Public sector and impact startup collaboration are hindered by four gaps

Social impact startups hold many of the innovative solutions that the Nordic welfare society needs to meet future challenges. However, too many social impact startups struggle to break through the “public procurement wall” to sell, implement and scale their solutions to benefit Nordic citizens and the Nordic welfare society.

The public sector and impact startups have complementary strengths that can be leveraged to drive innovation and create positive social impact. The public sector has resources and knowledge while impact startups are agile, creative and willing to take risks. By collaborating, they can combine their strengths and create innovative solutions to social challenges.

The report: Collaborate to Innovate investigates the dynamics between the public sector and impact startups in the Nordics in order to understand why they have difficulties in collaborating. It also proposes an action plan on how to accelerate welfare innovation in the Nordics through increased collaboration between the public sector and impact startups. 

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Public sector contradicts with the innovative nature of startups

The report highlights four gaps that hinder collaboration between the public sector and impact startups in the Nordics. The gaps are rooted in fundamental differences in how the public sector defines what they need to be solved and what they can procure and the innovative nature of startups. The four gaps are:

  • Need-offer gap: Related to the lack of mutual understanding between the two parties when it comes to the needs of the public sector and the solutions offered by startups.
  • Security-risk gap: The public sector has a high security need in their procurement processes and buying from startups can be an unsafe purchase.
  • Time gap: Working with a public tender is a time-consuming process and startups do not have the necessary time or resources.
  • Maintain change-gap: The public sector has little incentive to do things differently while startups always challenge the existing ways of doing things.

“To explore various perspectives in this important matter has been important for us. Therefore, our findings are identified through a combination of desk-research, interviews, workshops and questionnaires providing insights from different stakeholders such as the public sector, social impact startups and investors,” says Stine Lomholt, Director of Business Development, Den Sociale Kapitalfond.

“In this way we have been able to not only identify the four main gaps, but it has also given us the needed insight to formulate seven actions points that in our belief address these gaps and, if they are implemented, will start paving the way towards increased collaboration for the benefit of the many and our welfare society,” she continues.

How can we accelerate welfare innovation?

The report recommends seven action points to accelerate welfare innovation through public sector and impact startup collaboration. The seven recommendations involves:

  1. Test and educate:  Train social impact startups in the way the public sector works
  2. Fund & de-risk: Launch innovation funding programs for municipalities and social impact startups to de-risk the testing of innovation
  3. Support and spread: Create national welfare innovation lab to support and facilitate testing of new innovative solutions
  4. Facilitate measuring of outcomes: Increase impact measurement and management competency and provide access to data to model potential outcomes
  5. Invest & Scale: Provide catalytic capital in tailored financing solutions such as blended finance and result based finance
  6. Communicate & market: Create events and an online marketplace where the public sector can express their needs, and where social impact startups can display their solutions to potential investors, customers and partners
  7. Make it a priority: Make social innovation a priority and set strategic goals that allow for people and time to be freed up for innovation

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Marthe Haugland - Senior Innovation Adviser

Marthe Haugland

Senior Innovation Adviser
Marthe combines her international experience with her knowledge of business development and innovation to promote Nordic cooperation within the circular economy. She belives Nordic cooperation can drive the systemic change and give Nordic companies a competitive edge going forward.

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