Launching a new platform in the ecosystem is challenging in many of the same ways as starting a new business.
On the one hand, RISE has benefitted greatly from seed capital and additional funding from USAID, along with USAID’s network and reputation in the market. Moreover, RISE has benefitted from Swisscontact’s experience in SME development and TA provision and reputation, along with in-kind resources to supplement the budget. On the other hand, RISE is not a typical development project. It does not dole out free TA. It offers a service that requires down payment and repayment; it seeks to incubate and iterate a blended model that can eventually scale and sustain beyond the life of the project. Like a start-up, RISE needs to bootstrap an ambitious vision with a lean team, prove the concept, and then start pitching that concept to new investors (other donors) who can support growth and sustainability. But unlike a private start-up, RISE faces additional administrative and operational challenges as it is currently a development project managed by an international NGO. For example, Swisscontact typically does not receive money from clients and had to develop administrative workarounds to do so. Additionally, working at a regional scale necessitates repayment by companies from multiple countries with differing tax and legal considerations. Finally, a four-year project is a small window to launch, prove, and scale a model, especially one where the repayment model requires several years between service delivery and full repayment. RISE will need to secure additional funding to extend the project and the runway for proving and refining the model.
Bucking market trends is challenging. The original design of the RISE Platform focused on post-investment TA that required a down payment from entrepreneurs, full repayment of TA value, and an interest rate or fee that sat below market rates. This seemed reasonable as the overall cost of the TA would still be less than if an entrepreneur borrowed from a bank or MFI and the repayment timeline would coincide with business growth and cash flow improvement. However, there are several other forces at work in the market: entrepreneurs are accustomed to accelerator/incubator models and/or development support projects where they do not have to “pay to play”; some larger, more established impact investors have separate, grant-funded TA instruments that provide support to entrepreneurs for free or at a deep discount (50%-75% subsidy); and some funds-of-funds offer grant-based TA services as part of their investments in impact investors. In such an environment, many stakeholders have told the team that our expectations are logical, but out of sync with market trends. Additionally, the team has placed importance on a down payment as it demonstrates of ownership from the SGB. But other stakeholders have counterargued that (1) the obligation to repay might be enough, (2) that a revenue sharing model might be more appropriate, or (3) that something akin to an equity share in the company might be more appropriate, especially at the start-up, early, and early-growth stages of enterprise development.
It takes a considerable amount of time to secure investment. Based on the RISE experience, it can take a lot of time and consideration for people with significant capital to measure options and risks and to make final investment decisions. It can take a lot of time for the right investors and the right entrepreneurs to meet, negotiate, and land deals. The pathway is neither short nor linear. This is also true when it comes to establishing good partnerships with the right investor, consultant, and donor partners. Projects such as RISE should work aggressively yet be conservative with timeline estimates and expect delays. One way to manage this risk would be to allocate time and budget to contingency activities that contribute to the goal of the project on shorter time horizons.