When NGO grants become a stress-less seed funding channel
Prior to early stage funding rounds, or even being structured enough for VC funding, startups could go through an intermediary funding discipline to get extra cash into their ventures: Grants, which put less stress on the shoulders of these debuting concepts, thanks to more tolerant and permissive granting conditions.
Though difficult to find, these grants would be a good way to kick-off a startup’s funding path. NGOs and large foundations are a good door to knock as they could offer supportive funding as part of their CSR or missions. Grants are usually available based on the business themes, as well as on demographics.
Supporting children-driven initiatives
The UNICEF Innovation Fund is an example. This over $14 million fund allows the UNICEF to quickly assess, invest in, and grow open-source solutions that can improve children’s lives. The fund also offers tech support to companies that are using technology in innovative ways to improve the world. The Fund has made so far 51 investments in 28 countries with an eye to invest in 30 additional startups in 2018.
Last December, the UNICEF Innovation Fund announced six new startup investments, two out of which were from the Middle East: Palestine-based RedCrow which provides a platform for people to point out dangerous incidents and places - visualized through maps using a mobile application and a website, and Turkey-based Ideasis, a developing VR technology to resolve phobias and social adaptation problems of young people and children. Investment in RedCrow was $99,000 and that in Ideasis was $96,000.
“The fund’s strategy involved investing in frontier technologies providing innovative solutions to challenges faced by children with disabilities. VR technology company Ideasis aims to resolve phobias and social adaptation problems of young people and children. The Turkey-based firm hopes its platform will contribute to psychosocial interventions used in refugee camps to rehabilitate children from conflict and crisis areas,” said Sunita Grote, innovation fund manager at UNICEF Innovation Fund. She added: “In the State of Palestine, RedCrow provides a platform for people to point out dangerous incidents and places - visualized through maps using a mobile application and a website.
These startups made it through our selection process because each of them is working on something new in the frontier tech areas we are interested in. They also had a prototype with promising results, and they had a team capable of developing and scaling these solutions.”
UNICEF’s fund is currently building partnerships across the MENA region to encourage startups to apply for the fund, and “we are hoping to invest in 30 more startups in 2018. We expect startups from the MENA region to apply before Feb 28, 2018,” she said. The fund is more interested in the tech area than the industry. Grote explained that for instance, they invest in Artificial Intelligence startups from different sectors, as long as their AI component has the potential to impact the lives of the most vulnerable children, “because our venture fund is not seeking financial return, but to support, connect and scale innovative solutions to the world's most complicated problems using frontier open source technology.” She explained that even if a startup is not currently targeting children, they [will] still encourage them to apply and guide them on how to use their technology to solve some of the complicated problems UNICEF works on around the world. The fund invests in startups from any UNICEF Program Country, and is currently growing its pool of funds to be able to support as many startups from the whole MENA region.
The program does not provide follow-on funding but can facilitate networks and access to other investors and funders that could be interested in funding these startups. “UNICEF has strong connections to other development agencies and funds, as well as private investors and corporate partners can provide support for scale,” she added.
More regional initiatives
Also last December, MetLife Foundation, a $200 million grantmaking foundation part of insurance company MetLife, and Village Capital, which finds, trains, and invests in entrepreneurs solving real-world problems, ran the Middle East Financial Health Competition, which included a competition for twelve Middle East-based startups working to improve financial inclusion for low-to-middle income populations. At the competition’s conclusion, three startups were selected to receive grants from MetLife Foundation: Bridg, which allows smartphone users to make Bluetooth payments without using the Internet, was selected for a $25,000 grant; Ennota, a financial management tool that helps SMEs increase efficiency by moving from pen-and-paper to digital, was selected for a $15,000 grant, and One Clique Systems, which streamlines employee administration for small business owners, was selected for a $10,000 grant.
“MetLife Foundation is proud to partner with Village Capital on this innovative financial health forum that identifies and accelerates early-stage entrepreneurs who are leading the way toward a more financially inclusive Middle East,” said Dennis White, president and CEO of MetLife Foundation in a press release. “Village Capital’s approach to identify and support local entrepreneurs that have a deep understanding of culturally-relevant customer needs and solutions helps advance MetLife Foundation’s overall goal to provide individuals and communities with the tools they need to achieve sustainable financial well-being,” he added.
The US Middle East Partnership initiative (MEPI) also allows startups to apply for grants. Its funding approach focuses on promoting stability and prosperity in the Middle East and North Africa by empowering partnerships between citizens, non-governmental organizations, the private sector, and government institutions.
MEPI solicits project proposals via Internet postings on grants.gov, mepi.state.gov, and regional offices. MEPI’s implementers are selected through open competitions, limited solicitations, and, occasionally, sole source awards. A panel comprised of area and subject matter experts, drawn from both inside the State Department, NGOs, and the private sector review each solicitation. MEPI also supports some projects implemented by other US Government agencies through interagency agreements. The Empowering Youth through Entrepreneurship project (EYEM) in Morocco for instance, is enabling young entrepreneurs to kick-off small ventures such as launching a sewing business or a medical clinic, with small grants of around $2,000.
On a global scale, nonprofit funds are also supporting startups. The Global Innovation Fund (GIF) is a ground breaking new $200 million nonprofit innovation fund headquartered in London. We invest in the development, rigorous testing and scaling of innovations targeted at improving the lives of the poorest people in developing countries. GIF aims to support a portfolio of innovations that collectively open up opportunities and improve lives for hundreds of millions of people across the developing world.m GIF offers grants, loans (including convertible debt), and equity investments ranging from £30,000 (US$42,000) to £10 million ($14 million) to support a range of innovations with strong potential for social impact at a large scale. The innovations GIF supports can be located in any developing country and may focus on any sector relevant to international development.
Under this fund, a $230,000 grant was given to Jordan-based Talent Beyond Boundaries (TBB) to place refugees in jobs in Morocco and/or UAE, and empower them to regain their self-reliance through employment. TBB is demonstrating the hidden potential that the refugee talent pool offers when it comes to filling global skill gaps. Although aiding refugees by helping them to find employment has been the subject of academic writing for years, TBB is the first and only organisation that is working with the private sector to establish a clear pathway. With funding from the State Department, TBB has built a Talent Catalog, which includes 7,000 records with information about refugees’ work history and skills, and has established corporate partnerships with employers in Canada and Australia.
USAID’s Development Innovation Ventures (DIV) is also an open innovation fund that sources, tests, and accelerates breakthrough ideas that address global development challenges around the world. The fund seeks interventions that could change millions of lives at a fraction of the cost. Inspired by the VC model, the fund awards grant financing to winners in three distinct stages of financing. Funding ranges from less than $100,000 up to $15 million and is based on where a project is in its development and to what extent you have previously gathered evidence of success. Out of over 160 DIV investments, four were in the Middle East.
To sum it up, NGO grants, with the pro-bono aspects they involve, could be a guilt and stress-free funding channel startups could refer to to kick-off their money hunt.