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How Catalytic Capital Is Serving Social Entrepreneurs and Funders

SOCAP Global March 6, 2023

Fast, Friendly, and Effective: Disruptive Philanthropy Fueling Equal Opportunity and Entrepreneurship

As an innovative investing option, catalytic capital can help bridge funding gaps for social entrepreneurs looking to scale innovations that tackle the world’s most pressing problems. Increasingly, philanthropists and practitioners are seeking new ways to put catalytic capital to work to better connect with scalable ideas and drive change in grant distribution. 

At SOCAP22, several of these innovative funders shared how they are using new tactics with donor-advised funds, recoverable grants, and alternative structures to prioritize investments in impactful solutions. During the “Fast, Fast, Friendly, and Effective: Disruptive Philanthropy Fueling Equal Opportunity and Entrepreneurship” session, they highlighted their innovative efforts to democratize access to catalytic capital. 

Casey van der Stricht, Principal at MIT Solve, said entrepreneurs moving from pre-seed to the first institutional round face a competitive funding situation. At the same time, she said, “philanthropy is looking for new ways to deploy regenerative capital, but somehow entrepreneurs are still not getting that capital.” With this challenge in mind, MIT Solve developed Solve Innovation Future as a donor-advised fund that returns profits from investments to the fund as part of a regenerative structure. 

“In the best scenario, there are options to roll the grant forward,” van der Stricht said. “You can structure options in a recoverable grant that says, ‘If you return, just put it back to work.’ More often than not, that’s the option chosen. It encourages sustainable organizations.”

Roivant Social Ventures is another organization with a sustainable funding model thanks to its origins as a 501(c)3 public charity spinout from a corporation. President and CEO Lindsay Androski said the concept of a self-sustaining charitable model that recycles investment dollars requires some explaining. “The idea that you would donate charitable funds to us, we will invest them, then get repaid and redeploy them, is more confusing than I would have expected,” Androski said. “I like to tell people, ‘This is so exciting, we can build a self-sustaining charitable model, and your dollars can matter multiple times.’”

The nonprofit organization serves as a way for parent company Roivant Sciences to use its professional expertise and guidance while funding innovative programs in the healthcare sector. “When we do give an investment, we are usually the first non-grant money in,” she said. “We are knowledgeable, we can help guide them, we understand the mission focus, and because we are a nonprofit, they know we are aligned with them.”

Providing support beyond catalytic capital is also the goal of the Silicon Valley Social Venture Fund, which is made up of individuals and families who pool their finances and resources to support social ventures and ensure they have scalable models. “The entrepreneur needs a whole village with them to move forward. They need much more than capital,” Partner Aarti Chandna said. “We look for other investors that we can invest together with; we look for skillsets that we don’t have or we look for skillsets that will help these entrepreneurs get to the next level.”

As an organization of like-minded investors, Silicon Valley Social Venture Fund creates a learning environment for its donors as well as its entrepreneurs. “I encourage people to work in cohorts, especially investors, to share each other’s diligence and take the burden off the entrepreneur and let them continue to focus and do their work,” she said. 

Watch Fast, Friendly, and Effective: Disruptive Philanthropy Fueling Equal Opportunity and Entrepreneurship

Speakers:

Casey van der Stricht, Principal, MIT Solve

Aarti Chandna, Partner, Silicon Valley Social Venture Fund

Lindsay Androski, President and CEO, Roivant Social Ventures

Catalytic Capital / Impact Investing
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