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The Ultimate Introductory Guide to Funding Your Social Enterprise

From Crowdfunding to Venture Capital - Discover the Advantages and Disadvantages of Types of Funding to Scale Your Social Venture
32 minutes


Social entrepreneurs are motivated by a desire to improve lives and systems.

However, building a sustainable funding model is essential to realizing social impact on a meaningful scale.
If you're a social innovator serious about leading change, securing capital needs to be top of mind - whether it comes through increased sales and healthy margins, crowdfunding from your biggest fans, or a traditional bank or investor.
In one sense, social entrepreneurs are quite lucky. Capital options are much broader, since triple bottom line organizations can often explore financing vehicles from both traditional non-profit and for profit sectors. The Center for Advancement of Social Entrepreneurship (CASE) at Duke University refers to this continuum as the ‘impact capital spectrum’. Each type of capital comes with advantages and disadvantages depending on the goals and stage of growth of your social enterprise. 
There is no black and white approach to navigating the social enterprise funding landscape because every business has its own set of constraints, opportunities, and vision for growth.
Funding considerations are compounded by the fact that social enterprises can form under several legal structures, which vary across jurisdictions. Many types of capital are only available to certain legal forms, and funders often have a preference to support either nonprofit or for-profit entities.
When weighing the options, founders should also consider how aligned potential funders are with their vision for change or what strategic support funders could offer them beyonds capital.  For example, impact investors and granting organizations typically have a specific focus, or work in a particular geography or area of impact.
Additionally, each type of capital comes with its own set of commitments and timelines. Pursuing a crowdfunding campaign to pre-sell your next product is a much shorter timeline than entering into a partnership with an impact investor who plans to stay invested for the next 10 years. If your crowdfunding campaign attracts a few high-maintenance customers, it won’t derail your entire business, but partnering with an investor with misaligned values could send you down a path of no return.
The compounding effect of these factors leaves social entrepreneurs swimming in options.
It’s no wonder many feel under-informed and nervous about charting their funding strategy.

In this four-part series, we’ll review the major types of capital along the impact capital spectrum. We’ll also share insights and perspectives from funders and entrepreneurs about their experience seeking and receiving different types of capital.



Self-Fund and Tap Your Inner Circle to Test and Validate Your Idea

No matter how scrappy or ‘lean’ a founder is, proving out a new idea requires money to get started. You need to show some level of traction before funders will be willing to take a risk to put their money behind a new venture.
Two simple ways to get started are 1) through self-generated resources, also known as bootstrapping, or 2) rallying your personal network to support your idea. 


Bootstrapping is a term used to describe businesses that scale without taking on outside funding. Instead, founders self-fund the business. 
Funds can come from personal savings, by funneling money earned from another job or income stream back into the business, or from revenue earned directly from the business.
At minimum, entrepreneurs invest ‘sweat equity.’ After all, expending time and effort to bring your idea to life comes with a financial opportunity cost. This paired with bootstrapping is often a necessity in the earliest stages when a business carries the most risk due to lack of market validation and track record. Self-funding allows you to build credibility and prove market demand so that you can make a strong case to outside funders should you decide to go that route later.
Some entrepreneurs will move through this initial phase more quickly than others. Some will begin bootstrapping their idea and, depending on the business model, industry, or vision for the company, may never seek outside capital (although this is less common the larger a business grows).

Global Entrepreneurship Monitor 2016 found that the choice to bootstrap is often due to inaccessibility of other types of capital, especially for women entrepreneurs “who may face unequal treatment from traditional lenders, both in developed and developing countries (World Bank, 2015)”



  • The founders keep full ownership of the company unlike accepting equity investment, and there are no additional costs like interest or fees when accepting debt financing.


  • Since growth is limited by founders’ savings or revenue earned, the speed of scaling can be slower than if one were to accept outside investment.
  • Without outside funders, founders may miss out on the advice, mentorship, and network that is often attached to capital.
When Acumen Fellow, Krupa Patel, first envisioned Silverleaf Academy, an affordable primary school in Tanzania, she knew it would require personal investment to get it off the ground. This early personal investment allowed the team to gain enough traction to secure the next phase of funding from an innovation fund.

“The four of us all clearly had alignment around the absolute necessity that something like this needed to exist in Tanzania so we self-funded to begin.”

Krupa Patel
Founder, Silverleaf Academy
Similarly, Yuliya Tarasava, Acumen Fellow and co-founder of CNote, was driven to develop a tool to empower financial freedom. She spent the first several months conducting market research and confirming the idea had potential. For Yuliya, the initial investment was not just personal savings but also the ‘sweat equity,’ the cost of her time and work bringing this idea to life.


Venture Capitalists also recognize the value of bootstrapping. This former VC shares three reasons why he decided to stick to bootstrapping when he became an entrepreneur and found himself on the other side of the table: 1) Prioritize profitability and sustainability over growth, 2) Freedom to make mistakes openly and 3) Reserve VC connections for the right time and opportunity. 
For many social enterprises, scaling entirely through self-funded earned revenue is a challenge. It’s not impossible, but the necessity for outside capital depends on how large and how quickly you aim to grow. 
At the end of the day, the decision to seek outside capital is a personal one - there is no right or wrong answer to your funding strategy.
Social entrepreneur, Maneet Gohil, shares his thought process on the decision to evolve past self-funding alone:

I wanted to run it all the way bootstrap only because that’s where the fun is: you make money and then you put more money into the business, and grow it, and then make more money. But later I realized that it would take a lot of time for me and there are a lot more opportunities for impact and that impact can be escalated if I raise funds.

Maneet Gohil


As the title suggests, this type of capital is raised from friends and family. 
Raising funding from your immediate personal networks is, in a way, an extension of bootstrapping. Entrepreneurs can tap into their close connections to supplement their own savings invested into the company.

Mixing family and money can be a delicate situation. It’s best to document the agreement from the very beginning to ensure there is a shared understanding of repayment terms and conditions.



  • Friends and family are not necessarily deterred by market trends or lack of company track record because they believe in the founder(s).
  • When there are repayment plans, friends and family may be more lenient to shifting agreed upon terms.


  • Accepting funding from friends and family has the potential to strain relationships should there be miscommunication about expectations like terms and conditions of repayment, or if the money is never ultimately returned or recovered.
Acumen Fellow, Khizr Tajammul, shares his approach to organizing friends and family to grow Jaan Pakistan, a clean cookstove company in Pakistan, before they had much traction:

We didn't have anything to show to anyone. We had imported a number of products and tested them in the marketplace. We didn't have traction. We didn't have revenues. We had an idea. And at the idea stage, I think the easiest thing to do is to turn to friends and family, and that's what we did.

Khizr Tajammul
Jaan Pakistan
One inherent limitation of a friends and family round is that it is not an option for everyone. Allie Burns, CEO of Village Capital, shares how her team is looking for ways to support entrepreneurs through this early-stage funding gap that disproportionately affects women and people of color.


New membership-based organizations such as Pipeline Angels are expanding access to early stage investment by using members as a friends and family round for women and non-binary femme social entrepreneurs who many not already have support.
The Global Entrepreneurship Monitor (2016) predicts that crowdfunding will play a larger role in facilitating informal investment from friends and family: “In the era of massive social networks that can be tapped by entrepreneurs, it is likely that crowdfunding will increasingly take the place of asking close relations for funding directly.”

Part 2 of this series goes into options to raise capital over short-term engagements to continue building momentum in the early days: crowdfunding and competitions. These specialized methods can secure quick injections of capital and provide the necessary boost you need to keep charging forward.


Build Early-Stage Momentum with Crowdfunding, Competitions, and Programs (Incubators and Accelerators), and Grants

Part one of this series explores early-stage capital to grow a social enterprise. Personal savings and a friends and family round can ignite the spark, but that flicker will quickly extinguish unless more fuel is added.

Short-term engagements like crowdfunding or impact-focused competitions and programs can supply much-needed capital, especially if you’re trying to become ‘investment-ready’ for more traditional types of capital.

Just as critical, but often overlooked, are the non-financial benefits that come with these experiences: mentorship, networks, and exposure.


Crowdfunding is the process of campaigning towards a funding goal by collecting small amounts of money from many people.
The most popular type of crowdfunding is rewards-based, where funders, known as ‘backers’, receive a product or ‘perk’ in exchanging for supporting the campaign. A less common type of crowdfunding is equity crowdfunding, where backers receive a share of the company in exchange for their pledge. A third variation on crowdfunding is debt-based, where many backers pool their funds together into a loan that is expected to be repaid with interest (also known as peer-to-peer lending).
According to Startups.com, worldwide crowdfunding raised $2.1 billion USD from 2014 to 2016.
This equates to over $119,000 raised every hour via crowdfunding!
Rallying the crowd can also democratize access to funds. Bre DiGiammarino, Senior Director of Social Innovation at Indiegogo, shared that 39% of entrepreneurs on their platform are female, while only 2% of venture capital funds went to female founders in 2017.
Crowdfunding benefits include building social and financial capital as well as proving market demand - especially for product-based business where the perk backers receive is the product itself (effectively pre-ordering it through the campaign). For these reasons, crowdfunding can play a pivotal role in a social startup’s early development.

What’s more, Bre DiGiammarino explains that crowdfunding is, “no longer just the first-time entrepreneur... We’re finding repeat entrepreneurs who use it again and again to bring new products to market, and even established companies that are using it to launch exciting new products and learn about what is working in their community.”



  • Running a crowdfunding campaign can be an excellent way to validate your product and show future funders there is market demand and willingness to pay for your product.
  • Campaigns build social capital (a community of supporters) in addition to financial capital
  • Crowdfunding can supersede systemic barriers faced by women and people of color.


  • It can be time consuming to run a successful crowdfunding campaign due to the level of planning and promotion efforts involved.
  • Not all funds raised will be available for business needs because generally a large portion of funds raised go towards supplying backers with ‘perks’.
  • The obligation to deliver rewards in a timely manner can be challenging, especially for goods in their first major manufacturing run.
When we sat down to talk crowdfunding with Bre DiGiammarino of Indiegogo, she identified the three key components of  successful crowdfunding campaigns: 1) a compelling frame 2) compelling content and 3) promotion plan. Learn more in the video below.


Learn more about how to succeed with crowdfunding with advice from StartSomeGood founder, Tom Dawkins, and this crowdfunding advice from social entrepreneurs in the Acumen community.


With the rise of social entrepreneurship, there are an increasing numbers of business competitions for purpose-driven startups. This is especially the case in post-secondary institutions, so if you are a student, it’s worth exploring what opportunities are available on your campus.
One of the most well-known global competitions for student social entrepreneurs is the Hult Prize, which awards 1 million dollars to a team tackling a bold challenge aligned with a large market opportunity.
There is a range of formats, eligibility requirements, and prizes (both monetary and in-kind). When the timing and area of focus fits, competitions can be a great opportunity for both exposure and funding.

Overall, competitions can be a way to fast track your learning as a new founder. The judging rules provide concrete criteria to focus your efforts and pitching your idea forces you to practice explaining what you do and why in a compelling manner. Even if you don’t end up taking home cash for top prize, the experience of putting yourself into the spotlight can lead to many unexpected and welcome benefits in terms of building your network and awareness for your social enterprise.



  • Presenting at competitions provides a platform for greater exposure to your community (if local), as well as potential funders, supporters and partners.
  • Competitions generally come with a set of judging criteria that force participants to clearly articulate the fundamentals of their business, including ideal customers, business model, and financials. Although every entrepreneur should be clear on these, participating in a competition and receiving critique and questions from judges can be a great learning experience.


  • Preparation for Pitch Competitions can be very time-consuming. If participating in too many, the process of continuous pitch preparation and practice can distract from focusing on growing the business itself.
Below, co-founder and CEO of Musana Carts, Manon Lavaud, shares the benefits of participating in the 2016 Hult Prize competition where her social enterprise was selected as a top 5 finalist among 25,000 projects.



Incubators and Accelerators are programs that provide participating entrepreneurs with the resources and support they need to grow.
Most programs have an application process, are quite selective, and like to keep cohorts small and intimate. Many come with funding, but not all. Typically, for-profit accelerator programs provide funding in exchange for equity in the company, usually around 5%-10%. The Gust Global Accelerator Report 2016 found that 35.5% accelerators surveyed were non-profit, many of which support specific fields - such as healthcare or education - or serve a specific demographic - such as women entrepreneurs - and may not take equity in exchange for their support.
GALI, collaboration between the Aspen Network of Development Entrepreneurs (ANDE) and Emory University, the Global Accelerator Learning Initiative, collects data to analyze the effectiveness of accelerator programs. Their insights found that ventures participating in accelerators earned more revenue, hired more employees, and raised more investment capital than other ventures.
Regardless of whether or not they provide funding, accelerators and incubators provide a mix of access to mentorship, networks, office space, professional services (such as legal or accounting support), and a cohort of like-minded peers.

With a variety of program types, it’s important to understand the time commitment and responsibilities of participation and to make sure the goals of the program align with yours.



  • There are many incubator and accelerator for social entrepreneurs that come with various levels and structures of funding.
  • Being selected to participate in a competitive program can boost your enterprise’s credibility and exposure.
  • The primary goal of many accelerator programs is to prepare entrepreneurs to secure further funding with angel investors or venture capital. This can provide an excellent opportunity to get connected with the right investor networks if you plan to pursue more equity investment.


  • Participating in these programs can be very time consuming. They can also be distracting if program goals are not aligned with the priorities of your stage of business and your organizational values and goals.


Securing grants from governments, foundations, or corporations can be a great option for early-stage social enterprises. The Global Entrepreneurship Monitor 2016 report points out that grants can be crucial for sectors with high start-up costs and where investments are generally riskier to private funders, such as medicine, information technology or energy production.

Although you don’t need to give up equity with grants, there can be a considerable amount of time invested both in the application phase before receiving the money, and in the reporting phase after receiving the money.



  • Grant funding does not need to be repaid, and there is no additional cost associated with it other than time and managing a relationship with a funder.


  • Applying for grants can be time-consuming. Most require some level of progress reporting and/or auditing to monitor use of funds and to confirm the level of impact that is generated.
Dan Chu, Executive Director of Sierra Club Foundation, explains how one fund supports community-level groups to advance clean energy in a way that also creates job opportunities, affordable housing and more.


Grants can play a pivotal role in the early stages of growing a social enterprise. Acumen Fellow, Krupa Patel, shares how an Innovation Fund grant was critical in the first few years growing Silverleaf Academy, and why they wouldn’t have taken another type of capital in this early stage.


Scale Impact and Revenues with Debt and Equity

Part one of this series explores how early-stage founders can tap into personal resources and the support of friends and family to fund seeds of a social venture idea.

Part two explores the benefits and drawbacks of accessing capital through crowdfunding, competitions, programs designed for social entrepreneurs, and grants.

Grant funding, crowdfunding, and other types of early stage capital can help you prove the business fundamentals of your company  like market demand and revenue model, but at a certain point you’ll need to seek funding to scale.

The good news is that impact investing is gaining traction.

In the Global Impact Investing Network’s Sizing the Impact Investing Market report, the global impact investing market is estimated to be USD $502 billion, managed by over 1,340 organizations. The market has grown by 10 times since 2009 when funds under impact investment were $50 billion (Investopedia).

Despite the growth, there is still much to learn on the part of both entrepreneurs and investors.

As Brian Trelstad, former Chief Investment Officer at Acumen, and now Partner with Bridges Fund Management Ltd. shared in interview: “More clarity and more communication would go a long way to helping ensure that the capital that is allocated for impact delivers as much good as possible and the financial returns that people are seeking.”

Impact investors may have varying focuses in terms of geography, stage of business, or impact area, but they share the common objective of funding companies that are making an impact. However, many define and measure impact differently. For example, Acumen developed Lean Data to better understand how investee companies are making a real, lasting difference in the lives of low-income people.

Aside from considerations for impact potential, these funding vehicles work much the same as they would for a traditional, non-impact startup or company.

Raising capital at this stage, whether philanthropic or equity, is a challenging task for any entrepreneur. It takes an investment of time, building relationships, perfecting your pitch and mastering your mindset.

Sasha Dichter, former Chief Innovation Officer at Acumen and now co-founder of 60 Decibels, urges founders to examine their underlying beliefs about fundraising. Instead of fearing rejection, every fundraising conversation is an opportunity to serve both sides in a true exchange of value. Reframe your fear of fundraising with Sasha’s advice:


We talk ourselves out of successful fundraising long before we ever get in the room with somebody.

Sasha Dichter
60 Decibels


Debt funding is required to be paid back to the lender, typically the full amount plus interest accrued throughout the lending period.
The most common types of debt come from banks in the form of term loans, revolving lines of credit, or credit cards. Typically, debt needs to be secured by assets, which means that in the event of a default - when the borrow cannot repay the loan as agreed - security will be taken by the bank to recover their funds. In some cases, debt can be unsecured, but this is less common in traditional financing.
Debt requires the lender to make an educated decision about the creditworthiness of the recipient. This desire to mitigate risk can be fulfilled by a solid credit history, but most lenders require loans to be secured by an existing asset, such as equipment or property. Depending on the security available to provide the lender with reassurance in the event of default, or inability to repay, on the part of the recipient, they may ask for a personal guarantee.



  • Term loans can be a good option for financing assets and equipment that will increase efficiency or production. The revenue gains produced as a result can service (pay) the debt payments.


  • Term loans generally have set repayment terms including the monthly installments and term length. Loans require repayment regardless of financial performance so if the business is struggling taking on a term loan may contribute to overall financial strain instead of alleviating it.



  • You only pay interest on the amount you use, for the length of time the funds are drawn. Likewise, when funds aren’t being used, there is no interest charged (although there may still be bank fees).


  • Because lines of credit are designed to cover temporary shortfalls in operational cashflow, they are not designed to finance the purchase of capital expenditures like equipment or assets. 


In contrast to debt capital, equity capital is received in exchange for a share of the company, typically in the form of stock. Although equity capital doesn’t need to be repaid, it does come with the expectation that value creation will exceed the initial investment as well as certain governance and reporting responsibilities to investors and shareholders.  It also has the long term implication of decreasing your control over the direction of the organization, since more owners means more decision-makers at the table.
In order to determine what percentage of equity to give in exchange for the equity capital, you will first need to determine the total value of your company.
We’ll look at three types of equity capital: angel investment, patient capital, and venture capital.


Angel investors are high-net worth individuals who invest their own money in entrepreneurs and companies based on their individual investment thesis, which can be based on their experience in a sector, recognition of a trend, or area of interest. Sometimes, several angels will come together to invest in small groups. They are typically experienced entrepreneurs themselves, and are interested in passing on knowledge and mentorship to their investees.

Since many angel investors are focused on certain sectors or industries, it can be helpful to understand how their goals aline with those of your organization.



  • The capital does not need to be repaid; however, investors may receive dividends proportional with the company’s financial performance.


  • If the investor is not aligned with your company’s values and mission, there could be disagreement about strategic direction and financial decisions.
  • Securing angel investing can be contingent on your network, making it much more challenging for those traditionally excluded from capital opportunities - females, people of color, and companies based outside of hub cities like San Francisco or London.
Yuliya Tarasava, Founder of CNOTE and Acumen Fellow, explains what she likes about working with angel investors, and also why they might only be able to take you so far.



Venture capital is administered through venture capital firms, many of which have a specific industry, stage, or location focus. This type of capital is usually invested in companies that have already proven their business model, product-market fit, a sustainable market demand, and are ready to scale quickly.
Venture capital deals are sizeable when compared with other types of capital. The expected equity exchange can be up to 30% or more, with investments ranging from $250,000 to $100 million; VC’s typically look for 10 times return on their capital when the company is sold or goes public (GEM 2016).
Global Entrepreneur Monitor 2016 found that in 2014 roughly half (52%) of all venture capital was invested in the United States, with China and Europe representing 16% and 11% respectively.
Former Chief Investment Officer at Acumen, and current Partner at Bridges Fund Management, Brian Trelstad, explains the different types of venture capital:



  • Venture capital can provide large injections of capital needed to scale quickly
  • VC funding is often called ‘smart money’ because investors provide additional services, insights, and connections to help the company grow - it’s in their best interest, after all, to leverage the resources they have at hand! 
  • Venture capitalists are invested in your success for the long-haul, typically until the company is sold or goes public. This can be a huge asset, but it’s also important to put in the effort to maintain a good relationship over time
Below, Brian Trelstad shares a few specific ways Venture Capitalists can support the growth of a social venture:



  • By giving up shares in the company in exchange for funding, you cede some of the decision-making control
  • Raising VC funding can be a lengthy and time consuming process that takes focus away from the running of the business
If your venture is seeking venture capital funds, hear what Brian Trelstad and Kathryn Wortsman, Fund Manager of MaRS Catalyst Fund, have to say about they qualities they look for when evaluating new investee companies:


Also be on the lookout for making these common mistakes when raising venture capital funds: 


Fund Growth with Types of Capital Specialized for Social Enterprise

Similar to new legal structures emerging around the world to support the growing sector of social enterprises, there are also new capital funding options that aim to better meet the needs of hybrid organizations.

While many social enterprises will do well navigating the spectrum of funding available to traditional for-profit and nonprofit organizations (explored in the first three parts of this series), depending on the circumstances, sometimes a more specialized option is a better fit.



Patient capital describes an approach to impact investing that Acumen pioneered to invest in companies that create sustainable solutions enabling low-income people to transform their lives. 
Acumen defines patient capital as debt or equity investment capital with a long-term investment horizon of seven to 12 years, a high tolerance for risk, and a goal of maximizing both social and financial returns.
Acumen Founder and CEO, Jacqueline Novogratz, explains it as taking, “the best of the markets as well as philanthropy and aid.” The patient capital model is funded by philanthropy which allows it to go where no other capital is willing to go. This funding can help de-risk early-stage social enterprises by providing the funds needed to further validate their model and scale to the point where traditional capital is willing to step in.
Acumen’s Accelerating Energy Access: The Role of Patient Capital report found that energy portfolio companies raised more than $219.5 million in investment capital in subsequent fundraising rounds. This equates to 10x the capital initially invested by Acumen.


Source: Acumen’s Accelerating Energy Access: The Role of Patient Capital report. As Acumen’s Accelerating Energy Access: The Role of Patient Capital report elaborates, “grants can also be used to fund operations, therefore playing a similar role to equity.” However, equity patient capital has an important role to play due to its signaling effect, meaning it helps position companies for subsequent equity raises.



One of the newest financing options on the scene, Social Impact Bonds (SIBs) are designed to fund impact outcomes. SIBs require significant upfront coordination between the key stakeholders involved: 
  1. Service providers, who receive upfront funding needed to deliver a proven intervention to a community in need, 
  2. Impact investors, who provide the capital to the service providers and later receive a return when agreed upon targets are met, and 
  3. The government, who pays investors their initial capital plus a return after the intervention has been completed and measured. The repayment of initial capital invested and exact rate of return paid is determined by how closely achieved results match those expected and outlined at the beginning. 
A social impact bond (SIB) is a contract with the public sector or governing authority, whereby it pays for better social outcomes in certain areas and passes on the part of the savings achieved to investors. A social impact bond is not a bond, per se, since repayment and return on investment are contingent upon the achievement of desired social outcomes; if the objectives are not achieved, investors receive neither a return nor repayment of principal.
Out of all the specialized types of capital, SIBs are possibly the most controversial. On one hand, they are designed to ‘pay for success’ which means funding is tied directly to measurable outcomes. Instead of paying for programming upfront with no certainty of outcomes, SIBs allow the government to shift risk to investors and only pay for results, which are often tied to expected government cost savings. 
Seven service providers helped ex-prisoners with substance abuse and mental health issues, helping to cut reoffending rates by 9%–above a target of 7.5%. The SIB therefore delivered a financial return of 3% on capital to foundations that funded the initiative.
Those against the idea fear that SIBs overcomplicate funding of social programs and release governments of responsibility to deliver. Even though payment only occurs when interventions are successful and the government benefits from associated cost savings, detractors argue that the combination of setting up and administering complex SIB contracts plus providing returns to investors could be more expensive in the end. Another worry is that, since the design of a SIB directly influences motivations and actions while running the intervention, it could lead to unintended consequences while trying to meet the narrow scope of deliverables outlined in a poorly designed contract.

There is still much to be explored to determine the efficacy and optimal use cases for implementing Social Impact Bonds to finance social impact.



  • Articles from Social Finance 
  • Stanford Social Innovation Review - A Critical Reflection on Social Impact Bonds 
  • Stanford Social Innovation Review - Social Impact Bonds, More Than One Approach
  • Fast Company - More Government Are Turning to Social Impact Bonds but Do They Deliver 
  • Canadian Centre for Policy Alternatives - Fast Facts About Social Impact Bonds
  • Globe and Mail - The Dark Side of Social Impact Bonds 


There is another form of unique financing, called quasi-equity or revenue sharing agreements, which takes qualities from both debt and equity capital. The structure can vary, but the distinguishing factor is that repayments are linked to the future financial performance of the borrower. That is to say, when the organization generates higher income, the repayments of the loan are higher.
Daniel Epstein, founder of Unreasonable Capital explains how he defines quasi-equity as “structures of investment that take on the same win-win incentives of a normal equity investment but do not rely on “an exit” for investors to see a handsome return on their dollars.”

Epstein also explains how quasi-equity provides benefits for both investors and entrepreneurs. From the investor’s side, it allows them to invest in impactful companies that aren’t necessarily able to show a clear path to exit through acquisition or IPO (initial public offering). For entrepreneurs, it provides the opportunity to align investors with the best interests of the company, since they will only receive a return when the company does well. For both sides, quasi-equity is a financing solution that offers more flexibility as an alternative to the long-term commitment of a straight-equity deal.



  • Unreasonable Institute - Beyond Debt and Equity
  • Business Development Bank of Canada - What is Quasi-Equity and How Can it Benefit Early Stage Companies
  • Attract Capital - What is Quasi Equity and How Is It Different from Other Forms of Capital


PRIs and MRIs are a funding option that allows foundations who typically fund nonprofits to invest in for-profit companies with a social mission. Not every foundation supplements their giving with PRI or MRI offerings, but when available, it can provide social enterprise with less expensive capital than traditional debt or equity.
McConnell Foundation describes how each types of investment differs:
Mission-Related Investments (MRI): MRIs are financial investments made in either for-profit or non-profit enterprises with the intent of achieving mission-related objectives and normally earning market-rate financial returns. Financial instruments in this category include bonds and deposits, loans and mezzanine capital, public equity, private equity, and venture capital investments.

Program-Related Investments (PRI): PRIs are investments made to charities as well as for-profit and non-profit enterprises to further the Foundation’s program objectives, but, unlike grants, they also aim to generate financial returns, with a tolerance for below-market returns.



Still have questions after reviewing the series? Let us know what’s on your mind!