Frontier Capital: Early Stage Investing for Financial Returns and Social Impact in Emerging Markets

Entrepreneurs serving poorer populations in emerging markets face a variety of challenges that are less common in richer countries—from dysfunctions in banking systems to lack of “friends and family” funding to get new businesses kick-started to challenges in seeking traditional “exits” (including acquisition or IPOs). But the heart of early stage risk capital is something more essential than the specific venture capital formula. It’s about taking a small bet on an untested idea—and increasing that bet as we see increasing evidence of its traction. We firmly believe this practice holds broad application for the opportunity at hand.
Our goal in this paper is twofold. First, we sound a clarion call for more risk capital to support innovation to improve the lives of LMI populations in emerging markets. Second, we answer the related question: What types of risk capital are most appropriate for this purpose?