Impact investing accelerators are a critical component of the wider impact investing ecosystem. These time-bound intensive programs aim to supportively expedite the growth of an existing social enterprise. As a result, that enterprise’s social or environmental impact can increase, and those that successfully scale contribute to the economic development of their communities.
While accelerators are often lumped together with incubators, the latter focus on turning disruptive ideas into businesses, rather than scaling existing social enterprises. Read more for a closer look at impact accelerators in the COVID-19 era and beyond.
How Do Impact Investing Accelerators Work?
Although each accelerator program is unique, they share a few common characteristics. Most accelerator programs are cohort-based and limited to a specific time frame. Early-stage social enterprises apply to be part of a cohort in what is often a rigorous application process; those selected typically receive a seed-stage investment as well as access to a network of mentors to help the business grow.
In exchange for this support, the accelerator program will take an equity stake in the company. The Global Accelerator Learning Initiative found that every dollar in accelerator program costs on average generates $1.70 in additional short-term funding for participants, whether through revenue growth, equity investments, loans, or grants.
Accelerating Crisis Relief
Impact investing accelerators vary in their benefits. Because their purpose is scale rather than broad incremental growth, they are most beneficial as one tool in an economic development toolbox.
They are uniquely positioned to meet the urgency of the COVID-19 moment. Plug and Play, which has run accelerator programs since 2006 across a range of industries and sectors, launched its COVID-19 Accelerator to scale businesses that can help address the pandemic. Participants include companies with potentially scalable technology that prevents, detects, and fights the coronavirus; helps companies adapt to the new reality; manages supply chain disruption worldwide; and innovates in retail, finance, and travel.
The Bill & Melinda Gates Foundation, Mastercard, and Wellcome have also partnered to create a $125 million COVID-19 Therapeutics Accelerator, which will work specifically to scale emerging vaccines and treatments.
Impact Accelerators Beyond COVID-19
Impact investing accelerators are not just important during pandemics, of course. For example, the Techstars Impact Accelerator has seen the 73 social enterprises that have come through its doors outperform traditional ones—particularly those with tools applicable to large corporations. One Techstars Impact participant, Kinship, was able to scale its platform for factory human rights compliance to multinational companies that monitor complex supply chains.
Accelerators can also help align local or regional opportunities with existing social enterprises. For instance, Ecuadorian accelerator IMPAQTO partnered with Google Launchpad to create a unique accelerator program for early-stage ventures from Latin America that could resonate in the Ecuadorian market.
Whether scaling solutions to urgent problems like COVID-19 or longer-term problems like banking or credit options for low-income individuals, impact investment accelerators provide concentrated energy to help turn promising companies into transformative ones.