Bain has a long-standing partnership with Endeavor, a mission-driven organization that aims to inspire the world’s fastest-growing entrepreneurs to dream bigger, scale up, and pay it forward. Over more than a decade, in almost three dozen pro bono cases, we have helped Endeavor refine its strategy and operating model, expand its reach, and deepen its impact around the globe. Thirty Bain partners have served as mentors and helped select entrepreneurs for Endeavor’s network, and an equal number of consultants have taken a leave from Bain to work as full-time externs with Endeavor affiliates and entrepreneurs around the world.
Since its founding in 1997, Endeavor has identified founders with the greatest potential, inviting them to participate in a proprietary international selection process. Once selected, entrepreneurs are supported with an unrivaled global network, peer-to-peer community, demand-driven services, and rules-based fund, Endeavor Catalyst. Ultimately, Endeavor elevates its entrepreneurs as aspirational role models and provides avenues for them to mentor and inspire others to reimagine what is possible. Today, Endeavor supports more than 2,000 entrepreneurs, whose companies generate combined revenues of over $28 billion and have created more than 4 million jobs.
Facing the economic downturn of Covid-19, Endeavor’s network pulled together to help entrepreneurs pivot, keep people employed, and develop new products. Endeavor also spent 2020 investigating how it might further raise the bar by identifying and supporting the entrepreneurs that are likely to become “outliers.” These are the scale-ups that will grow fastest and attract the most capital, and have the greatest impact on jobs, revenue, and their local entrepreneurial ecosystems.
By applying advanced analytics to a variety of data about current and past Endeavor entrepreneurs, Bain helped Endeavor better understand what the most successful companies—outliers such as African payments technology company Flutterwave; Indonesian e-commerce platform Bukalapak; Checkout.com, a fintech operating largely out of the Middle East; Argentina-based marketplace Mercado Libre; and Buffalo-based Squire, which provides software for barbershops—looked like when they were first selected by Endeavor. Patterns were even found in Endeavor’s own evaluation process, in the words selection panels used during their four-hour deliberations and how they differed between descriptions of companies that would go on to be top performers and those that would not.
Recognizing the patterns and the combination of characteristics these firms typically exhibit will help Endeavor increase its chances of selecting the candidates with the highest potential for impact and of better supporting them as they grow.
Impact-first investors are providing entrepreneurs with the capital and support they need to develop scalable, sustainable solutions to poverty.
One of these investors is Acumen, a global nonprofit that aims to change the way the world tackles poverty by investing in businesses, leaders, and ideas. Acumen is a pioneer of patient capital—a “third way” that seeks to bridge the gap between the efficiency and scale of market-based approaches and the social impact of pure philanthropy. This kind of capital has a longer investing horizon and accepts lower returns. It provides early-stage companies with the time and flexibility to validate and prove the commercial viability of their business model. Acumen also provides post-investment support, helping these entrepreneurs grow their businesses and reach as many low-income customers as possible. Over 20 years, it has invested $137 million (and helped attract many times that from other investors) in entrepreneurs working on some of the toughest challenges of poverty—such as delivering reliable, affordable access to clean energy, education, and healthcare—touching the lives of more than 300 million people.
Our work with Acumen builds on a partnership that since 2012 has encompassed 15 projects, including supporting it on strategy and operating model, both globally and regionally, and most recently helping refresh its strategy in East Africa. In that time, we have embedded 25 Bain consultants in externships with Acumen and its investees, from India to Kenya to Peru. We have also provided 24 volunteer consulting teams over the past two years, working in what we call an “extra 10%” capacity on top of their daily responsibilities, to support social enterprises participating in the Acumen Leadership program. These teams have tackled education challenges in Pakistan (with Orenda), youth employment in Uganda (with Kyusa), and preschool and tutoring in Mexico (with Hipocampus), among others. Importantly, following our collaboration on Growing Prosperity, about how to scale smallholder farmers’ adoption of agricultural innovations, we worked together on a report published last fall that makes the critical case for supporting farmer-allied intermediaries, the linchpin enterprises that are key to unlocking Africa’s food production and economic potential: How Farmer-Allied Intermediaries Can Transform Africa’s Food Systems.
In addition to Acumen, we have multiyear relationships with Root Capital and global nonprofit Accion, both of which provide capital and other supports to underserved small and medium-sized enterprises that are facing the most challenging recovery from Covid-19. In 2020, we helped Root Capital refresh its strategy to strengthen smallholder farmer livelihoods and resilience by deepening its support of and collaboration with small and growing farmer-allied agribusinesses. We also saw our earlier work with Accion in the US bear new fruit in the creation of Accion Opportunity Fund, which provides access to capital and coaching to small business owners in the US, particularly entrepreneurs of color, low-income entrepreneurs, and women.
ESG in Private Equity
We also work with investors that operate at the commercial end of the impact/return spectrum. We help private equity firms embed ESG criteria—including carbon emissions, waste byproducts, and diversity, equity, and inclusion, among other metrics—in their due diligence and value-creation plans as they consider new investments. This is of growing importance. More than 3,000 institutional investors and PE firms have now signed the United Nations’ Principles for Responsible Investment, and we have helped a number of leading firms adopt these principles internally and within their existing portfolios. We have also helped them set up impact-focused investment funds.
Recent work we did with a paper company backed by private equity investors illustrates how ESG considerations can be incorporated—and the impact these factors can have on financial returns. To evaluate the company’s ESG opportunity, we talked to customers, investors, regulators, and other stakeholders. Collaborating with EcoVadis, our strategic partner on ESG assessments, we compared the company to competitors in terms of greenhouse gas emissions, water consumption, waste, and sustainable sourcing. We evaluated the factors influencing its top-line growth and performance. We also looked at product life cycles, employee health and safety, and other factors.
This data all fed into a plan we developed with the company for more efficient plants, carbon-neutral products, and a smaller emissions footprint. Once fully implemented, this plan is expected to increase EBITDA approximately 10 points through reduced emissions costs, energy savings, revenue growth, and other opportunities, and another 2 to 3 points by mitigating risks, including rising energy prices and regulatory threats.