Social impact Investors and Higher Education: All talk, no walk?

Share on facebook
Share on twitter
Share on linkedin

The death of higher education has been declared and eulogies have been written over and over (and over!) again. The truth is that, in most developed economies, higher education institutions have had to evolve beyond “relying on the credentials they offer” and address access, equity, technological or relevance realities, or risk joining the graveyard. 

The truth is also that in Sub-Saharan Africa, less than 10%  of high school graduates have a seat in any form of tertiary education. This blog is not a debate on whether traditional higher education credentials have value or not (hint: they have value, particularly in conservative labour markets or in the absence of alternative labour market signals) or whether we should only bet on the disruptive innovative models (e.g. ALX/The Room/Holberton). My belief is that, to solve the skills crisis on the continent, we need both to succeed: innovative, affordable higher education institutions and the disruptive non-credentialed models. 

So here is the question: in a market that could absorb (immediately) millions of young people, why isn’t there a flood of venture-backed new institutions across the continent? Isn’t this the perfect definition of a white space, where innovation in learning, operations or business models should be proliferating? There is a lot of  energy around “the app that will solve Africa” but a lot less on getting the fundamentals right.  

Let’s first address the elephants in the room when it comes to credentialed programmes: regulatory processes are arduous, long, and often frustrating, injecting incredible amounts of risk in the long term viability of a venture. Even when one gets regulatory approvals, the list of challenges keep piling up (e.g. student finances, operations excellence). To be honest, it’s hard. 

It makes sense then that traditional investors can’t make a case to their committees to invest in a venture whose timeline to revenue is – in the best case scenario – the same as investors’ timeline to exit. It makes sense that higher-education entrepreneurs struggle to raise the required funding to sustain a longer journey. 

Nevertheless, it makes a lot less sense that patient capital and social-impact investors have been equally shy – and often apply the same financial, human capital framework on ventures that have much different timelines and challenges. The number of times I have been told: “You have a great idea, you have a great team, and what you are doing is one of the most important undertakings for our continent – but we will pass” or the more pernicious: “unless you’re dedicating a 100% of your time to this, we can’t see how committed you are to it”.  The tension between, “we won’t give you the funds to survive the regulatory process” and “you can’t work on the side (within limits) and earn a living” is… ironic… for impact investors.  

The implications of this “all talk, no walk” from social impact risk capital is dire for the whole ecosystem. First, it perpetuates the ever reliance on a public tertiary system that is seeing a surge in demand, a reduction in funding and rapidly changing expectations from its student body. They can’t be expected, and won’t be able, to solve this challenge by themselves. Second, a rapid consolidation of the market (see Growth10, Honoris, and many others) which increases concentration, uniformity, and decreases the potential for innovative breakthroughs (in learning or in business models) for the sake of extracting economies of scale. Third, the emergence of foreign – particularly online – players filling the gap and operating with limited oversight from regulators and without protections for learners. 

There is an exception. Mastercard Foundation is making incredible, needed, necessary commitments to the space; they nevertheless tend to support institutions that are well established, as they have a different risk profile. It feels like a lost opportunity for the continent, too. In an era where we are discussing decolonising education, what better way than to fund indigenous ventures in higher education and let them innovate (and sometimes fail) towards models that are more adapted to the communities and context they are serving. 

My plea to impact investors: if you expect your entrepreneurs to come up with innovative solutions to complex social challenges, you must come up with innovative funding models that will allow you to earn your returns, while enabling an environment for aspiring higher-education entrepreneurs to deal with a mountain of complex challenges without the fear that funding will run out before getting to revenue. 

Prologue

It occurred to me that, while I took a cynical view above, we (at Instill Education) are still here, somehow. Seven (or is it eight?) years + a pandemic + some crazy stories, and yet we are inching closer to welcoming our first cohort of pre-service student-teachers. 

What’s our secret? Lots of perseverance, lots of hard work, tons of privilege, tons of committed family and friends, a few really amazing investors, a committed team and… a lot of luck. And I mean a lot of luck. Like a f* load of luck. I think that’ll be the title of my next blog: How we got here? A f* load of luck!

 

by Alim Ladha (Founder, Instill Education)

Learn anywhere anytime for free!

Upskill is our professional development platform. Register here and start learning for free!