the team in place to manage it at scale or the demand from customers or users.

That being said, striking the balance between openness to transformational or radical innovation and adopting a more linear process for incremental innovation is necessary. Judgement is required as to when a stage or category in the VPM can be leaped over by a transformational innovation.

POC is not one step

Our VPM breaks the POC process into 3 stages. This helps us to manage our expectations of an investee more realistically. This 3-stage POC is also in line with a more agile development process that encourages testing a defined set of assumptions, learning, iterating and then testing another set. It also helps in identifying more accurately where the barriers are to success. 

Don’t try to count impact too early

While we would love to tally the numbers reached across our portfolio and frame that number as ‘impact’, we know that this is not meaningful. We are also cautious about conflating breadth and depth of impact. 

This is because we know the pitfalls of wanting to see impact too early, in the VPM (see increments of evidence), we only begin expecting impact metrics at the final POC stage.

Conceptualise a ‘win’ differently

We’d all like to back an ‘impact unicorn’. But, in order to be most catalytic, we know that we need to allow the potential unicorns out of our stables. Part of the VPM (see sustainable resourcing) is about anticipating where additional funding or follow-on funding can come from, and working with investees to access this. 

Being able to de-risk a venture for a future funder, feed into another investor’s pipeline or make a venture appealing to an impact investor is considered a win. 


As with the brain science of early childhood, we know the importance of laying the right foundations. We’ve learnt that success at scale for a venture requires these building blocks and that a solid foundation is only possible if all the blocks are in place.

As very early-stage investors, we also know that taking risks is part of our mandate and part of our value add to the ecosystem, so our VPM should not be used as a set of non-negotiables, but a tool for reflection.

For more information about Innovation Edge and why investing early matters take a look here, you can also access our diverse portfolio and share your innovative ideas with us. 

 

 

Tags:  Africa  ANDE Members  East Africa  entrepreneurship  impact investing  inclusive innovation  innovation  social  Social entrepreneurship  social impact 

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