Make or Buy: Corporate Impact Venturing at the Base of the Pyramid

This report outlines the reasons why companies should consider buying inclusive businesses externally as an alternative to building them internally. It also describes ‘how to buy’ and who can provide support.

Developed by - Endeva

 

Synopsis – Endeva’s research, which draws on insights gathered from interviews conducted with eleven companies, four investees and nine experts, identifies three main constraints to scaling inclusive business: a lack of leadership support and conducive structures and processes; long gestation periods and low margins; and a lack of suitable talent and insight.

It proposes that Corporate Impact Venturing can circumvent these constraints by buying inclusive businesses externally. By taking equity in existing inclusive businesses that already cater to large numbers of customers or suppliers at the base of the pyramid(BoP), companies can expand more quickly and save the time it takes to come up with a functional model. In addition, the acquisition comes ready with skilled staff who have a deep insight into the market. Companies can decide how closely they want to integrate the inclusive business, and whether it should be on their own balance sheet. They can help inclusive businesses scale up and complement them with their specific strengths, not just by bringing in fresh capital, but also by leveraging existing company structures and networks and learning from its professional management systems and technical knowhow.

 

Actions for MNCs - MNCs are encouraged to: integrate the “buy” option systematically into their investment decisions around inclusive business; link the inclusive business/BoP work with Corporate Venturing and explore joint activities/investments; and explore opportunities to invest through impact investors and funds.

 

Actions for other stakeholders - Impact investors should explore collaboration opportunities with MNCs around specific investment criteria as well as opportunities to set up dedicated funds. Donors should establish financing mechanisms that can support alongside the growth process. Corporate Venturing events should integrate Corporate Impact Venturing as a topic. 

 

Additional tools and guidance - The report provides:

  • A checklist with five main objectives and four widespread barriers to assess buy vs make decision
  • Three structures to invest in inclusive business (direct investment, self-managed fund, third party fund)
  • Overview of partners to build strategy and structures, identify investees and leverage external funding

 

To download report, click here

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