By Adva Saldinger, Catherine Cheney
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| An Off Grid Electric employee installs a solar home system in Tanzania. The off-grid solar startup is the first company to receive all three rounds of funding from Development Innovation Ventures. Photo by: Matthieu Young |
Development Innovation Ventures, a part of the U.S. Global Development Lab that focuses on supporting entrepreneurs with “breakthrough solutions,” will stop accepting applications at the end of the day on Friday.
The application window for DIV is “temporarily suspended beginning on July, 28, 2017, until further notice,” a U.S. Agency for International Development spokesperson wrote Devex in an email, adding that “The temporary closure of the window does not mean a closure of the DIV program.”
Past and present DIV grant recipients got a heads-up via email this week that applications will not be accepted until further notice.
USAID declined to say why new applications will be suspended, but the move comes amid widespread uncertainty over budget cuts, foreign aid reorganization and the future of the Global Development Lab, an Obama administration initiative.
DIV has been a key instrument for USAID to support and experiment with emerging technologies to tackle development challenges. Former recipients and USAID employees told Devex that it has been successful in helping companies scale and that USAID should continue doing more innovation work.
Since 2010, DIV has supported 170 innovations that have reached 13 million people in poverty and resulted in $5 in follow-on funding from outside investors, lenders and philanthropies for every $1 of U.S. taxpayer funds, according to a USAID spokesperson.
One DIV grantee, LaborVoices, a platform that provides brands with supply chain data crowdsourced from workers, told Devex that DIV financing was critical in helping the California-based startup prove its platform to private sector investors.
“DIV helped us scale up our impact by 100 times,” said Kohl Gill, president and founder of LaborVoices, which had expected to work with the Global Development Lab to expand its work beyond Bangladesh and Turkey.
Several organizations told Devex that, while they expect USAID will pay their unpaid balances for past awards, they had been gearing up for the next stages of DIV funding. USAID told Devex that “every effort will be made to limit disruption to existing awardees of a DIV grant and to those high-potential applicants already being reviewed for a potential award.”
In December 2015, Off Grid Electric, a solar energy provider, became the first company to receive all three rounds of funding from DIV. Ann Mei Chang, former chief innovation officer at USAID, told Devex she sees that investment as one of the great successes of the Global Development Lab.
“The tiered, evidence-based funding model for DIV is something we should do more of, not less of,” Chang told Devex via email. “Modeled after venture capital funding, it allows USAID to take measured risks by placing lots of small bets on promising innovations, and doubling down on those that are proven to be effective. The result is more cost-effective and scalable solutions, that frequently leverage far greater private sector and local government investment. DIV delivers smart aid, improving more people's lives for less.”
She added that she hopes the temporary closure for DIV applications is merely a cautionary measure due to the uncertainty surrounding the foreign aid budget and potential reorganization.
DIV is a unique model in the development sector, because it is focused on a process of hypothesis and testing, rather than a rigid grant structure that becomes outdated in months, said Nat Manning, who recently became the new CEO of Ushahidi, the nonprofit crisis mapping software company that was awarded a $1.5 million grant from DIV last year. He called DIV one of the “most important supporters” of the development innovation industry.
"DIV is one of the best funders Ushahidi has had the pleasure to work with. Their approach to helping organizations scale their impact and business models is fantastic and unfortunately scarce in this market. They spent months working with us to define the milestones that would be most helpful for our organization and our users, and then shaped their grant around that,” he said.
For other organizations, the news was a disappointment, but not a surprise. Michael Lwin, co-founder at Koe Koe tech, a mobile health company in Myanmar, told Devex that his organization had expected this to happen and built it into their forecasts.
“DIV is trying to follow the private sector model of capitalizing the entrepreneur so they can take risks and focus on product and service build out and establishing a sustainable business model,” he told Devex.
Entrepreneurs told Devex they hope to see the budget and strategy deliberations result in further investment along similar lines.
Dan Runde, the William A. Schreyer chair and director of the Project on Prosperity and Development at the Center for Strategic and International Studies, echoed those sentiments.
“I think that it’s appropriate for the United States to have some sort of innovation function in development,” he said, adding that innovation is a key part of what people in the developing world, particularly in middle-income countries, find attractive in working with the U.S.
While the U.S. should have a function that leverages science, technology and innovation, it is also “appropriate and useful for the Trump administration to take a look at the way these sets of activities … are organized,” Runde said. “I’m not too concerned about [DIV] being closed down, he said, “especially if there is some exercise to think about how it can be done differently.”
A key challenge with innovation funds is that while they may help an organization grow, they often struggle to help proliferate innovations. Moving forward, USAID should consider how it could leverage its global reach to help innovations not just move from a second to third tier but expand to five or six, or more, countries, he said.
While new DIV projects may be on hold, initiatives that it helped inspire, including the Global Innovation Fund, are ongoing.
“I think DIV is a model for many other countries to follow. I am an American taxpayer, and DIV is something I am proud to give my tax dollars to. It serves as compelling example to other countries on how to both test and scale innovation ideas,” Andrew Youn, founder of One Acre Fund, which serves smallholder farmers in East Africa, told Devex.
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