Harvard Business School » Social Enterprise » Blog » Funding exceptional social enterprises starts with challenging your pipeline
Impact Insights

Funding exceptional social enterprises starts with challenging your pipeline

By: Christy Chin & Elizabeth Washburn 19 Apr 2018

Editor’s Note: The below post is part of our Alumni for Impact series, which features alumni who are making a difference in the social sector, specifically in K-12 education, impact investing, nonprofit supportive services and social entrepreneurship. Christy Chin (MBA 1998) is a Managing Partner, and Elizabeth Washburn (MBA 2014) is a Principal at the Draper Richards Kaplan Foundation, which funds early stage social enterprises. They share their thoughts below on how they’ve systematically improved their pipeline of applications, and how that has a broader effect on the social sector.

At DRK, our work is guided by a singular belief: that finding, funding and supporting exceptional social entrepreneurs and the organizations they start is the foundation for creating lasting impact for our world and its most vulnerable populations. Since 2002, we have invested in more than 130 organizations, including Kiva.org, Room to Read, One Acre Fund, Living Goods, Last Mile Health, Crisis Text Line, and EducationSuperHighway; and newly named 2018 Skoll Award winners, myAgro and Global Health Corps, to name just a few.

But recently, we’ve been reflecting on our approach to finding exceptional social entrepreneurs – and we’ve learned that we must start by asking hard questions about our pipeline: Are we really seeing the full set of potential applicants? Are we accessible and approachable to the most compelling applicants, many of whom get started outside of the usual geographies and may not have access to existing ecosystems? And importantly, how can we answer these questions if we don’t know who we are missing? 

In today’s world, answering these questions is critical. Cheryl Dorsey, the CEO of Echoing Green, posited in a recent SSIR piece that many of the best emerging leaders by definition come from places that too many funders miss. These social entrepreneurs have lived the problems they are solving, and have the authenticity to create movements and drive community action. At DRK, we asked ourselves: How can we be confident that our pipeline reflects these leaders, and that our selection process is welcoming and valuable to them?

This past year, we have pushed ourselves to look beyond the success of our past investments and look at how robust our pipeline is. We have created systems to track, analyze, and reflect on our pipeline, enabling us to better understand the challenges that prevent some social entrepreneurs from getting to us. We now look regularly at who is reaching us – and by inference, who is not. We’ve simplified our open application form, while making sure to capture metrics that reveal our pipeline’s diversity, including demographics, geography, and issue area; and we’ve sought to hear from applicants about their experience working with us. 

What have we learned so far? We have seen greater breadth of issue areas and geographies in our pipeline, likely from outreach in areas such as food, environment, and criminal and social justice; and geographic outreach in Africa and India. We saw that 40% of organizations in our pipeline were women-led. 30% of US applicants were first or second-generation immigrants, and about the same percentage were first-generation college graduates. Nearly 25% were African Americans. 

We also saw gaps, most notably that we had little exposure to Latino social entrepreneurs, and that we still needed to do more to drive gender and racial balance. Too much of our pipeline was still coming from the usual actors and places, particularly US coastal cities; and too many of our international organizations, especially in Africa, were led by foreigners rather than locals. The data made it clear that we must work harder to meet Cheryl Dorsey’s challenge. 

So, what have we done to get started? 

We’ve embedded this mindset in our entire investment team by discussing our pipeline data at least quarterly. Requiring that all deals start with our application form, no exceptions, has greatly improved our data quality. We’ve piloted a nominating process, most recently in patient outcomes, to build a wider network of referral partners. We’re resourcing efforts to reach communities that have not been represented enough in our pipeline by attending convenings that are new to us, and by leveraging new partners on the ground. 

Equally important, we’ve sought to better understand those entrepreneurs who have reached us, but have not ultimately been funded. Beyond analyzing demographic data, we’ve also created a short anonymous survey that we send to applicants we’ve had to decline. It has averaged a 40% response rate, which quickly showed us that social entrepreneurs have so much to share with funders. We receive immensely helpful qualitative feedback on whom we might be missing and how we might be more accessible, transparent, and entrepreneur-friendly. 

One early lesson was clear. Many of our declines were from organizations that were too early, even for us. They were in the ideation, pre-pilot stage. Now instead of a quick “no” we instead signal “not yet” and do our best to explain why. We believe this is an important distinction both internally and externally. Based on other feedback, we have made our website clearer and have made our application more flexible to different styles (e.g., written summary, 2-pager, pitch deck, etc.), in order to lessen the burden on applicants. 

Over time, we hope that these efforts will help drive greater diversity in our pipeline and ultimately in our portfolio. But we recognize that this work is never done. Now that we’ve learned how to challenge our pipeline, we’re only going to continue.