A Series B funder gets us to A+ impact

Receiving a large grant as a growing non-profit has some similarities to a private sector start-up receiving Series B funding.

In the world of start-ups, there are multiple rounds of funding. In each successive round, investors take a calculated risk around future returns and benefit from the risk that earlier investors took.

In the first round, the funds come – usually in small amounts from people who know and trust the founders, who themselves are putting in massive amounts of unpaid labor. At this “pre-revenue” stage, the founders dedicate time to honing an idea and attracting larger investors.

The second round is the “seed round,” usually between $100,000 and $2 million, that provides capital to get off the ground. Prove a concept, build a core team, build a prototype or two, do early market tests.

The third round is “Series A,” when the start-up has demonstrated a viable business model with strong growth potential. This funding, often somewhere south of $10 million, permits an organization to expand its operations through hiring, in anticipation of business to follow. At this stage, growth often requires creating systems instead of depending solely on relationships. In many cases, this is when the leadership team grows to include a new chief executive.

The next round is “Series B,” where the investors bank on a solid, growing organization that has demonstrated that the bets pay off. At this point, the start-up knows who it is relative to others in the market and is ready to lift off to the next level. The range of funding here is broad, depending on the market segment and the product or service, but usually greater than $10 million.

If the financing from a Series B round is used well, this is often the point where a business moves into a phase of rapidly growing returns, which pay off for all the earlier investors – and potentially attract larger but more risk-averse future investors.

IDinsight has just received the equivalent of Series B funding with the grant of $12 million from MacKenzie Scott and Dan Jewett.

As a non-profit start-up, now a fully established international social impact organization, our situation is far from perfectly analogous to a venture-funded for-profit business. But the parallels are there.

IDinsight would not be in the position we are in today without the creativity, commitment, sweat, and tears of the Founding Partners and those who joined in the early days; the people who joined to strengthen rapidly evolving organizational capabilities; the generations of dynamic team members; and, truly, the funders at every stage who made a bet on IDinsight. These start-up contributions in kind and in cash created the conditions for us to be able to receive and make good use of a significant unrestricted grant.

As is the case in the world of venture investing, this new influx of money does not reduce the power of future contributions. In contrast, it means that every dollar we receive to support our work in the future, whether at the project or organizational level, is a lower risk for the funder. (The Mulago Foundation’s President, Kevin Starr, recently made a similar point.)

What have been the returns – and what will they be in the future? You know our model: They are the benefits to communities living in poverty that come when meaningful decisions made by government and NGO leaders are based on evidence and monitoring information. More social impact from every dollar, rupee, shilling, and peso. The returns also come in the form of hard-won lessons as our services are refined.

We will use these resources to invest in organizational capabilities that will permit us to serve clients even more robustly than we currently do and to make contributions to the larger field around impact measurement and decision-oriented monitoring.

As we go forward, our central question will be: “How can we deploy these resources to truly elevate our social impact to the next level for the long run?”

Answering that question will require us to be reflective, responsive, and laser-focused on impact. If there were ever a team up to that task, it’s this one.