By Jhana Valentine
MBA Candidate, Class of 2026
SOCAP Global is one of the world’s largest convenings of the impact investing ecosystem. This year the San Francisco-based convening brought together roughly two thousand fund managers, allocators, entrepreneurs, academics, and more to Unlock the Power of Markets for Impact.
Catalytic Capital 2.0 was one the conference’s five content tracks and while the regular attendees of SOCAP might be ready to explore what the next iteration of catalytic capital might look like, it doesn’t strike me as a commonly understood concept in the mainstream just yet. But I hope that will change, because catalytic capital is truly at the heart of impact investing.
What is Catalytic Capital?
Despite what some funds and investors will advertise, most of the time there is a tradeoff between social impact and financial return. Catalytic capital accepts higher risk and lower returns because its aim is to unlock the future impact potential of people, projects, and businesses where traditional market forces fall short.
The MacArthur Foundation has been a leader in bringing catalytic capital more mainstream through the Catalytic Capital Consortium. They define it as “debt, equity, guarantees, and other investments that accept disproportionate risk or concessionary returns compared to a conventional investment in order to generate positive impact.”
To avoid any confusion, catalytic capital is not an asset class. It can be a grant, loan, equity investment, or some creative financing solution hyper-specific to the project or business need. Oftentimes it comes with hands-on support, called technical assistance in some circles. This flexibility is precisely what makes it so impactful and also why it is not a mainstream method of financing.
Catalytic Capital 2.0
At the recent SOCAP panel titled “Hitting the Reset Button: Unlocking the Next Era of Impact Investing,” several key insights emerged that underscore why catalytic capital is gaining recognition and maturing as an investment strategy.
First, venture capital (VC) is not the only tool in the toolkit. Many early-stage entrepreneurs discover that despite having strong business traction they can’t secure VC funding, or they don’t want to because the terms don’t align with their growth timeline and impact goals. These entrepreneurs can look beyond VC to other forms of catalytic capital.
For investors, there is an opportunity to examine where they operate in the diagram, illustrated below, showing impact and financial returns and debt to equity. Catalytic capital often exists in the middle areas, blending and bending the traditional financing structures to meet businesses where they are.
Finally, we can draw on the example of Jibu to see catalytic capital in action. Jibu operates a network of franchised water kiosks across East Africa that treat locally available water at the point of sale and sell it in reusable bottles for about $1 per 20 liters. The company flipped the traditional franchise model by investing 95% of startup costs upfront, allowing locally-owned businesses to become profitable within six to nine months. With $1 million in catalytic capital that accepted below-market returns, Jibu has grown to over 11,000 retail points across 8 countries, improving more than 700,000 lives—a 47-times impact multiplier. Without that initial patient capital to prove viability, the company would likely have failed before demonstrating that safe water access and local entrepreneurship could successfully work together at scale.
Catalytic capital represents a critical evolution in how we finance social impact. As the impact investing ecosystem matures, catalytic capital will be essential to bridging the gap between grant funding and conventional investment, creating financing solutions for businesses addressing our most pressing challenges.