Balloon Ventures
Location
Uganda, Kenya
Sector
Business Services
Type of Investment
Grant
Project Stage
Pilot
Length of Investment
2019+
Website
Investment Overview
A social enterprise that runs development programmes to give micro-enterprises the training, funding and support needed to grow, create jobs and build communities.
The Development Challenge
Globally, two billion people work in the informal sector. In East Africa, it is around 75% of the population. Women and youth are disproportionately represented. Informal work is typically low-paid, insecure, and unsafe. The benefits of economic development are only unlocked through access to secure jobs.
The Innovation
Balloon Ventures invests in small and growing businesses from poverty-reducing sectors that have the potential to create secure jobs. They partner with investees, embedding their team of experts to work side by side with entrepreneurs, driving growth and improving conditions for employees.
Our Investment
A $230,000 grant to refine and de-risk Balloon Venture’s model of delivering intensive, long-term, in situ management best practice support with high-fidelity in a cost-effective manner. Additionally, our investment will aid in creating sector-specific best practice tools, policies, approaches, case studies, and insights, which Balloon Ventures and other organisations can use to support informal Small Growing Businesses (SGBs).
Investment Objective
To test market viability of a credit plus management support model for micro SMEs, and to document and share lessons learned. Additionally, to enable the company to meet its target number of investments, expected return on investment, and to ensure its business plan assumptions are borne out. The company’s service offering should contribute to productivity improvements for supported businesses.
Why we invested
The investment is fully aligned with GIF’s priorities to support SMEs to create productive jobs, as well as formalising informal markets.
The grant provides an opportunity for Balloon Ventures to test and add to the body of evidence about improvements in management practices leading to enhancements in the productivity of businesses.
Balloon Ventures in numbers
Of support for each beneficiary business
GIF grant
Balloon Ventures Impact Brief
Small businesses are characterised by productivity deficiencies which hinder growth and limit profitability and incomes. In addition, they struggle to access the finance they need. Their lack of collateral assets and weak or mixed financial performance often make them too high risk for traditional financial service providers such as commercial banks (see this report to find out more about the unique financing issues faced by SMEs). Their returns are too low to attract investors. And, whilst micro-finance institutions tend to lend to them (their primary clients being subsistence micro-enterprises), the loan amounts are below what is required, the interest rates are high, terms short and inflexible, plus there is no provision of the crucial aspect of technical and managerial support. Arguably, the technical and managerial support, in the form of ‘simple’ business practices like accounting, staff management, marketing, etc. are even more important than access to finance.
Balloon Ventures seeks to help formalise SGBs with 5-20 employees and monthly revenues of USD 3-10K in ‘bread and butter’ industries that have proven business models. Balloon Ventures believes that these businesses, if provided the right mix of business development support, can, potentially, grow to fill the missing middle-tier of SMEs and become the engines of good job creation. This is significant since such informal enterprises form the vast majority of the enterprise-base and the overwhelming employment source in developing countries.
Balloon Ventures’ innovation lies in delivering intensive, long-term, in situ, best practice management support (up to 500 hours over 3 years to each beneficiary business) along with flexible long-term credit. For comparison, competing providers offer less intensive, mostly off-site, group-based, and much shorter-term training, for either non-employer subsistence micro-enterprises or for larger dynamic enterprises. Businesses pay for such services, and it is Balloon Ventures’ goal to make the model financially sustainable and scalable. The thesis is that this combination of investment plus business support makes a currently unviable segment viable. GIF is supporting testing of Balloon Ventures’ model, as well as codification of learning such that other players in the market may take up similar models.
Use of GIF funds
GIF’s funds are being used to:
Refine and de-risk Balloon Ventures’ model of delivering intensive, long-term, in situ management best practice support with high-fidelity in a cost-effective manner.
Create Playbooks, i.e. sector-specific best practice tools, policies, approaches, case studies and insights, that Balloon Ventures and other organisations can use to support informal SGBs, without the need to reinvent the wheel.
Objectives
To test market viability of a credit plus management support model for SGBs, as well as to document and share lessons learnt. Also, to enable Balloon Ventures to meet a target number of investments, to fulfil expected return on investment, and to test its business plan assumptions. The company’s service offering should additionally contribute to productivity improvements for beneficiary businesses.
More specifically:
Make loans and provide growth support to at least 24 new businesses over a 24 month period in Kenya and Uganda.
Generate evidence of improved business performance of beneficiary businesses.
Refine and de-risk the model of delivering flexible finance and in situ, long-term management best practice support with high-fidelity, in a cost-effective manner, to enhance productivity.
Identify ways to test the viability of reducing human engagement via use of technology.
Create Playbooks, i.e. sector-specific best practice tools, policies, approaches, case studies and insights, that other organisations can take off-the-shelf and use to support/learn about supporting formalising SGBs. Including learnings on entrepreneur selection, as well as approaches to recruiting and developing investment officers to support beneficiary businesses.
Impact to Date
To date, Balloon Ventures has provided 25 businesses with intensive, tailored capacity building support on management best practices, alongside flexible loans, thereby driving growth and creating jobs. The vast majority of beneficiary businesses are in the agri (value add), manufacturing, hospitality, and education sectors. The average annual turnover is 110K USD. The best performers saw a doubling in revenue during the first six months of 2020.
A number of Balloon Ventures’ beneficiary businesses have been impacted by the Covid-19 pandemic. As a result, the majority of gains in terms of jobs created over the previous year were lost. Fortunately though, none of the businesses stopped operating. In response, Balloon Ventures has put in place supportive measures such as payment holidays. Balloon is currently back to investing at a pre-Covid-19 rate of two or more investments per country per month.