Philanthropy & Funding

Integrated Capital for Social Enterprises

To build a thriving social enterprise sector, we need to rethink the purpose of capital and employ a new strategic funding approach.

A thriving social enterprise sector is essential to increasing community resilience and improving the lives of those who’ve been marginalized by the global economy. Social enterprises—which are in business to solve social and environmental problems—are willing to tackle complex systemic problems, build new infrastructure, and develop products and services that address pressing needs even if their profit potential is not obvious or will develop only over a long term.

These enterprises’ ability to succeed is hampered, however, by the current division of capital resources into overspecialized sectors, such as venture investing and charitable foundations, that fund only narrowly defined types of enterprises at particular stages. This situation won’t produce the breadth of social enterprises we need to solve systemic problems, because these enterprises confound the expectations of conventional funders in many ways:

  • They may have to build a supply chain or other systems (rather than just plugging into an existing infrastructure), which results in relatively high up-front costs.
  • They may have slower revenue growth or relatively low profit margins—by definition, they aim to maximize social value before profit.
  • They may have hybrid business models that put them outside conventional for-profit and nonprofit funding models (for example, a revenue-generating business with nonprofit charitable status).
  • They think about growth as a way to serve their mission, not as an end in itself. They may intend to remain rooted in a community and serve as a model to others, for example, rather than pursuing rapid and far-reaching expansion.

To build a thriving social enterprise sector, we need to rethink the purpose of capital and employ an integrated capital strategy. Integrated capital is the coordinated and collaborative use of different forms of capital (equity investments, loans, gifts, loan guarantees, and so on), often from different funders, to support a developing enterprise that’s working to solve complex social and environmental problems.

Integrated capital addresses the funding challenges social enterprises face in a number of ways: It allows for longer development times by including some types of investment that don’t need to make a return, such as grants. It gets enterprises through the “valley of death,” where they have a promising business model, technology, product, or service, but need more capital to realize its potential and don’t qualify for traditional financing. And when community foundations and local investors participate, integrated capital creates a community commitment to the enterprise’s success.

Integrated Capital in Action

Viva Farms, a social enterprise that addresses the twin problems of a shortage of farmers and lack of access to farmland near consumers, provides a good example of how integrated capital can work. The farm incubator in Washington’s Skagit Valley works with a mix of highly skilled migrant farm workers who have no access to land or capital, and young, educated urbanites who have little agricultural experience. Viva Farms provides training in sustainable farming practices, small land parcels with shared infrastructure, and marketing support.

The integrated capital approach gave Viva Farms access to funding that would not have been available otherwise. In 2011, our organization, RSF Social Finance, provided a $50,000 program-related investing (PRI) loan for equipment even though Viva Farms had no collateral, because the RiverStyx Foundation made a 100 percent loan guarantee. In 2012 and 2013, RSF provided gift funding for three AmeriCorps positions and a farm manager to coordinate winter education and farm planning programs. A new $200,000 loan for farm stand improvements and additional equipment will involve $50,000 from the Seattle Impact Investor Fund through a revenue loan agreement; $200,000 from RSF; and a loan guarantee from RiverStyx.

This support has allowed Viva Farms to train about 250 people and launch 15 farm businesses that produce on more than 70 acres.

Another prime example is Common Market, which provides a distribution link between threatened Delaware Valley farms and urban communities that lack access to fresh foods, largely through sales to institutions. The enterprise has grown rapidly through a series of integrated capital financings, the most recent one enabling purchase of a $945,000 warehouse space that significantly increased its capacity. Common Market at the time (2012) was not large enough to support the mortgage loan, but RSF was able to fund it with the backing of $350,000 in pledge contributions (which can be called upon in case of default) from W.K. Kellogg Foundation, the Claneil Foundation, and the 11th Hour Project; a $35,000 guarantee from the Common Market community placed as an investment in the RSF Social Investment Fund; a $250,000 RSF Local Initiatives Fund guarantee; and a $100,000 Local Initiatives Fund grant.

The warehouse has enabled Common Market to exponentially increase its product stock, which translates into increased purchases from local producers and more good food for those who need it. Common Market has also used the expanded facility to provide affordable shared space for other food entrepreneurs, creating an ecosystem that reinforces shared values around remaking the food system.

Tearing Down Walls, Opening Up Collaboration

As this work illustrates, RSF has the advantage of being able to draw on a diverse mix of both investment and philanthropic funds under one roof to support organizations we see as models for systemic change. We’re ideally positioned to serve as a laboratory for the integrated capital approach, and we’re taking on that challenge by reorienting our entire funding operation around the concept. We’re finding that it requires we break down the internal walls between investing and philanthropy—a reflection of the need to break down the walls between these sectors generally.

It’s encouraging to see that others are thinking along the same lines. Integrated capital shares collaborative and creative aspects of Nonprofit Finance Fund’s complete capital approach, which brings together financial, intellectual, human, and social capital to help nonprofits succeed, and Pacific Community Ventures’ catalytic capital concept, which recognizes that grants, guarantees, and seed funding can trigger additional financing that otherwise would not have been available to an enterprise.

The fact that we’re seeing this fresh focus on the uses of capital to achieve social benefits tells us that there is a real opening now for vastly greater collaboration between impact investors (individuals, networks, and firms), foundations (community and private), and community banks. As intermediaries working in social finance, it’s up to us to create a finance infrastructure that enables social enterprises—and the communities they serve—to thrive.

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  • Laurenne Garneau's avatar

    BY Laurenne Garneau

    ON July 17, 2014 12:08 PM

    Could you please provide more details on the governance structure of the body/institution/group that manages the total capital coming from these various sources of funding.

  • BY Sahar Khan

    ON July 17, 2014 12:59 PM


    Thanks for your comprehensive piece. I definitely think that the integrated capital model will reveal even more untapped potential in social impact work. I am a recent Stanford grad working on a women’s empowerment social enterprise in India and am at the ideation stage, but also seeking fund sources. Could you kindly recommend organizations/foundations/networks that fund social enterprises in India? Here’s a video of the project:

    You can email me: .(JavaScript must be enabled to view this email address)

  • Ian Matthews's avatar

    BY Ian Matthews

    ON July 18, 2014 09:31 AM


    Thanks for your interesting article and your thoughts on what is a complex issue. I look forward to seeing how RSF and others are able to continue to push funding towards models which better address the capital gaps of young for-profit social enterprises. Our experience is that there is no shortage of funding for early stage, incubated projects (<100K) and certainly no lack of interest in taking projects to scale once the social benefits/business model are already established (>2M) -the latter of course being the comfort zone for the vast majority of impact investors. Still, it remains very difficult for small companies to find funding to perform capital-intensive R&D-related pilots to accelerate product iteration and test the business model in a rigorous way (~500K). This is unfortunately true in the health space and even more so in developing world ventures where the huge potential for impact and market reach should conceivably balance greater risk. As a result, working with multinationals to re-purpose existing technology becomes the status quo, effectively discouraging innovation.

    Just a few thoughts. Thanks again for an intriguing article.

  • BY Andy Posner

    ON July 18, 2014 09:55 AM


    Thank you for this fantastic piece. I run a nonprofit CDFI called Capital Good Fund, and the Valley of Death you described could not more accurately describe the situation in which we find ourselves.  I’ve been looking into various means of financing the infrastructure and people we need to grow, and the Direct Public Offering model has seemed the most attractive. I think the integrated capital component is critical because it recognizes that as nonprofit we can, and must, accept philanthropic gifts in addition to the debt we take on.

    So thank you.  We will keep this top of mind as we pursue our scaling strategy.


  • Sabrina's avatar

    BY Sabrina

    ON July 19, 2014 07:17 PM

    Sahar, take a look at Acumen’s work.

  • Ted Levinson's avatar

    BY Ted Levinson

    ON July 21, 2014 10:23 AM


    There are plenty of organizations that fund social enterprises and social entrepreneurs in India. The key is to identify which ones match your corporate structure (non-profit vs. for-profit), stage of development (startup vs. seed stage vs. established organization) as well as your focus area and amount of funding you are seeking. is a good place to start. I also encourage you to check out the social enterprise incubator  Additionally, there are business plan competitions such as the DBS-NUS Social Venture Challenge Asia, fellowships such as Echoing Green’s Global Fellows program and geographic-specific funds such as Deshpande Foundation’s Hubli Sandbox focused on Karnataka.

    The best advice I can give to any budding social entrepreneur is to identify successful organizations operating in the same space and find out how they got their funding. In your case, will lead to plenty of leads if you focus on their portfolio organizations.

    Ted Levinson, RSF Senior Director of Lending

  • Sara Ellis Conant's avatar

    BY Sara Ellis Conant

    ON July 26, 2014 04:43 PM

    Fantastic explanation of RSF’s great work, Don.  And I love that RSF is so accessible to all investors with a $1K minimum.  I’m planning to open a college fund for each of my kids.

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