Accion Venture Lab

Toolkits and Guides

&gt; Posted by Nate Gonzalez, Investment Officer, Accion Venture Lab

The following post was originally published on <a href="http://nextbillion.net/blogpost.aspx?blogid=3851" target="_blank">Next Billion</a>.
In this age of “big data,” technology has begun to drive strategy formation, and this shift could have big implications for traditional businesses and social enterprises alike. In a <a style="color:#028e9b" href="https://www.youtube.com/watch?v=ayI7MTLfyCk" target="_blank">thoughtful and engaging presentation</a> (below), Philip Evans, managing director and partner at Boston Consulting Group, explains why. Most traditional businesses, he says, operate in a value chain, where transaction costs are the “glue” that holds the chain together. Large corporations (such as banks) have been able to fend off competition by sufficiently reducing transaction costs through economies of scale. However, as the accessibility and flow of information has become cheaper and faster, the transaction costs traditionally associated with accessing the information needed to make key business decisions (e.g., extending a loan) have plummeted.
[youtube http://www.youtube.com/watch?v=ayI7MTLfyCk?rel=0]
Plummeting transaction costs create space for new entrants to come in and completely disrupt traditional value chains and corporate structures. In his presentation, Evans lays out the case that lies at the foundation of the investment thesis behind <a style="color:#028e9b" href="http://www.accion.org/what-we-do/investing/venture-lab" target="_blank">Accion Venture Lab</a> (where I am an investment officer): Start-ups with technology-enabled models can create scaled products and innovate much faster, smarter, and more cheaply than incumbent institutions.
Here in Nairobi, this is particularly relevant to the small- and medium-enterprise (SME) lending space. Most banks in East Africa view small businesses through a horizontal lens, the prevailing wisdom being, “All SMEs are relatively the same in terms of their risk profile, and thus we need two years of audited financials and 100-125 percent collateral backed by hard assets to issue a loan.” The result is that very few SMEs qualify for funding in this market. Based on data from a <a style="color:#028e9b" href="http://mckinseyonsociety.com/two-trillion-and-counting/" target="_blank">McKinsey report on the credit gap for SMEs in sub-Saharan Africa</a>, we estimate that there is a USD $2–5 billion unmet credit need amongst these businesses in East Africa alone.
Microfinance institutions (MFIs) have long sought to address this issue, but it’s well documented that the transaction costs for determining the true risk profile of a small or micro-business (e.g. through group lending models or loan officer visits) are very high. So, you have one group of debt providers (banks) that feels the opportunity costs of more tailored risk assessments for SMEs are too high, and another group (MFIs) that’s willing to lend to this segment on principle, but the high transaction costs associated with their operations and risk-mitigation techniques too often prevent these institutions from scaling.
However, as new pools of alternative data have been made accessible, we’ve seen a number of start-up, non-bank financial institutions (NBFCs) come online, and they could be poised to disrupt the status quo of East Africa’s lending industry.
To read the rest of this post, visit <a href="http://nextbillion.net/blogpost.aspx?blogid=3851" target="_blank">Next Billion</a>.
Have you read?
<a style="color:#4e87a0" href="http://cfi-blog.org/2013/01/31/tech-start-ups-and-financial-inclusion-trends-to-watch-in-2013/" target="_blank">Tech Start-Ups and Financial Inclusion: Trends to Watch in 2013</a>
<a style="color:#4e87a0" href="http://cfi-blog.org/2013/06/26/democratizing-data-to-increase-transparency-access-and-knowledge-for-the-new-generation-of-latin-americans/" target="_blank">Democratizing Data to Increase Transparency, Access, and Knowledge for the New Generation of Latin Americans</a>
<a href="http://cfi-blog.org/2013/11/22/jipange-kusave-m-shwari-and-the-influence-of-startups/" target="_blank">Jipange KuSave, M-Shwari, and the Influence of Start-Ups</a>

The Great Equalizer: How Advances in "Big Data" Allow Tech-Savvy Start-Ups to Compete with the Major Players in East Africa

Sub-Saharan Africa

Agent Banking

Delivery Channels

Data Analytics

Financial Technology

Blog Post

&gt; Posted by Elisabeth Rhyne, Managing Director, CFI

I was recently asked to give a talk at the University of Pennsylvania’s 8th (!) annual <a href="http://pennmicrofinance.org/conference/" target="_blank">Microfinance Conference</a>. This year’s theme, “Microfinance Beyond Its Roots” set me in search of ways in which the microfinance industry is moving into areas beyond its original microcredit core. Of course, this process has been going on for a long time, and so there are many topics to choose from.

<a href="http://promujer.org/what-we-do/"><img class="alignright wp-image-14578" src="http://centerforfinancialinclusionblog.files.wordpress.com/2014/04/alicia-fox-photography_alicia-fox-photography_img_1291.jpg" alt="" width="229" height="344" /></a>I decided to look at health care, partly because, as every staff member of a microfinance institution knows, health setbacks are one of the most frequent sources of repayment problems among low income clients. As they learned about the health vulnerabilities of their clients, microfinance organizations began to invest in experiments, bringing their businesslike approach to bear on a challenge that is often dealt with in heavily subsidized, non-market ways. Today, many of these programs have matured and grown, even as new ideas are being tested.

I looked among the organizations belonging to the <a href="http://microfinanceceoworkinggroup.org/" target="_blank">Microfinance CEO Working Group</a>, and I found that nearly all have something exciting going on in health care. Approaches include some combination of direct health care service provision, health insurance coverage, and education. Many are using technology as a means of reaching people at scale and low cost.

The meetings associated with group lending provide a convenient and cost-effective platform for health services, and adding a health component to group microcredit is probably the earliest and most widespread model. Health education was perhaps the starting point, as pioneered by Freedom from Hunger and also implemented by Opportunity International. Today the services often reach farther (while health education continues to be important). ProMujer, for example, directly employs nurses and other health practitioners to staff fixed and mobile clinics available to ProMujer members. They focus on maternal and reproductive health, as well as screening for the chronic diseases that are increasingly major health issues in Latin America. Hundreds of thousands of women get access to health care through ProMujer’s efforts.

Health insurance is another area of important advances. As one of many examples, Women’s World Banking, working with Microfund for Women in Jordan and Zurich Financial Services, developed a hospital insurance program, Caregiver, that pays hospital fees and a share of lost income when a client is hospitalized. I find it revealing that Caregiver does not try to cover every health need. It focuses on a specific range of services prioritized in a particular market – the costs associated with hospitalization. From looking at all these initiatives, I conclude that selecting a limited range of high-priority needs to address is part of what enables programs to cover their costs and thus be scalable and sustainable.

Stepping beyond microfinance clients, Opportunity International, together with local insurer ELAC and Airtel mobile operator, provides life and health insurance free to Airtel subscribers in Ghana. This program applies what Opportunity has learned about microinsurance since it created MicroEnsure a decade ago, to benefit all Airtel users.

Grameen Foundation is also using mobile technology as a health care tool. Here’s an elegant application of its MOTECH platform, which connects directly from providers to patients: One of the challenges of chronic disease treatment is making sure patients take their medication on schedule. For HIV positive patients in India, MOTECH sends an automated phone message every morning asking, “Have you taken your medicine this morning? Press 1 for yes, 2 for no.” If the patient answers no (or doesn’t respond), MOTECH calls again in half an hour. No response triggers escalating interventions, including contact from the health care provider. These messages increase compliance and keep patients healthy.

Accion’s Venture Lab is also investing in mobile technology as a health care tool, through Mera Doctor, in India, which offers subscribers 24/7 access to a phone consultation with a doctor, together with health insurance and discounts on drugs.

I’d like to know more about all of these efforts – like how many people they are reaching, how sustainable they are, and what the program designers have found to be key success factors. I think the numbers may be surprisingly large. Freedom from Hunger, for example, is working with about 25 MFI partners around the world reaching a combined total of over 2.6 million women with multiple-benefit health packages.

What I am fairly certain about is that these programs all benefit from their connection to microfinance. In some cases, the connection is direct: you must be a microfinance client to receive the services. In others, however, the connection is indirect: in the knowledge the microfinance organizations have gained about low income clients and in their experience building sustainable social business models.

Image credit: <a href="http://promujer.org/what-we-do/" target="_blank">ProMujer</a>
Have you read?
<a href="http://cfi-blog.org/2014/03/05/balancing-client-value-and-the-business-case-in-kenyan-health-microinsurance/" target="_blank">Balancing Client Value and the Business Case in Kenyan Health Microinsurance</a>
<a href="http://cfi-blog.org/2013/12/06/microinsurance-gets-three-wishes/" target="_blank">Microinsurance Gets Three Wishes</a>
<a href="http://cfi-blog.org/2013/10/17/microfinance-ceos-make-six-major-commitments-at-2013-partnerships-against-poverty-summit/" target="_blank">Microfinance CEOs Make Six Major Commitments at 2013 Partnerships Against Poverty Summit</a>

Microfinance Does Health Care

Ishan Mishra

India Investment Officer

Appropriate Product Design and Delivery

Client Treatment

Consumer Protection

Customer Centricity

Digital Financial Services

Entrepreneurs of MSMEs

Financial Service Providers

Fintechs

Human Centered Design

Product Pricing

Underserved Groups

Neobanks

Advisory Services

Impact Investing

Governance

Equity Investing

Initial Public Offering

Insurance Companies

Launching a new product is a feat that can occupy a large share of time, energy, and resources — and for an early-stage company, it's a very consequential decision to make. It’s imperative to take an objective, thoughtful approach when considering new products to build and launch. A well-executed plan can help a product gain traction, attract lifelong customers, and help you instill confidence in your team and approach.

We’ve built our new resource, <a href="https://content.accion.org/wp-content/uploads/2020/09/0820_New-Product-Approach_vF2.pdf" target="_blank" rel="noopener noreferrer">A Startup’s Guide to New Product Developmen</a>t, to assist you along your journey. This guide will touch on:
<ul>
 	<li>Understanding your core customer and their needs</li>
 	<li>Brainstorming potential products across your core customer segments</li>
 	<li>Defining and estimating the impact of potential new products</li>
 	<li>Determining the effort required to get there</li>
 	<li>And, ultimately, choosing and prioritizing your product roadmap moving forward</li>
</ul>
Be on the lookout for an extended guide that covers the full process, from post-product decision to launch, coming in the next few months.

A startup’s guide to new product development

A good product serves as an extension of your own team — your vision, mission, and values — and with any good organization, it deserves its own form of iteration and continuous improvement. But as an early-stage company, the balance between building a product that’s “good enough” and other competing interests can often result in poor product-market fit, or even worse, burned out and frustrated engineers. 

We’ve built <a href="https://content.accion.org/wp-content/uploads/2020/03/202003-Product-Testing.pdf">Product Testing: A Guide to Getting Started</a>, to help you navigate the important decisions around testing, iterating, and improving your products. We’ll walk you through some of the key aspects of:
<ul>
 	<li style="font-weight: 400;">Building a test-friendly culture in your organization</li>
 	<li style="font-weight: 400;">Using an experiment framework and prioritizing what to test</li>
 	<li style="font-weight: 400;">Building and implementing a testing plan </li>
 	<li style="font-weight: 400;">And, how to implement and share your findings.</li>
</ul>

Product Testing:A Guide to Getting Started

Research shows that engaged employees increase productivity and bottom-line performance while reducing turnover and costs. Although creating a corporate culture of engagement can sound elusive, an employee engagement survey is a good place to start. Employee engagement surveys ties to specific performance outcomes, so it gives a pulse read of current engagement levels and offers a way to spot areas for improvement to increase overall engagement. We’ve developed this resource to give you the right questions to ask on an employee engagement survey, and guide you through successfully launching it, analyzing results, and implementing next steps. Use this resource as a tool to manage the end-to-end process of running your next employee engagement survey.

How to successfully launch an employee engagement survey

Technological advancements have made collecting, storing, and analyzing customer data easier than ever. While these advancements have unlocked large benefits for financial technology companies, they have also come with their own set of risks and challenges: with more data being collected and stored, the risk of information being hacked, stolen, or used without authorization has also increased.

Data protection, defined as both data security and data privacy, has become even more critical to maintain customers’ trust, avoid regulatory scrutiny, and keep companies running. This data protection resource helps fintech startups understand the policies, protocols, and practices that should be in place to protect their business, customers, and partners from potential data threats. 

In this resource, you’ll find:
<ul>
 	<li>Data audit and risk assessment workshop templates and guidelines</li>
 	<li>Data protection assessment, strategic initiative list, and implementation guide</li>
 	<li>Data policy template</li>
 	<li>Seed stage investor due diligence checklist and portfolio management guide</li>
</ul>

Data Protection

As a company grows, employees benefit from performance management becoming less ad-hoc and more systematized. This guide provides a structure for growing startups to use as they evaluate their employees on their performance, and think about how to maximize the potential of employees at all levels of the organization.

Performance Management

This guide highlights best practices and sample job descriptions for key roles in early-stage financial inclusion startups. It is intended to serve as a starting point for your hiring process.

Hiring best practices and sample job descriptions for startups

This guide outlines how to build and structure a board, including tactics on effectively leveraging board member expertise and networks. Also included are tips on planning effective board meetings.

How to leverage a startup board

This template is meant to guide businesses through creating effective board decks.

Board deck template for startups

Referral marketing programs generate new customers while keeping past customers active. This guide is useful for entrepreneurs seeking to launch their own referral marketing program in the B2C context. It includes a case study of the program launched by Lyft, a rideshare app.

Referral marketing program design and best practices

This guide covers options plans, how much equity to offer, creating terms, and long-term strategies. It includes a <a href="http://www.accion.org/employee-stock-option-plan-model/">model example</a> and resource appendix.
<h3>Part I: Intro to Options Plans</h3>
<ul>
 	<li>What is an ESOP?</li>
 	<li>What is an Option?</li>
 	<li>Lifecycle of a Startup ESOP</li>
 	<li>Common Terms in an Options Package</li>
 	<li>Why Issue Options to Employees?
<ul>
 	<li>A Defining Characteristic of Startup Culture</li>
 	<li>A Necessary Part of the Capital Structure</li>
</ul>
</li>
 	<li>When to Create an ESOP?</li>
 	<li>Communicating Options to Employees: % versus $</li>
</ul>
<h3>Part II: How Much to Grant</h3>
<ul>
 	<li>Two Approaches</li>
 	<li>The Top-Down Process
<ol>
 	<li>How Much Equity to Set Aside in the ESOP?</li>
 	<li>A Typical Distribution Schedule</li>
</ol>
</li>
 	<li>The Bottom-Up Process
<ol>
 	<li>Segment Your Human Resources</li>
 	<li>Establish Pay Multipliers for Each Role</li>
 	<li>Determine the Dollar Value of the Options Grant</li>
 	<li>Determine the Current Share Price</li>
 	<li>Calculate the Options Grant</li>
 	<li>An Example: Hiring a CTO</li>
</ol>
</li>
 	<li>Important Takeaways</li>
</ul>
<h3>Part III: The Fine Print - Terms</h3>
<ul>
 	<li>Strike Price</li>
 	<li>Vesting Schedule</li>
 	<li>The Cliff
<ul>
 	<li>Example: Standard Vesting w/ a Cliff</li>
</ul>
</li>
 	<li>Vesting in a Liquidity Event</li>
 	<li>Exercising Options</li>
 	<li>Tax Considerations</li>
 	<li>Legal Advice</li>
</ul>
<h3>Part IV: ESOPs for the Long Term</h3>
<ul>
 	<li>Retention Grants</li>
 	<li>Discretionary Grants</li>
 	<li>Social Impact Considerations</li>
 	<li>Options Modeling – Overview</li>
 	<li>Options Modeling – A Detailed Example</li>
</ul>
<h3>Part V: Resources &amp; Further Reading</h3>

Startup employee stock option plans: Overview and best practices

Employee stock option plans (ESOPs) motivate startup employees by aligning their incentives with the growth of the business. This Excel model can help you calculate ESOP allocation. It is structured after the presentation model also available on our site: <a href="http://www.accion.org/startup-employee-stock-option-plans-overview-and-best-practices/">Startup employee stock options plans: Overview and best practices</a>.

Model: Employee stock option plan for startups

An employee manual details every aspect of company policy, the procedures for following those policies, and the forms needed to complete each process. This sample employee manual includes guidelines and prioritization recommendations for various policies. It can easily be customized for your organization.

Employee manual: Guide and template for startups

This guide contains the results of our survey on the best software, systems, and tools used for various functions across organizations. This data can be useful as startups explore other potential providers and evaluate options under consideration.

Software, systems, and tools for startups: Survey results

After raising seed-round funding and further building the business, startups begin the process of raising their Series A round. This guide breaks down Series A fundraising best practicies.

Series A fundraising guide for startups

Whether you have two employees or a thousand, an effective performance management program helps a business achieve results by ensuring all employees are performing at their best and connected with the overall company strategy. This guide helps companies think through how to design a performance management process. It includes sample processes and rating systems as well as evaluation templates.

Designing and implementing an effective performance management process

Raising wholesale debt is critical for businesses that are growing their loan portfolios. This guide can help lending businesses navigate the debt-raising process by providing best practices for selecting debt providers, applying for debt, and evaluating debt contracts and terms.

Raising debt and on-lending capital

Selling fintech products and services to large enterprises, and in particular financial institutions, is challenging for any company — especially startups. This guide provides an overview of best practices for pitching to financial institutions and draws on advice from leading fintech startups and financial institutions themselves.

Enterprise sales for fintech products and services

Customer research is critical for startups aiming to reach underserved customers: they must improve their product quickly without traditional resources. Executing surveys and focus groups in low-infrastructure markets is challenging. This presentation provides an overview on best practices in developing and administering surveys and focus groups.