The SGB Sector in 2018

Capacity Development

Top Four Types of Capacity Development Services ANDE Members Provide

As in previous years, the most common services provided by members are classroom training, consulting services, peer networking, and one-on-one mentorship. However, the overall proportion of members offering classroom training and one-on-one mentorship increased from 2017 to 2018 (from 42 to 49 percent, and from 40 to 48 percent, respectively) while the proportion of members offering online training decreased from 23 to 17 percent. It is worth noting that, as in previous years, almost no members offer classroom training alone, with 98 percent of those that provide this type of support bundling it with other services.

Network support has shown particular promise as a means of building capacity for SGBs, with a recent study finding that business networks can drive median SGB revenue growth of over 20 percent.[4] This aligns with previous research that has consistently found peer networking and engagement to be an effective driver of growth, as reflected in a 2018 review of the literature on what works in supporting SGBs.[5]

Capacity development providers spent an average of US $4,222 per SGB, which is higher than previous years.

GALI data finds accelerators are a good investment

In 2018, the Global Accelerator Learning Initiative (GALI), a partnership between ANDE and Emory University, continued to build the evidence base on the landscape and effectiveness of accelerators. Over the course of the year, GALI published a major report on program design choices, a guide to measuring the value for money of acceleration, and regional reports on Nigeria, India, Mexico, and sub-Saharan Africa, while GALI’s academic partners published a book on the findings from the past five years of data collection. GALI’s research has concluded that in the aggregate, accelerators are a cost-effective way to drive increased revenue and investment in SGBs. Analysis of program performance data on over 40 accelerator programs showed that one year after applying, accelerated ventures reported higher levels of new investment and revenue than their rejected counterparts and that one dollar in program costs leads to an additional $1.70 in short-term funding for participating entrepreneurs. Programs that emphasize access to peers, guarantee investment, and focus on women and minority applicants were linked to superior venture performance.[6]

Aside from confirming that accelerators do in fact accelerate, GALI research has also shed light on some long-held beliefs; the presence or absence of several program elements that are anecdotally considered important, such as mentorship and a structured program curriculum, did not (at least in the aggregate) differentiate higher and lower performing programs. The findings also provide a more nuanced understanding of the overall impact of acceleration; for example, the overall positive benefits of accelerators are largely driven by a relatively small proportion of ventures that show extraordinary growth, rather than the benefits being distributed more evenly among participating ventures. And not all entrepreneurs are equally likely to access these benefits: consistent with other research on investment, GALI found that all-female teams report less than one-third of the investment of all-male teams upon application to an accelerator, and these gaps do not seem to be closed by participation in an accelerator. Finally, entrepreneurs in emerging markets benefit more in the form of revenue growth, and less in investment growth.[7]

Corporate Engagement

ANDE members are finding dynamic ways to engage corporations in the SGB sector

Which division within a corporation did you engage with in 2018?

The nature of engagement suggests that corporates and SGB intermediaries are identifying opportunities to create ‘shared value’[8] rather than partnering through traditional philanthropic support. Corporate engagement with a commercial focus far exceeded corporate engagement from a philanthropic lens, as members most commonly engage with corporates through a core business unit. The top two focus areas for the engagement were strengthening distribution networks in new markets and facilitating the sourcing of goods and materials (see next slide). Over twice as many members worked with corporates on either distribution or supply chains than did so to execute a philanthropic grant.

Corporate Engagement

ANDE members are finding dynamic ways to engage corporations in the SGB sector

What was the focus of your engagement(s)?

ANDE members continue to innovate in their work with corporates. Members have engaged corporates in co-creating corporate accelerator programs and joint ventures, co-investing in SGBs, mobilizing capital for the SGB sector, engaging in new product development, partnering for a new business model, and providing pro-bono legal assistance or trainings for SGBs. The trend towards partnerships between SGBs and corporates is particularly strong in the fintech space. GSMA found that in 2018, “mobile operators support or run over 14 percent of the active tech hubs identified in Africa”[9] while in Nigeria, fintech startups are increasingly developing lucrative partnerships with large global payments multinationals.[10]