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The Power of Microgrants in Addressing the SDGs

How can microgrants — relatively small, one-time cash awards — actually make a difference when it comes to addressing problems as massive in scale as the UN’s Sustainable Development Goals (SDGs)?

This past April, Stardust Startups conducted a study on how microgrants and micro investments empower small solutions for massive challenges. Finding the answer to this question was important to us because we’re an organization that offers a microgrant program ourselves. We’re a Donor-Advised Fund (DAF), which basically means we’re an organization that connects impact investors to impact entrepreneurs by managing partnerships as a third party. At Stardust, our microgrants come in the form of $2,000, and we focus our projects around the SDGs by asking early-stage founders to target at least two of them.

So, what did our study find? How can microgrants address the SDGs successfully?

We found that microgrants uniquely impact both the micro investor and the entrepreneur’s experience, which has allowed entrepreneurs to make a lot of progress within their SDG targets.

Grant recipient Sashka Avanyan receiving a $2,000 check from Camille Babington, co-founder of Stardust Startups, in Armenia.

Grant recipient Sashka Avanyan receiving a $2,000 check from Camille Babington, co-founder of Stardust Startups, in Armenia.

This is because the SDGs can feel a bit daunting; 17 big, international goals with an infinite amount of ways to go about them. Our study found that microgrants — through their small-scale, accessible nature — were able to funnel these globally recognized concepts into goals at a human scale.

From the perspective of investors, this idea came through in a number of ways. First of all, microgrants allow unaccredited investors to be micro investors. In other words, even those with modest contributions who want to make a difference as impact investors can participate.

When it comes to micro investing through DAFs in particular, DAFs are valuable in that they allow smaller donors to actually see the impact of their relatively modest contributions. This is because DAFs allow donors to have a say in how the funds are spent. Networks are formed between the fund recipients and donors, and investors can actually feel like they are a part of the process. In other words, micro investors get to see, on the ground, the real impact of their contributions.

We found that microgrants uniquely impact both the micro investor and the entrepreneur’s experience, which has allowed entrepreneurs to make a lot of progress within their SDG targets.

Micro investing through DAFs also makes contributing more accessible, which makes investing more appealing to people across the economic classes. DAFs take care of the paperwork, sourcing, reporting, and other aspects of impact investing that can be overwhelming for investors who might not have the support to do so themselves.

Microgrants also make targeting the SDGs more accessible for entrepreneurs. For one, microgrants are financial awards, as opposed to microloans that would need to be paid back. Through our study, we found that 100% of respondents would choose a microgrant over a microloan. Some of the reasons for this were that with microgrants, there was no fear of paying back a loan in the early stages of a startup, as well as fewer constraints and more independence. Moreover, loans were often seen as impersonal, while grants were reported to show true interest and confidence.

Microgrants are also meant for entrepreneurs at the early, pre-seed stage. Often, many entrepreneurial support organizations (ESOs) exist to foster companies with 1-2 years under their belts, but not many resources are out there for organizations that are at the pre-seed stage. Microgrants meet some of the most important needs of an emerging startup during a stage where support is arguably most critical.

Our study found that confidence levels of emerging impact entrepreneurs, before and after receiving the microgrant, showed an inverse trend. Confidence aside, microgrants propelled morale by inspiring other essential feelings such as trust, freedom, credibility, and relief. Both the microgrant and trust given by an organization like Stardust Startups to an emerging entrepreneur can boost their confidence and pave the way for other organizations and individuals to support the project.

Through our study, we found that 100% of respondents would choose a microgrant over a microloan.

We found that all the factors of microgrants that were discussed above — by making the experience of targeting the SDGs more personal and accessible for both the impact investor and entrepreneur — help lead to the success of the projects themselves.

Confidence levels of emerging entrepreneursFor example, in the fall of 2020, Stardust Startups provided Megan Takeda-Tully with a $2,000 microgrant for her business, Suppli, aimed at minimizing restaurant waste through providing a reusable takeout container service. The microgrant helped Takeda-Tully pay for marketing to grow both Suppli’s restaurant and consumer base. As of August, Suppli has launched its minimum viable product (MVP) in 24 restaurants and has prevented 8,300 single-use containers from ending up in landfills.

Due to the nature of the microgrant program, Takeda-Tully, along with the impact investors involved in the process, was able to actualize her SDG targets of sustainable cities and communities, responsible consumption and production, and climate action.

It’s clear that microgrants are valuable in that they help connect impact investors to the entrepreneurial minds that are truly making a difference. They serve as the vessel that propels the SDGs into tangible ideas on the ground. In return, the SDGs serve as the glue between impact investors and entrepreneurs who are able to find commonality through these globally known concepts.

We think a lot of people look at the SDGs and want to do their part in helping to achieve those goals. However, the next step—the action phase—can often be difficult. Entrepreneurial minds may have brilliant project proposals but have no support to actualize their ideas. Others might not feel as if they have enough money to contribute to such ambitious goals as the SDGs in a meaningful way. For impact investors, it may be tricky to ensure that their money is being put in the right place and that their contributions are actually making a difference.

Suppli’s reusable containers.

Suppli’s reusable containers.

Sometimes it’s difficult to know exactly where to turn, but micro investing — particularly through DAFs — uniquely addresses all of these concerns.

So, for entrepreneurs and investors wanting to do their part in addressing the SDGs, microgrants are a very convenient way to do so. This is why, if you’ve ever had a project proposal or if you’ve ever considered wanting to contribute financially, we urge you to look further into microgrants. And if you simply want to learn more about the power of microgrants themselves, head over to Stardust Startups and check out our full study, Democratizing Impact.

Source: L.J. Palmer-Moloney, C. Babington, C. Ward, K. Wolff, and N. Bousquet. Democratizing Impact: How Microgrants and Donor-Advised Funds Empower Small Solutions for Massive Challenges. Stardust Startups, 2021. Morehead City, NC.

Emma Leyland is a writer at Stardust Startups and a recent graduate of McGill University. As someone with a strong commitment to social justice and a keen interest in politics, she believes in the value of grassroots organizing and community building as a means to making the world a better ... Read more

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