Aside from the fact that social innovators often lack the opportunity to accumulate capital, there are (at least!) five factors that act as significant constraints to scaling up impact investment. To put it more simply, there are (at least!) five things making it harder for investors to put more money into impact investment:
1. Social enterprise programs typically exclude financial services innovators, as do most innovation focused programs;
2. Programs for women entrepreneurs typically exclude financial services ventures. This may not apply to you, but I, for one, was shocked to discover that I am not a “woman entrepreneur” despite my gender;
3. Investment banks are ramping up their effort to reach emerging managers (yeah!) with at least – wait for it – US$ 1 Billion under management (boo!);
4. Unintended consequences of Dodd Frank vis-á-vis innovation, small business & social enterprise investment are only beginning to come to light now. It’s hard to walk the line when nobody really knows yet where the line is, so I expect a lot of money will be fence-sitting for a while; and
5. Downward market volatility means that even passionate, multi-bottom line investors are scaling back their commitments. Dipping into new investment themes, especially potentially risky ones, is lower on most investor priority lists these days. Notional interest in (and need for) impact investment aside, more people are now chasing less money. Need I tell you that is is not a recipe for happiness or sustainability, much less scale?