Since launching in September 2015, Capria has received an incredible amount of interest from fund management teams across the globe. In our first nine months, more than 500 impact fund managers with varying backgrounds and experience have requested to apply to our accelerator program from over 60 countries. Capria’s mission is to invest in, support and help capitalize new fund managers backing early-stage startups in Sub-Saharan Africa, South Asia, Southeast Asia, and Latin America. We couldn’t be more pleased to see how many aspiring managers resonate with our mission.
As we searched for the top impact fund managers, we also started working on market intelligence through a study on the impact investing ecosystem in a carefully selected subset of developing economies in Latin America, Africa, and South/Southeast Asia. Across the countries in our study, we identified a number of recurring themes with respect to impact-oriented investment activity, local ecosystem readiness, and entrepreneurial activity.
The countries covered in the study are:
- Africa: Kenya, Ghana, Nigeria & Rwanda
- South/Southeast Asia: India, Indonesia, Vietnam & Philippines
- Latin America: Mexico, Brazil & Peru
The ‘Global Trends in Impact Investing‘ blog series summarizes the trends from the above-mentioned regions as well as provides high-level insights into the global impact-investing ecosystem. The first in the series is our report on ‘Investment Activity‘. Don’t forget to read parts two and three of the series, which delve into the global themes in ecosystem readiness and entrepreneurial activity.
Impact Investment Activity
To measure impact investment activity, we considered:
- The amount of capital deployed relative to both regional and global trends
- The number of investments made in early-stage impact ventures
- The size and activity level of venture capital and private equity groups
- The level of collaborative funding among private sector investors, development finance institutions (DFIs), philanthropic organizations and government agencies.
Through over 200 conversations with ecosystem actors, visits to over 15 countries and analyzing the content of Capria’s 66 Cohort 1 applications from 25 countries, we identified 4 key global trends in impact investing activity:
1) The definition of impact varies significantly
Unsurprisingly, we found that the way impact is defined differs considerably across countries. In countries where impact investing was a relatively new concept (Vietnam, Philippines, Peru and Nigeria), impact goals primarily focused on job creation. In other countries such as India, Kenya and Mexico, the definition included:
- Access to essential services (education, healthcare, etc.)
- Environmental considerations (sustainable agriculture, etc.)
We saw this first hand during the Capria Cohort 1 Intensive. The team we worked with from Zimbabwe had a much narrower view of impact compared to the other groups in the Cohort. After discussions with Cohort members and the Capria team, they built on their impact thesis to clarify the broader impact of their proposed investment pipeline.
2) Philanthropic investments influence markets
Development Financial Institutes and philanthropic organizations often make below market rate investments. While their contributions may decrease risk for other investors, it can also distort how investments are structured, company valuations, and how impact is measured. Our analysis found that DFIs and foundation funders were most successful when they strategically made investments in partnership with mainstream and impact-oriented investors. This trend is most apparent in the areas of environmental conservation, healthcare, agriculture, and education.
The trend of DFIs and philanthropic organizations making successful investments in partnership with private investment groups is most pronounced in India, Rwanda, Ghana, and Brazil. An example of this is the StartHealth program. In partnership with the global health non-profit, PATH, and the Pfizer Foundation, StartHealth identifies for-profit healthcare technology companies eligible for a grant, followed by a potential investment by Unitus Ventures (formerly Unitus Seed Fund) and other investors seeking commercial returns.
3) Public programs can support entrepreneurship
There is significant variation in the quantity of funding allocated as well as the ability of government agencies to collaborate with the ecosystem. In Mexico, India, Kenya, and Brazil, local governments appear to be making significant contributions to the ecosystem by:
- Providing direct funding of support organizations or favorable debt financing
- Engaging entrepreneurs to solve social and environmental issues alongside government programs.
4) Most mainstream investors are still not making impact-oriented investments.
Despite an overall increase in impact-oriented investment activity, most mainstream investors are not investing in impact sectors. There are some cases where mainstream investors are supporting ventures that impact low-income populations, such as financial services, agriculture and education, but it is not yet widespread.
These trends shape the ecosystem for prospective invention-intensive impact fund acceleration in South/Southeast Asia, Africa, and Latin America. They have been identified through primary research as well as secondary sources.