New research from our Management and Marketing Department shows that misunderstandings between investors and founders are a major reason why social innovation ventures fail to grow. In many cases, they collapse altogether.
The study was led by Professor Pablo Munoz alongside Dr Jonathan Kimmitt. It found that whilst investment funding is available and ideas are strong, relationships between venture leaders and impact investors are often fragile.
Funding is not the main barrier
The researchers found little evidence that a lack of capital is holding the sector back. There is also no shortage of viable ideas.
Impact investors are estimated to control more than $1.5 trillion in assets. Much of this is intended to support socially driven ventures.
However, despite this, many projects fail to turn early backing into long-term partnerships.
This limits their ability to tackle major social and environmental challenges.
Clashing expectations
The study highlights a clear disconnect between investors and founders. They often have different expectations around growth, accountability and value.
These differences can lead to poor communication. Over time, goals become misaligned. As ventures develop, relationships can weaken further and eventually break down.
A tool to bridge the divide
To address the problem, the researchers developed an "impact investment relationship builder". It is designed to improve alignment between both sides over time.
The tool focuses on three areas: impact, accountability and revenue. It encourages ongoing dialogue, rather than one-off decisions.
This approach helps investors and founders build trust. It also allows expectations to evolve as ventures grow.
Research behind the findings
The study draws on a large body of evidence including over 500 historical cases of social impact investment relationships.
Researchers also examined 55 social ventures in detail and analysed 70 video interviews with founders in the United States.
They also spoke with investors, consultants and fund managers. A roundtable with London-based B Corps added further insight. These sources helped identify common coordination problems.
Improving long-term outcomes
The findings suggest that better communication could improve success rates. Clearer alignment between investors and founders is also key.
The new tool is designed to support stronger partnerships and help both sides manage trade-offs and develop shared goals.
