This is the first article, in our three-part series on ‘Decoding Capria’s Impact.’ Read the second article, The Framework – that outlines our comprehensive evaluation criteria for fund managers. Read the third article, The Operation – that outlines how to operate for impact.
The biggest challenge faced by the impact investing industry is the lack of appropriate capital across the risk/return spectrum, according to an investor survey conducted by GIIN and J.P. Morgan. Of the existing capital invested, 91% was focused on the post-venture stage, and only 9% has been being committed to seed/start-up companies or venture-stage businesses. There is a need for high quality early stage impact investors. Adding to the challenges of deploying cash, over 50% of funds are “new” or are managed by a team lacking direct investment experience. First-time new funds are more willing/able to target smaller ticket sizes and hands-on work for early-stage and early-growth investing, but per a recent Preqin report, such funds are only interesting to about 30% of LPs.
Microfinance funding has peaked in many developing countries and is not applicable to growing business that need funding of more than a few thousand dollars. Banks are not willing to lend to uncollateralized new businesses. Thus, entrepreneurs continue to be unable to access capital to start scaling their businesses. This gap in emerging markets for funds managing less than $100 million investing between $500,000 and $3 million, being called the “missing middle” is in huge demand for an ecosystem of financial and social capital. Capria is a global impact investment firm that identifies, invests in and supports local impact fund managers investing in the “missing middle” in emerging markets. Capria works with teams in emerging markets to provide acceleration and advisory services, capital, and access to a growing network of impact fund managers around the world.
Capria will be instrumental and catalytic in the creation of 15 or more impact investment funds in emerging markets over the next five years. The impact funds will initially provide early-stage and early-growth financing to 200 or more local high-growth companies while deploying at least USD $500 million of follow-on capital raised from local, regional, and global sources. As these companies grow, we estimate positive impact on at least five million people over a 10-year period.
At Capria, we use the logic model to define our impact strategy. The logic model is an evaluation process which breaks down the broader vision into a plan of actionable items (inputs and activities) and intended results at different time frames (outputs, outcomes and impact).
We find highly committed fund managers envisioning both market rate returns and positive impact and engage with them in dozens of areas, ultimately looking to help them dramatically improve their fund management. The immediate output is the creation of local impact funds with strong fundraising and operational abilities, and access to capital and a peer network of comparably equipped fund managers around the globe. Launching these funds leads to investment in local impact businesses generating indigenous innovation, providing local employment with better salaries and working conditions, and scaling innovative product and service ventures to reach to new geographies while growing their profitability and sustainability.
In many markets, these businesses will directly or indirectly impact disadvantaged populations or systems by providing products and services that increase their access to basic necessities and improve their livelihoods. In other markets, the firms in the Capria Network will deliver impact solely via supporting the entrepreneurial ecosystem. In the long-term, Capria envisions dozens of new markets where thriving entrepreneurial ecosystems will be fueled by local and global capital flow, healthy competition will be established among entrepreneurs, and a network of advisors and investors will support the continued ecosystem development.
Below is Capria’s logic model in detail –
CAPRIA – Inputs and activities
- Pre-intensive: Identify fund managers investing in entrepreneurs from emerging markets with an impact vision
- Intensive: Develop content and trains fund managers to improve fund management and fundraising
- Advisory services and support: Continue to track progress and provide technical support
- Network: Connect global impact leaders to share their expertise, global best practices, fund capacity development, etc.
- Capital: Provide warehousing/GP/LP capital investment through the fund
LOCAL IMPACT FUNDS – Outputs
- Fundraising: Improved fundraising strategy, pitches and presentations
- Operations: More insight into how to run a lean operation that effectively deploys capital
- Network: Access to a network of fund advisors and investors
- Capital: Access to warehousing capital to reach first-close
LOCAL IMPACT BUSINESSES – Outcomes
- Employment generation: Formal, higher quality employment generation in predominantly low to middle income informal economies
- Scale: Growth and expansion to new geographies
- Increased credibility: Increased presence in the market leading to increased revenues
- Capital: Access to further / follow-on social, financial, and ultimately bank capital
- Improved governance: Better working conditions, improved pay structures and benefits for employees
ENTREPRENEURIAL ECOSYSTEM – Impact
- Network: Shared research and knowledge, best practices, pipeline, portfolio performance, etc.
- Increased competition: Improved quality and quantity of pipeline companies
- Capital: Increase in the amount and variety of capital flow into these regions
DISADVANTAGED POPULATIONS/SYSTEMS – Impact
- Enhanced access: Improved livelihoods, educational outcomes, healthcare, clean energy, water and sanitation, access to formal financial services, etc.
- End users: End clients could be anywhere along the supply chain – buyers/users/sellers. Examples include children, women, refugees, farmers, artisans, immigrants, etc.
This is the first article, in our three-part series on ‘Decoding Capria’s Impact.’
Read the second article, The Framework – that outlines our comprehensive evaluation criteria for fund managers.
Read the third article, The Operation – that outlines how to operate for impact.