Critical role of entrepreneur support organisations in advancing impact investing

Entrepreneur Support Organisations (ESOs) play a vital role in bridging the gap between promising ventures and investors seeking measurable impact.

For entrepreneurs, ESOs often serve as the first, and sometimes only, source of support in navigating the complex path to investment readiness.

They provide critical support and resources to navigate the early stages of development, as well as networks such as mentors, partners, and investors.

Without this foundational support, many high-potential founders struggle to access the capital and resources they need to grow their businesses.

For investors, ESOs are a critical intermediary addressing their biggest challenge: quality deals flow and ensuring these ventures are investment-ready. ESOs help renew business models and validate the market potential of startups, the groundwork that reduces risks for investors and increases the likelihood of meaningful returns, both social and financial.

Case in point: Octavia Carbon, a Kenya-based company leveraging Direct Air Capture (DAC) technology to filter CO2 directly from the air, joined Village Capital's Innovation for Ecosystem Restoration program in Africa in 2023, which supported startups addressing environmental degradation.

Reflecting on the value of the support, Co-Founder Duncan Kariuki shared: "The support from Village Capital helped us understand the complex dynamics of investment, positioning us to secure the funding we needed to scale our impact."

Since then, the startup has raised multiple funding rounds, successfully closing $5 million (Sh645 million) in seed funding. This success story isn't an isolated case; it highlights the role that ESOs play in preparing startups for funding.

Tackling the sustainability of ESOs while we see the incredible role of ESOs in the success stories of startups such as Octavia Carbon, these organisations face various challenges that threaten their sustainability and effectiveness.

Our research reveals that ESOs rely heavily on grants as a primary source of revenue and are often constrained by restrictive, cyclic, programme-based funding models. This financial instability makes it difficult for them to build institutional resilience and plan for long-term impact.

Despite its notable success and backing, the Catalyst Fund, a global accelerator that funds early-stage startups improving the livelihoods of underserved communities across Africa, Asia, and Latin America, and one of the organisations that invested in Octavia Carbon, recognizes the persistent challenges ESOs face in the region.

Village Capital is addressing this challenge by re-imagining the sustainability of these organisations. Research shows that organisation-level investments lead to the most sustained impact for entrepreneurs, yet this investment into local ESOs is the most lacking.

One key approach we're testing is shifting how capital decisions are made by investing in the institutional capacity of ESOs and empowering them to act as trusted intermediaries in capital deployment.

This moves beyond viewing ESOs merely as service providers for development programs to recognizing their potential as key ecosystem builders that unlock capital for their startups.

One institutional impact funder collaborating within Africa is Norad - the Norwegian Agency for Development Cooperation, through the Empowering Sustainable Entrepreneurship Africa (ESEA) initiative.

Over the past 12 months, we have supported 14 ESOs and are now deepening our partnership with ve of them - namely, the Catalyst Fund (Kenya), Reach for Change Foundation (Ghana), Innovate Ventures (Tanzania), Emerge Livelihoods (Malawi), and Ideialab (Mozambique).

These ESOs will receive funding to co-lead venture programs in 2025-2026. "This ecosystem-building initiative facilitates collaboration across the continent, encouraging ESOs to share best practices, co-build solutions, and leverage collective knowledge.

This level of connectivity is essential for fostering more holistic support for climate startups, giving them access to a broader set of resources and insights," notes Sydney. By equipping ESOs with the resources and autonomy to design and implement impactful programs, we are also strengthening their ability to unlock capital tailored to the needs of the startups they support.

In doing so, we envision an ecosystem where ESOs facilitate access to capital and ultimately drive sustained economic and social impact in the communities they serve

The writer is the Regional Lead for Africa at Village Capital