Bridging the “Pioneer Gap”: The Role of Accelerators in Launching High-Impact Enterprises

Despite our current age of unprecedented global wealth, billions of people worldwide still live in poverty. Over the past decade, however, governments, the nonprofit sector, and the business world have explored the ability of small and growing businesses (SGBs) to reduce poverty, particularly in emerging markets. The promise of finding market-based solutions to social problems has generated a good deal of excitement about impact investing—an investment strategy that seeks social/environmental returns in addition to financial returns. According to a 2013 study by J. P. Morgan and the Global Impact Investing Network (GIIN), a total of $17 billion is expected to be deployed into socially beneficial sectors in 2012-2013.¹ However, this capital is not yet reaching many of the innovative small and growing businesses that can help to alleviate poverty through the jobs they create and the products and services they provide. While social enterprises continue to emerge—Village Capital alone has seen over 5,000 applications from impact-focused entrepreneurs worldwide over the last three years—many innovative companies in their early stages have had difficulty getting off the ground. They are still not able to access and take advantage this new flow of capital, or the other types of support and resources they need to succeed.

A 2012 report from Monitor-Deloitte and the Acumen Fund highlights this paradox: The Pioneer Gap: While there are thousands of early-stage innovators seeking to launch companies that can drive social change worldwide, very few are able to build the teams, find the customer base, or raise the investment necessary to scale.² The so-called pioneer gap specifically refers to the burden shouldered by enterprises that are pioneering new business models for social change. Monitor and Acumen identify four stages that these firms typically go through, from the blueprint stage to validation, preparation, and, finally, scale. The pioneer gap occurs in the early stages of an enterprise’s growth, when it is not yet considered investable by many impact investors.

The pioneer gap hypothesis is supported by additional research on the social impact sector. In an industry survey conducted by Village Capital in 2012, of more than 300 self-described impact investment funds, fewer than 10 invested, at less than $250,000 per company.³ Additionally, a Monitor study of African impact investors found that only 6 of 84 invested in companies still in the early stages.⁴

According to a 2013 GIIN/J. P. Morgan report, impact investors cite a “lack of appropriate capital across the spectrum” and a “lack of investable enterprises” as the top two barriers to deploying more impact investment, which suggests that the bottleneck of (a) not enough quality companies in the early stage and (b) not enough effective support to produce later stage investable companies is thwarting the growth of this sector.⁵

The Role of Accelerators

Over the past several years, actors in the impact investing sector have developed a growing recognition that early stage support—specifically in the form of business incubators and accelerators—is a key intervention for addressing the pioneer gap. Business incubators and accelerators support early stage entrepreneurs by providing them with (a) business development support (e.g., consulting, technology assistance); (b) infrastructure support (e.g., access to office space, shared backoffice services); (c) network support (e.g., access to potential customers, investors, mentors); and (d) financial support (in the form of grants/investments). This study surveys 52 impact-focused accelerators worldwide in order to understand their characteristics, operations, and performance more fully.⁶

This research is particularly timely, as the number of accelerators has grown significantly over the past five years—in fact, 73 percent of accelerators surveyed are fewer than five years old. While the role accelerators play in entrepreneurship has been studied to some extent (we review the existing literature in the next section), existing studies are largely limited to those focused on technology companies in developed markets—that is, the U.S. and Europe. There is little research on accelerator activity in emerging markets and...