Investment fund management
Historically government-led early stage investment funds and entrepreneur training programs, incubators and accelerators have rarely or never met their promise.
“For every successful state-funded entrepreneurship program in rich countries, there have been multiple failures wasting many billions of public dollars” The Boulevard of Broken Dreams
“There are over 7,500 business incubators around the world, and most of them fail.” Harvard Business Review, ‘The problem with Incubators’
Further, recent studies show that “there is no evidence that basic accelerator services of cash and co-working space have any effect on fundraising, scale, or survival” The effects of Business Accelerators on Performance
But there are models for early stage investing that governments can sponsor that have been shown to work. S4S pioneered the integrated training and funding model called “Readiness Funding.” Readiness funding is based on three key pieces of evidence:
If training and funding are carefully coordinated, training outcomes are improved by funding and funding outcomes are improved by training.
Funding should only be triggered by readiness and readiness is determined by ongoing training and constant monitoring.
An integrated approach requires a formal methodology that creates a common set of metrics that can be shared between the trainers, the monitors and the investors.
Readiness Funding is also based on designing financial instruments that are bespoke for the stage, sector and locale of the business. Such financial instruments include: pre-start micro-grants, grants and convertible startup loans, Angel side-car funds using SAFE and traditional equity investment, or patient capital investment for scalable social enterprises.
S4S was commissioned by the UK government to launch a startup loan program to help aspiring young entrepreneurs start and grow their businesses. The initial program, managed by S4S combined small loans ranging from $1,500 USD to $40,000 USD (in GBP) with training and one year’s mentorship to early stages businesses across all sectors. The loans were tied to the progress of the business, and entrepreneurs were provided ongoing training and monitoring. Over a three year period S4S made over $20 Million USD of loans to over 1,500 startups.
S4S developed and delivered the largest entrepreneurship training program globally in partnership with the Nigerian Governments and DFID. The program educated, mentored and invested in 1,200 startups and young companies for a year. S4S designed and managed a Readiness Fund that managed the distribution of $65 Million USD in the form of grants to each of the 1,250 based on milestones supervised by the mentor staff.