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April 14, 2021 in Peer-selected investment

Peer-Selected Investment at Year Here

At the height of the pandemic, social enterprises around the world were facing an existential crisis: sink or swim. In London, one impact startup incubator, Year Here, found itself in the middle of the storm.

With over 30 ventures in the Year Here portfolio facing a critical point, they launched an initiative to “Covid-proof” their social enterprises. As Year Here fellows, Kasia Cheng, Monica Pun and I were commissioned to work on this project – including the distribution of two £4k grants provided by Paul Hamlyn Foundation. 

We were given the liberty to design the grant-giving process from scratch. Having read about Village Capital’s work in the past, we were eager to try out their peer-selected investment model ourselves – as a way to put entrepreneurs  in the driver’s seat.

Peer-selected investment is a unique model that Village Capital uses to make investment decisions. The model was developed as a response to the fact that more than half of all venture funding globally goes to startups headquartered in San Francisco, Boston or New York. The model flips the power dynamics of traditional VC. Rather than investors giving advice and making investment decisions far-removed from the day-to-day realities of running a venture, peer-selection puts that power in the hands of groups of entrepreneurs, who can build on their own experience and give each other specific, actionable advice. 

We thought this model could be a great opportunity for ventures to find opportunities for collaboration, and to better understand the mindset of an investor. All in all, this would forge a renewed sense of community and strengthen founder relationships to create a mutually beneficial support system.

With these benefits in mind, we designed a peer-selected grant distribution process – a mix between peer-selected investment and participatory grantmaking. We asked the final six ventures to assess each other and collectively choose two winners to receive grants, based on which ventures had the best strategy to weather covid and would have the most social impact.

Two ventures, Pivot and Supply Change, had the highest scores in the variables of business model, Covid resilience plans and social impact and won a £4k grant each to implement their covid pivot plans. 

Here’s what we learned:

  1. It’s all about the learning. All participants agreed this was a learning experience and left the workshop with clearer ideas about their business next steps. They also left with renewed (and some new) connections with other founders. Creating the energy and safety for participants to share deep mutual feedback is key to ensuring everyone leaves with value, even if they didn’t get the investment. To make sure this happened, we only invited founders into the room and made it clear that all the decision making would happen in that room without any external revision. 
  2. Peer selection takes time. Village Capital usually runs their programmes over a 16-week period with continuous voting rounds and consistent mutual feedback. In our case, pitching and voting was done the same day. The quality of our results was a direct result of the time participants spent presenting and sharing feedback. Participants need time to dive into each other’s ventures, time to understand the criteria and how it applies to each case. This was aggravated by the fact that our ventures were in different stages of development and worked across multiple sectors. 
  3. Participation has its scales. Handing the baton to entrepreneurs to make an investment decision is something few people had heard of when we discussed this approach. As with any new idea, we had to confront challenging views about the role entrepreneurs occupied in this process. Participants themselves had a hard time understanding they would be the only people influencing the results of the grant. Kelly Bewers picked up on this pending debate and wrote a thoughtful piece you can read here.

Lots of questions arise that might help us shape the future of participatory grantmaking. Although our experience shows no conclusive results on bias mitigation and future revenue prediction as Village Capital has shown through their work, we attribute this to the lack of extensive data and brevity of implementation. 

We encourage other funders to experiment with peer-selected investment, and to learn about participatory funding models more broadly. The idea of involving people with lived experiences in funding decisions is getting more and more traction. Every year new frameworks and case studies emerge, from organizations like Village Capital and GrantCraft, networks like Transform Finance, and books like the soon-to-be-released Letting Go. We believe that participatory funding has the potential to positively influence diversity and inclusion policies, and open the door to more effective and sustainable decision-making.

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Want to connect with the Year Here team? Reach out to Kevin Fay, Monica Pun, and Kasia Cheng. Learn more about Spedal.

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