Horizontal capital aggregation for social enterprises

I found a really interesting study on horizontal capital aggregation for social enterprises (the process of syndicating distinct pools of impact capital matched to the multiple phases of an social enterprises' development and growth).

    Overall, our analysis confirms that a variety of contrasting investment models and investment expectations exist, and the poor coordination of impact investors creates inefficiencies and redundancies that obstruct the efficient flow of capital system-wide. We conclude that the aggregation of capital can benefit businesses when investors are first and foremost aligned by return expectation.
    Our research indicates that social capital mobilization is early in its development and lacking market mechanisms common to other asset classes. While developed markets enjoy a well-worn path of “upround” private equity sources, there is little, if any, of this “vertical” capital aggregation ladder for social entrepreneurs operating in underserved markets. Consequently, much of the capital formation needed to support the scaling of social enterprises will necessarily be “horizontal”—meaning that capital sources are much more varied than pure equity investors and may include philanthropy, “soft” loans, quasi-equity, and private equity. The hand-off between these participants would not necessarily require valuation increases. Instead, such participants may require systems or organizational infrastructure development, increased management capacity, and a more rigorously stress-tested business model to attract follow-on investors.

Source:

COORDINATING  IMPACT CAPITAL: A New Approach to Investing in Small and Growing Businesses

An Examination of Impact Investors and Phased Investing for the Launch and Growth of Social Enterprises, John Kohler, Thane Kreiner, Jessica Sawhney, July 2011.