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:
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.