As this dreadful year comes to a close, it’s time to look back and assess what happened. Here are six trends of note that occurred in the world of impact entrepreneurship and investing during 2020.
Social Entrepreneurs Rise to the Occasion
Impact enterprises targeting low-income and underserved communities—people most severely hurt by the pandemic—found themselves uniquely positioned to help those populations cope.
Case in point: fintech startup Propel. Its Fresh EBT app/platform helps beneficiaries check their food stamps balances using their electronic benefits transfer (EBT) card, get grocery discounts and find jobs. In mid-March, it teamed up with nonprofit GiveDirectly to pilot a program sending payments of up to $1,000 to households receiving Supplemental Nutrition Assistance Program (SNAP) benefits. A few months later, the COVID-19 Relief Fund pilot turned into Project 100, a massive cash assistance campaign, led by GiveDirectly, Propel and children’s education advocacy group Stand for Children, to provide $1,000 in cash directly to 100,000 families in need.
Accelerators Focus on Racial Inequity . . . .
In the wake of massive actions protesting the killings of George Floyd and Breonna Taylor in the spring, as well as the disproportionate impact of Covid-19 on communities of color, many social enterprise startup accelerators stepped up their programs targeting diversity and racial justice.
Founded in 2016 to help bridge the gap between underrepresented tech entrepreneurs and the resources they need, Austin-based DivInc added a more-targeted focus on racial disparities in criminal justice, healthcare, education, voting or housing in August with a program called the Social Justice Innovation Accelerator. The idea for the new program grew out of a week of conversations between founder Preston James and DivInc’s board of directors about how the organization could best address the problems laid bare by the killing of Floyd.
Another example: Cox Enterprises Social Impact Accelerator powered by Techstars moved from emphasizing startups addressing social and/or environmental challenges to those targeting racial and social justice issues. As Managing Director Barry Givens noted: “We realized that, if we took all our energy and put that behind companies solving social justice and systemic racism problems, we could contribute to real change in our country and our world.”
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And another: Echoing Green announced a $50 million Racial Equity Philanthropic Fund, which will include funding for existing Echoing Green enterprises and new startups, in addition to other activities.
. . . And Adapt to Address the Pandemic
To address the devastating economic and health impacts of Covid, lots of social enterprise accelerators also introduced pandemic-focused emergency programs and funds, while also pivoting in other ways, as well.
As you’d expect, they went all-virtual. But that required developing creative ways to take their usual curriculum and make it work online. Thus, for example, Unreasonable Group adapted its “brain trusts”, which are sessions during which entrepreneurs meet with mentors to zero in on specific problems, to a virtual format. That also allowed the accelerator to enlist far-flung advisors who might not have been able to meet in person during normal circumstances.
Another long-standing accelerator, Santa Clara University’s Miller Center for Social Entrepreneurship, developed emergency Covid programs for alumni, plus an emergency loan fund, created with impact lender Beneficial Returns, among other moves.
Impact Investors Provide Aid
Impact investors, including family offices, lenders and many others, responded to the pandemic with emergency response programs and new investments. Social impact finance pioneer Impact Investment Exchange, for example, recently announced the latest in its series of Women’s Livelihood Bonds (WLB), a $27.7 million bond targeting enterprises in Cambodia, India, Philippines and Indonesia and focused on helping women and women entrepreneurs cope with the pandemic’s impact.
CDFIs to the Rescue
The more than 1,000 community development financial institutions (CDFIs) in the U.S. turned into lifesavers for small businesses. CDFIS, which lend to small companies, plus schools, health facilities and affordable housing projects, served on the front lines of the economic crisis. (Perhaps recognizing that, the second round of the Paycheck Protection Program included $10 billion for CDFIs, significantly more than the $3.8 billion in the first iteration). For example, LISC, one of the biggest CDFIs in the country, raised a $100 million fund to help small businesses and community organizations impacted by Covid-19. Many foundations with CDFI loan portfolios also took such steps as lowering the interest rate or providing an interest rate holiday.
Entrepreneurs Madly Pivot
Impact enterprises pivoted their business models to survive the pandemic. Take mother and daughter Teresa Hodge and Laurin Leonard, who founded R3 Score in 2017 to provide a more accurate way to assess the potential riskiness of formerly incarcerated applicants for jobs, loans and the like. While initial customers were corporations, CDFIs and other business clients, they decided to switch the focus to consumers. Hodge noted: “From the moment the coronavirus hit, we recognized we could no longer rely on the goodwill of businesses. They weren’t in a place where they wanted to be more inclusive and considerate of individuals who had conviction records.” Many sustainable farmers also changed their business models to target consumers instead of the restaurants they had previously served.