What are the greatest challenges that young businesses face?
Many might consider “getting funding” and “sales and marketing” to be most pressing of all.
However, a new report by Rippleworks confirms what we at Accion Venture Lab regularly encounter as we invest and support early-stage financial inclusion companies across the world: finding and keeping good talent surfaces as the most critical challenge that early-stage companies face, particularly in emerging markets.
The Human Capital Crisis
Fittingly, Rippleworks released “The Human Capital Crisis: How Social Enterprises Can Find The Talent to Scale” during the 7th annual Global Entrepreneurship Summit (GES) in Silicon Valley. Built upon a global survey and a series of in-depth interviews of over 600 social enterprises and 47 impact investors and entrepreneurs, the report highlights that more than a quarter of early-stage entrepreneurs considered accessing talent to be very or extremely challenging. This does not get any easier as the business grows; almost half of later-stage entrepreneurs indicated similar problems with human capital. Recognizing the importance of the issue, Venture Lab contributed to the development of the report and shared the insights and experiences from our work with our portfolio companies.
Having the right talent is a key determinant for an early-stage company’s success in developing and scaling its business. The challenges around recruiting, developing, and retaining strong talent are extremely salient, for entrepreneurs and their businesses. We see this as we sit in board meetings with our portfolio companies and provide strategic advice and operational support for our companies, as well as in our conversations with other startup CEOs in the fintech for inclusion space.
Early stage startups face a number of particular challenges in acquiring and developing talent:
- Baseline lack of talent in market: There are huge issues of talent availability at all levels in many markets. Moreover, regionally, there is often a concentration of talent in certain industries and cities. In particular, many emerging markets face a lack of experienced C-level and tech talent.
- Internal organizational limitations: Early-stage companies often lack a formal HR structure and standard HR processes and guidelines. This means that they don’t always have the resources to provide career advancement opportunities, including training and skill enhancement opportunities.
- Competing with established, large, brand-name companies: Difficulty to attract key talent as established companies tend to offer more attractive compensation, better job stability, and higher prestige. A young startup without an established brand can often struggle to attract talent.
Venture Lab Resources
The importance of these issues drove Venture Lab to provide support that could help our companies navigate these challenges – for example, through direct support such as advising companies on developing their organizational structure and hiring plans, facilitating connections with local recruiters, and posting portfolio companies’ vacancies on our website and newsletter as well as on social media. We also developed a set of open resources that we hope can benefit not only our portfolio companies, but also other seed-stage startups, particularly those in financial inclusion. These resources provide a practical starting point to address some of the challenges the Rippleworks report surfaced.
Our human capital resources include:
- Hiring Manager Guide: Helps hiring managers through the process of defining a role, creating a job description, screening and interviewing candidates, and conducting reference checks for hires of any level.
- Job Description Bank: Provides sample job descriptions for 15 key roles at early-stage financial inclusion startups and highlights best practices across the postings.
- Startup Employee Stock Options Plans (ESOPs): Overview and Best Practices and Model: Provides information and examples around employees’ options plans, how much equity to offer, creating terms, long-term strategies, as well as an excel model to calculate ESOP allocation as presented in the best practices document.
While we are making a keen effort to help our portfolio companies tackle these human capital challenges, we recognize that the path remains difficult. There is a multitude of high-potential early-stage companies in need of strong talent. In emerging markets where the quality of education is still poor or where the entrepreneurship ecosystem is nascent, the problems are further accentuated.
We greatly commend Rippleworks’s thoughtful initiative in this space, and we were honored to be able to contribute. We will continue to make our resources open to all companies and share the lessons from our portfolio.
For aspiring entrepreneurs and individuals interested in exploring working in the startup space, there’s an abundance of lists or advice on why you should take the plunge. As impact investors who work closely with our entrepreneurs, we can testify to how deeply inspired we have been by the intelligence, drive, and passion of the talent currently working in the space. Check out open roles in our portfolio companies. We look forward to seeing and working with you in this space.