The Center partnered with The Aspen Institute and ANDE in 2010 to develop the scope of this small-scale research project to accelerate the understanding of practices that may lead to horizontal capital aggregation among the impact-investing community. The community is focused on small and growing businesses (SGBs) and for the purpose of this paper, SGB is synonymous with social enterprise. The reason impact investors support SGBs is to establish commercially viable businesses that have significant potential for growth and social impact in the area where they operate. We define horizontal aggregation as the process of syndicating distinct pools of impact capital matched to the multiple phases of an SGB’s development and growth. This approach is in contrast to the more widely used “moment in time” form of syndication such as a financing round. Both forms of syndication are examined in this study, but the underlying focus is on whether a phased approach to capital syndication can be achieved.
This project was an outgrowth of a breakout session on the topic of “capital aggregation” involving a subset of ANDE members at the annual ANDE member conference in October 2009. It was guided by a document commissioned by ANDE and prepared by Dalberg Global Development Advisors, which pointed to the “missing middle” of funding to SGBs and identified restrictions to capital flow to support this sector. The session resulted in the formation of a Working Group focused on issues related to the flow of interested capital to SGB initiatives worldwide. One of the areas identified was a phased or horizontal aggregation of capital, which became a spirited topic of discussion within the Working Group.
