Experts in impact investing are getting together on NextBillion to talk about what impact investment funds can do better to help early-stage startups get off the ground. Sachi Shenoy, executive director of Upaya Social Ventures explained on March 4 in the first post of the new weekly series:
The fact is, most [impact investing funds] are structured to only invest in companies that are already succeeding and ready to scale. Their fund managers cannot afford not to reap a return, so it is extremely hard for these funds to take chances on novel ideas or unproven approaches.
The resulting “pioneer gap”--where beginning startups run out of money before developing their ideas--requires fresh ideas and new funding models. For example, Upaya is backed by philanthropic capital, but some of its investments produce a return that it can reinvest in expanding operations. Shenoy includes a nice graphic showing how his organization’s funding structure is unique.
Keep up to date with the newest posts from the series here.