How Do I Use This Guide?

This guide will tell you how to develop and manage successful shared-value partnerships with private-sector businesses using an approach based on Partnering for Innovation’s experience. It is meant to be used by development practitioners and others like you who want to work with the private sector to achieve your development goals. Of course, we are always learning more as we continue to work with private-sector partners, as are you, so we will update this guide periodically with new ideas from our own experience and suggestions from yours as well. If you have any suggestions, comments, or recommendations, please email us at innovation@fintrac.com. Otherwise, consider the following questions as you determine if this guide will help you in your work:

 

Who Should Use This Guide?

 

What New Terminology Do I Need to Know?


This guide is meant for development practitioners and others who want to work with the private sector to achieve development goals. Such investors can include bilateral and multilateral government donors who are fostering the resilience of the whole-market system, nongovernmental organizations who are building the capacity of private-sector stakeholders, and social impact or angel investors who have added social impact to their portfolio return indicators.


The private-sector investments discussed in this guide are different from traditional donor relationships—instead of focusing only on the recipient’s potential impact on smallholder beneficiaries, these investments also focus on the impact to the company, related value-chain actors, and the market system as a whole. As a result, we use investment language when appropriate to indicate that profitability, financial viability, and a business’ bottom line are important results , just like smallholder impact and improved food security are important results. This is a market systems approach where donors or investors promote better opportunities for smallholder farmers to participate in a diverse, resilient agricultural market system, which results in more sustainable achievement of key development goals. The following terminology will help you better navigate this guide from an investment perspective:

De-risking Investments

De-risking investments, sometimes using grants, fund private-sector businesses, usually for a combination of social and financial returns. Such investments provide targeted one-time seed capital to private-sector businesses focusing on underserved customers. They are different from venture-capital investors in that they prioritize the social impact of their investments over the financial return. De-risking investments tend to be provided by bilateral and multilateral government donors , NGOs , social-impact investors , and angel investors . Partnering for Innovation uses performance-based investments. Unlike a cost-reimbursable donor funding structure, where the company submits receipts for the expenses incurred because of activities undertaken and is then repaid based on actual costs, payments under a performance-based investment are negotiated upfront and paid based solely on proven achievement of the stated results.

Private-Sector Partnership

A Private-Sector Partnership is a formal relationship between a donor and a private-sector company for the purpose of achieving mutually beneficial development and business goals. May kinds of funding structures may be used for a private-sector partnership. What sets private-sector partnerships apart is not the funding structure, but rather the idea of encouraging private-sector businesses to build their work around smallholder farmers as a valuable, viable, and vast market for their products and services. Such partnerships are called shared-value partnerships.

Expression of Interest (EOI)

An Expression of Interest (EOI) is a request for a short, basic concept note instead of a full proposal, and is the first phase in Partnering for Innovation’s investment selection process. The EOI should clearly and concisely explain the proposed investment activity’s relevance, purpose, objectives, activities, and expected results. After evaluating the EOIs, investor will invite businesses that submitted successful EOIs to enter into a second phase of the competition by submitting a full application based on the concepts and technical approaches proposed in the EOI.

Request for Applications (RFA)

A Request for Applications is a request for a longer, more detailed proposal, and is the second phase in a two-step investment selection process. The RFA should clearly and concisely explain the proposed investment activity’s relevance, purpose, objectives, activities, and expected results. It should also clearly outline the evaluation and scoring criteria for applications. After evaluating the applications, the investor will invite businesses that submitted successful applications to enter into due diligence and negotiation of a formal partnership.

Performance-Based Award

Performance-Based Awards align goals and expectations while leaving room for private-sector partners to respond flexibly to quickly changing business environments that smallholder farmer markets present. They are like fixed-amount awards, where the expected costs of activities are negotiated up front and then paid based on results. The achievement of these results is broken up into milestones, or periodic targets that demonstrate that the partner is making progress toward their final goals. This approach saves time and money for private partners while setting up clear expectations, unlike cost-reimbursable awards. Milestones and means of verification (MOV) are part of the negotiation process and should be considered as a critical part of the agreement.

Acceleration Services

Acceleration services are short-term capacity building activities that provide businesses with targeted corporate mentorship and training. Acceleration services may include activities such as marketing improvement, strategic planning, or executive-team development, and they emphasize connecting early-stage businesses or product lines with investment or other strategic partnerships. The objective of these activities is to develop a business’ ability to successfully commercialize products and services in smallholder farmer markets, build a strong and diverse portfolio of investments with complementary potential for commercial and development impact, and create value for next-phase investors to finance further growth in the agriculture sector in emerging markets.

How Should I Use This Guide?

This guide is long, and we do not expect you to sit down and read it in one sitting! We expect you will explore the topics most interesting or relevant to your work. To make it simpler for you to do that, we structured this guide as a series of questions you may ask yourself when partnering with the private sector, each one including a checklist on what you need to know or how you can answer each question. To keep the guide from becoming overwhelming, certain ideas are annotated, so you can scroll over the underlined text to get a bit more background. We also provided links to outside resources and program tools that you may find useful, as well as links to more in-depth information should you want to do a deeper dive into any topic — so keep an eye out for the symbols described in the call-out box.