Caption: Open Capital Advisors, a USAID partner through the Partnering to Accelerate Entrepreneurship (PACE) Initiative, supports high-potential businesses, investors, and scalable approaches to economic growth across Africa. Open Capital Advisors is one of more than 40 partners that the PACE Initiative works with to find and test innovative solutions to support entrepreneurs in emerging markets.
Entrepreneurs inspire us. They bring together ideas to create solutions for problems that many of us didn’t even realize were problems. And, in growing their businesses, they overcome enormous hurdles daily.
The global development community increasingly recognizes the importance of entrepreneurs as key drivers of economic growth and innovation. We have seen that supporting and investing in entrepreneurs, and the business environments in which they operate, is crucial to achieving development objectives.
Yet determining how donors should help is a challenge. Entrepreneurs everywhere require different types of support at different stages—business development services for early-stage enterprises look quite different from consulting support for medium-sized businesses. In addition, entrepreneurs in developing countries face a myriad of obstacles—from accessing appropriate finance at reasonable interest rates, to finding the right incubator or accelerator program to provide the support needed to grow.
We know there is no silver bullet or a one-size-fits-all solution that can solve all these problems. But we know that solutions do exist, and it is important that we keep trying new approaches to find the best way to help entrepreneurs succeed.
Donors like the U.S. Agency for International Development (USAID) are in a unique position to test new solutions to help entrepreneurs. USAID has the convening power to bring new and nontraditional partners to the table and the ability to mitigate risks that might turn cautious investors away. These partnerships benefit both parties—donor agencies get ideas from new actors and the private sector, while partners find opportunities for investment they may not otherwise have pursued.
USAID uses its position as a donor to encourage entrepreneurship in many different ways—from investing directly in entrepreneurs through Development Innovation Ventures and Grand Challenges, to convening policy discussions with the Aspen Network for Development Entrepreneurs and the Global Impact Investing Network.
But to address the middle of this spectrum—in between high-level policy debates and grants to individual enterprises—there is a need for an ecosystem-based approach. The Partnering to Accelerate Entrepreneurship (PACE) Initiative, a program within USAID’s U.S. Global Development Lab, works with intermediaries who are searching for new ways to help support entrepreneurs that are navigating a complicated and challenging operating environment.
By testing ways to catalyze private investment and foster entrepreneurship, PACE is addressing the challenges that entrepreneurs face by combining the innovation of a startup and the convening power of the U.S. government.
Since 2013, USAID has created seventeen partnerships through PACE that support acceleration approaches and work to blend public and private capital for small and growing businesses (SGBs). These partnerships are expected to leverage $100 million in combined public and private investments over their lifetime. In September 2016, the four newest PACE partners were announced:
- MCE Social Capital and USAID are working to help entrepreneurs access appropriate finance through MCE’s innovative loan guarantee model
- USAID is partnering with Investisseurs & Partenaires (I&P) to capitalize locally funded and managed impact investing firms in West Africa.
- With USAID’s support, Villgro is piloting its highly customized early-stage incubation support to enterprises in Kenya and Vietnam.
- Root Capital aims to promote increased impact investment by identifying ways to improve cost effectiveness and limit the need for subsidies through its research on the true cost of acceleration.
By working with partners to test new approaches for impact investing, and business acceleration and incubation, USAID is supporting conditions and tools that enable entrepreneurs to overcome obstacles and implement market-based solutions to global problems. By “crowding in” private investment into high-risk and earlier-stage market segments, USAID and our partners are creating new paths for supporting entrepreneurs.
Follow USAID’s Global Entrepreneurship Week Blog Series to learn more about these new approaches directly from our partners themselves. Throughout the week, we will be discussing the importance of entrepreneurs for development, the challenges they face, and innovative models being developed to address them.