S2 Capital: Increasing Social Investment Opportunities for Seed-Stage, Youth-Run Companies in Emerging Economies

Multi-city
India
2011
Internship

After six months of focused research, interviews, and due diligence, I and a partner established a nonprofit micro venture capital fund called S2 Capital that invests in social entrepreneurs under the age of 30 in the developing world who are working in the sectors of healthcare, clean tech, mobile tech, women, and education. Uniquely from other nonprofit funds, the entrepreneurs that we invest in become our partners in sourcing new portfolio companies, thus implementing a unique pay-it-forward scheme in which entrepreneurs partner with investors to quest, cull, and highlight the next best examples of innovation.

This summer, both of us traveled to India—Mumbai, Delhi, Bangalore, Chennai and Hyderabad—to meet with potential portfolio companies in our five sectors of focus, leading philanthropists, investors, government officials, and scholars. When we arrived in India, we possessed a thoroughly researched yet still superficial understanding of the funding landscape for social entrepreneurs. We initially planned to invest exclusively in the “missing middle”—providing between $25,000 and $250,000 of growth capital to enterprises too big for microfinance and too small for traditional VC firms. Soon, however, we realized that raising those amounts of money is extremely difficult, especially in the current global financial environment and given our relative lack of experience as for-profit investors. But perhaps more importantly, after meeting with several of the social entrepreneurs themselves, we realized that another tremendous gap in the social change ecosystem was India’s young people, who—despite living in the country home to perhaps the highest number of social entrepreneurs in the world—are exposed to few if any resources on development through enterprise: how to innovate market-based approaches to eliminating poverty. So with the support of our partners on the ground, we decided to shift our focus to cultivating, supporting, and investing in specifically young people with the potential for launching and scaling social ventures. We have decided to focus our operations for the first three years on India and to invest only up to $15,000—up to $50,000 with co-investors—in 4 to 5 youth-run enterprises per year.