This was my first SOCAP and I could feel the energy and buzz the moment I entered the Fort Mason Center. There was lots of youth participation with new ideas and promise to improve the lives of people lives at the bottom of the pyramid. However, the marathon of 10-12 parallel sessions every hour was not only exhausting but also diluted the overall objective.
While most of the panels discussed the mechanics of impact investing, the core philosophy of impact investing seemed different for different stakeholders. For example, foundations are looking for projects that create impact, whereas big institutions like JP Morgan are deploying large pools of capital which directly, or indirectly, creates impact.
Today, there is a lot of philanthropic and grant capital flowing to support programmes in emerging markets. But we don’t see enough capital pushing businesses out of their comfort zone to create sustainable and economically viable models that can attract more commercial capital. Healthcare and education are two sectors which have received a lot of funding from foundations, but these sectors have not received equity capital from investors. This is primarily because most of the capital has gone towards programs rather than making business models sustainable and scalable.
We now have large global firms such as Deutsche Bank, Morgan Stanley and Bain Capital setting aside large pools of capital to be invested in projects in emerging markets. On the other hand, early stage, impact-focused entrepreneurs are starved of venture capital. This gap seems to be widening.
A lack of understanding of the emerging markets coupled with no local presence is a significant hurdle for many early-to-mid stage funds to commit capital. I spoke to early stage investors who were keen to invest in Africa but were hesitant without local support to manage the investment. They are now working with angel networks to identify good quality companies.
This is where advisory and consulting firms like Intellecap can play an important role, by providing an impact-focused angel network, carry out due diligence and also provide regular monitoring support to investors.
Gagandeep Bakshi is director and head of Investment Banking, Intellecap