According to a survey by J.P. Morgan (JPM), so-called impact investors—those who fund companies they think will create financial returns and societal benefits—put $10.6 billion into almost 5,000 companies worldwide in 2013. More than half allocated money to sub-Saharan Africa, the most of any region in the world. A preliminary study by Open Capital Advisors, a Nairobi-based consulting firm, estimates that $650 million has been invested in Kenya alone, mostly in the last five years.
…Roberts and her co-founder at Open Capital Advisors, Andreas Zeller, have 27 employees. Their 80-plus clients have raised $45 million so far from leading impact investors, including Acumen, the Grameen Foundation, and AlphaMundi Group. Roberts, 30, says that while the world of impact investors is becoming more sophisticated, many still haven’t figured out how to finance these companies appropriately. Some bring the perspective of nonprofit donors. “Every investor says they are interested in everything,” she says. Yet when they do decide to back a startup, investors set high expectations. Roberts says many impact investors still want 15 percent to 40 percent returns, with terms tougher than you’d find in Silicon Valley. “They perceive the risk to be extremely high,” she says.
On the flip side, many businesses rely on donor grants to get off the ground, and some end up depending on them for too long, Chen says. “As long as donors can see the potential social impact, organizations will continue to receive grant funding, even if the business model is not sustainable.”
Business schools increasingly want a piece of the action. Many elite institutions have set up classes where students can do a semester-long consulting project for a social enterprise, which they then visit for a week or two. Nairobi is a popular destination. “If I wanted, I swear to you, I could have 200 business school students here next week,” Roberts says.