Stanford Social Innovation Review | Winter 2013
Many entrepreneurs creating companies that serve the poor still find it difficult to raise capital, particularly at the early stages of their company's growth. Most investors, even those who care about impact, avoid these companies or wait to invest at a later stage when the execution risk is lower or when the risks are better understood. This hampers the growth of the market, keeping poor people from accessing high-quality goods and services that can improve their lives.
- Social entrepreneurs aiming to provide new products and services to customers with both low incomes and aversion to change also need to overcome the additional challenges of poor physical infrastructure, underdeveloped value chains, and thin pools of skilled labor to build their businesses.
- Few impact investors are willing to invest in companies targeting the poor, and even fewer are willing to invest at the early stages of the creation of these businesses, creating a pioneer gap.
- Without a structural change in the capital market for social businesses that attracts more impact investors, many will fail to bridge this gap.