#3 All That Glisters Is Not Gold
Why novelty is overrated.
Read the application form for any early stage funder of social enterprises and you’re bound to find a question like the following: “How is your approach unique?” “Explain how your work is innovative.” “Describe how this idea is new or different from current approaches.” The message to budding social entrepreneurs from the funders who will decide their fate is clear: if it’s not new, we’re not interested.
When we were starting Rising and looking for seed funding, I used to dread getting these questions. Building on promising approaches that had been tried elsewhere was fundamental to what we were setting out to do. In so far as we had an edge, we saw it as being about combining these approaches in new ways (and in new places), about iterating and learning quickly, and about building an effective and resilient organization. Some of this was a comms problem, and if we’d known people like Might Ally back then maybe I could have found a way to communicate all that more pithily, and maybe we would have got more of a hearing. In any event, our success rate with these funders was approximately 0%. We found partners willing to bet on us anyway, but for a long time I felt like we had just got lucky.
But ten years on, I feel differently. I do think we got lucky, but I don’t think the problem was that we flunked the originality test; I think the test itself is flawed. Novelty is overrated.
Think about the binding constraints to reducing poverty, ending hunger, improving dismal learning outcomes, [insert your preferred cause here]. In these and countless other cases, the problem is not that no one in the world has thought of a technically feasible solution but that the overall operating environment prevents those solutions from being widely adopted. There’s always a gap between vision and execution — between having the idea and making it work — but in less developed countries that gap is huge. Indeed, that is a fundamental part of what it means to be a less developed country. As Professor Mushtaq Khan of SOAS puts it:
If you ask me what is development, what is the main thing that distinguishes less-developed from more-developed countries, I think it’s something that most people don’t normally think about. It’s the distribution of organizational capabilities. Because whatever it is that a society produces — and I’m using ‘producing’ in the broader sense, it could be culture, it could be art, it could be services, it could be food — it requires organization.
This has nothing much to do with what you learn in business school. It is to do with how you organize a whole team of people to operate seamlessly as an organic whole. And it sounds to us to be rather obvious, but this is an incredibly difficult thing to achieve.
This really, really resonates with me. There are just a million things that are harder for businesses and organizations in Sierra Leone or Liberia or Ghana to do than would be the case in a more advanced economy, and many of them have nothing to do with obvious technical barriers like skills gaps or power or connectivity (though those make things hard too).
Let me give you a boring example: employment references. If you are applying for a job as a middle manager in, say, the UK, it would be surprising for a prospective employer not to ask for employment references, and employers usually follow them up. Because of this, TORC — threat of reference check — has a subtle but important disciplining effect on employee performance. Being a jerk, stealing, taking another job without giving notice and countless other undesirable behaviours are all made at least slightly less likely by the fact that a future employer could find out about them and decide not to hire you. By contrast, I can count on the fingers of one hand the number of times that we’ve been asked by a prospective future employer if they should have any concerns about hiring someone who has previously worked for us. The absence of a culture of reference checks is just one of innumerable micro-frictions making organizational life more difficult.
Having a good idea is great, but getting things done in an environment where it’s difficult to get things done is ultimately what drives impact. That capability is what we should be trying to discern when we try to work out whether an entrepreneur is worth backing.
This isn’t a manifesto for a new Luddism. At Rising Academies, for example, we’re really excited about the transformative potential of new technologies like generative AI. But the way you really harness the power of these innovations is through organization. In the case of Rori, our AI-powered, WhatsApp-based math tutor, that’s meant combining the power of LLMs with what we know about pedagogy, both from the research literature and from 10 years’ applied effort to improve learning outcomes with thousands of teachers across more than 900 schools. It’s meant understanding existing social relationships, and especially the critical importance of adults (both parents at home and educators in schools) in supporting and supervising children’s learning. It’s meant deploying Rori in our own schools and unleashing the potential of our own students as super-users, giving us mountains of data and insights to guide the product development process. All of that requires organization.
What would it look like for early stage funders to take the problem of organization more seriously?
First, it would mean properly weighting track record and the ability to get things done. That’s likely to mean putting more emphasis on local knowledge, networks and experience — and frankly, just experience full stop. One recent study of 200 first time social entrepreneurs found that on average they had just 8 years of total experience before starting their organization, fully half to two-thirds less than their equivalents in the private sector.
There’s an opportunity for better research here on which characteristics of social venture founders and teams seem to matter and which don’t. Back in 2014, one of the (many) early stage funders that rejected us also enrolled us in a study that a business school professor was doing to track the long-term growth and impact of the organizations they rejected for funding, not just the ones they picked. It was a great idea but the study seemed to die a death after a year or two, and as far as I know never saw the light of day.
Second, it would mean recalibrating how we value ideas. When it advises on the scalability of potential solutions, the Mulago Foundation — to my mind, the best in the business when it comes to this stuff — asks organizations to consider whether they are big enough, cheap enough and simple enough. That last one is key. Other things being equal, we should prefer simpler ideas to more complicated ones (a soccer ball that generates electricity!) and ideas that are closer to what existing systems of public service provision can do to ideas predicated on radically changing what the system does, or worse ignoring it altogether (give every child a laptop!).
Third, rather than dismissing proven solutions as unoriginal, funders should be actively investing in social franchising, encouraging replications and adaptations of ideas that have maybe worked in one context but not tried in another. VCs always say they want to fund category-defining businesses, but they back plenty of successful copycats too; no reason social venture funders can’t do the same.
Finally, because accurately inferring someone’s organizational chops isn’t easy when they are just starting out, early stage funders should be willing to put more chips on the table. Just as the data suggests that private sector venture capitalists would be better off funding every credible deal they see rather than trying to pick winners, funders should be more open to experimenting with fellowship programs, accelerators, lotteries, challenge prizes, fast grants and other mechanisms that give them exposure to more teams more quickly without spending more money.
The reflexive embrace of novelty as a cardinal virtue has important real world implications for what (and who) gets funded. At its worst, it makes early stage funders vulnerable to what’s been elegantly described as ‘the reductive seduction of other people’s problems’. The potential to build an organization that will actually work and endure in its intended context might be harder to judge than the snappiness of an idea, but it’s a lot more important in the long-run. Funding entrepreneurs based on that potential? Now that really would be a novel idea.
