The private sector has significant potential to accelerate development outcomes by investing in businesses that address social or environmental issues. However, less than 10 percent of such impact investments is committed to seed-stage or venture-stage businesses, creating a “pioneer gap.” A critical reason for this gap is that investment funds rely on management fees to operate and thus have an incentive to raise large funds with high minimum investment amounts. As a result, seed- and venture-stage businesses cannot offer the return needed to properly resource their teams, and fall outside the target investment criteria for these funds. To solve this issue, the Partnering to Accelerate Entrepreneurship (PACE) Initiative at USAID’s U.S. Global Development Lab and VilCap Investments formed a public-private partnership to build an investment vehicle to unlock private capital for seed-stage impact investments. Utilizing Village Capital’s peer-review model and a market-rate management fee, VilCap Investments has helped create 2,530 jobs, generate $5.6 million in revenues, and raise a $25.2 million in additional capital.
