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Jan. 30

5 Lessons As We Launch Civic Startups

ayesha_khanna_headshot

Today’s post is written by Ayesha Khanna, president of the Civic Incubator, which incubates and nurtures emerging civic ventures.

Points of Light has partnered with Village Capital to launch the first national startup accelerator program focused on “civic ventures” – enterprises that inspire, equip and mobilize people to create positive change. In November 2012, our inaugural class of 10 nonprofit and for-profit civic ventures started their term in the Civic Accelerator, and they are preparing to graduate at the end of January.

It’s been a time of great learning – for the 10 teams and for the Civic Accelerator – and I would like to share the five big things we have learned so far.

1) Accelerators and investment terms are new concepts to nonprofit organizations and their Boards

  • The market is moving away from purely philanthropic grants to more outcome-based and program-related investments; however nonprofits are only slowly adjusting
  • The investor and customer mindsets are not natural ones for nonprofits; although it is seen as very beneficial following training, modeling and use
  • Many of the nonprofits had to be educated about the role of accelerators; the selected for-profits took 1-2 days to accept, whereas the nonprofits took much more time to absorb the time commitment and investment opportunity
  • For most, this investment was the first they had ever taken; the concept of earning revenue and paying back a recovering loan after two years and hitting total revenue targets was intimidating

2) Art matters as much as science when selecting teams

  • Criteria such as the entrepreneur’s growth orientation and coach-ability proved to be critical to the success of teams in the program
  • The question of stage of development and how catalytic the Accelerator can be to the venture’s trajectory ended up being as important as financial and program measures when selecting the teams
  • The intersection of the leadership and the venture both being a good fit was a challenge to find, but both are important criteria

3) Peers are exceptional evaluators and can get into the investor mindset

  • How well the leaders interacted with one another during the selection process proved to be indicative of how well they contributed to the success of their peers, a key driver of progress over the 3-month program
  • Peers can be tough on one another without creating a “blood-bath” competitive environment
  • Transparency in feedback and ranking is a must to develop trust

4) For-profit and nonprofit ventures can learn from one another and, in fact, bring important and differing strengths

  • The for-profit ventures focus on their business model, investment levels required to deliver a profit, and clarity on customer needs was helpful when applied to nonprofit models
  • The nonprofits focus on how to best leverage resources and partnerships, engage the community, and build their brand by engaging people in their mission and social media provided useful models for the for-profit ventures
  • Early stage for-profits have a tougher time raising early stage funds, but can scale much easier with a proven business model.  Nonprofits with charismatic, effective leaders can more easily raise early stage funds, but risk prematurely scaling without building a sustainable business model for the long-term that includes repeatable revenue and earned income.

5) Rigor is missing in many accelerators, which do not measure metrics beyond the valuation of exits

  • The identification of metrics, across legal structures, to measure venture progress and the program’s impact would differentiate the Civic Accelerator
  • The metrics around “what does success look like” for graduation and the long-term for civic ventures is an area where we can provide important models and learning

Applications for the Civic Accelerator’s second round of investments in 10 start-ups will be open from Feb. 11 to March 15. To learn more and apply, go to www.pointsoflight.org/civic-accelerator.

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