Company founders and impact advisors, Margaret Gifford, Principal at Watervine Impact, and our own Shen Tong, Partner of FoodFutureCo, give advice on how to find patient capital from foundations, focusing on program related investment for mission driven companies and nonprofit organizations. Watervine Impact is a consulting firm for mission-driven companies and investors.

Both Watervine Impact and FoodFutureCo function as investors and mentors, supporting social entrepreneurs as they seek capital or capacity during the growth phase of their companies. Over the last few years, we have seen the rise of program related investment (PRI) and mission-related investment (MRI) from philanthropic investors. This has become an increasingly powerful tool for funding the gap between early stage to growth. In 2017, the Ford Foundation committed $1 billion toward PRI/MRI investing, bringing this form of mission-based investing into the mainstream. However, despite this visibility, the field is still in the earliest stages of development for investors and for those seeking funds. Philanthropic investing can be an excellent source of patient capital for early stage impact-driven enterprises, but accessing the capital can be frustrating for entrepreneurs.  We explain the nuances of this type of investing, and how companies can identify, source and secure successful PRI/MRI funds.

The Scenario: A growth gap

A B-Corp is on the verge of its first $1MM in revenue. Demand for its first bioplastics product appears strong, and the founders are hoping that the development of their second product will capitalize on this momentum. The company needs a fresh infusion of cash, but fundraising has stalled—they can’t find money that fits the company and its mission. As an early stage company still in the R&D phase, it is both too small for private equity and too large for friends and family. The priorities of the private investors so far just don’t fit the type of double or triple bottom line that the founders aspire to create.

On the other hand, imagine a nonprofit with a mixed revenue model. The nonprofit social enterprise provides direct services to feed the hungry, and also runs a small food hub distribution center, selling healthy food a critical  part of its impact. The business has grown over the last decade, and the executive director and board are ready to invest in larger-scale physical infrastructure to better serve communities in need. However, the nonprofit’s long-standing traditional grant funders aren’t interested in making grants to build buildings. The company has no collateral for a bank loan, and the mainstream bank interest rates are not affordable. How can they move forward?

In either scenario, the mission-driven enterprises are left in the gap between traditional types of funding—finding their growth path unappealing to large investors, while simultaneously, not quite qualifying for many types of grants. Here is where philanthropic investment can be a powerful way to fund growth.

The Opportunity: Types of investments from philanthropic investors and entrepreneurs

First, a couple of definitions. PRI and MRI are subcategories of Socially Responsible Investment (SRI). These investments are made by philanthropic foundations and are subject to IRS rules governing how the foundation can disburse grants or make impact investments. It is important to be aware of these rules and definitions before seeking philanthropic investment.

Socially responsible investments (SRIs) are investments which are screened so that investors avoid putting capital  into companies that are causing negative impacts to our environment or to society.

  1. Mission-related investments (MRIs) are a subcategory of SRI. These investments are made with the goal of having a positive impact on our environment and/or society, while also generating a financial return. MRIs are typically made out of a foundation’s endowment and are subject to IRS rules on non-jeopardizing investing.

  2. Program-related investments (PRIs) must have a charitable intent as their primary purpose, with financial returns as a secondary goal. PRIs fall between grants and traditional investments, and reflect qualities of both. They can take many forms, including equity, debt, or guarantees, and  are managed out of a foundation’s program portfolio. (For more information see The Case for Impact Investing (Gifford and Faella, SSIR 11/2/17)

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The Takeaway: Four tips for securing PRIs and MRIs and finding patient capital from foundations

Our decade-plus of experience working in the impact investment space has yielded these four top insights for entities seeking funding from foundations.

1. Do your research. Know your audience.  

It is crucial to understand how the broad framing of your company aligns specifically with a foundation’s goals, objectives and process. Foundations typically have a few focus areas, which they state on their website and in their tax documents. They also regularly review their impact metrics, seeking to increase the efficacy of their funds. Enterprises seeking foundation investment must know, and be able to articulate, how their company fits with these focus areas, and inside of the foundation’s mission or program priorities. Gaining certification like a B Corp, fair trade certification, or clear alignment with the U.N.’s Sustainable Development Goals (SDG) can help a company gain the attention of a foundation.

Knowing a foundation’s process is as important as knowing its priorities. Foundations must work very carefully between programming, investing and oversight to ensure that they are working inside of IRS rules for prudent investment. Entrepreneurs seeking funding must do their homework to understand the foundation’s process and respect the timeline for making decisions.

2. Prepare a long enough runway for the funding process.

Patient capital requires patience, and some flexibility for a long timeline. Since many foundations are new to this type of investment, the diligence process may take more than twelve months. But it pays to wait—Tom McDougall, of 4P Foods, a Virginia-based Benefit Corporation, is a prime example. 4P Foods works to build a more equitable food supply chain using scale-appropriate infrastructure and an open source technology platform. They recently raised $500,000 from the Bainum Family Foundation along with FoodFutureCo and traditional high net worth individual investors. 4P Foods also has an additional commitment of $925,000 as repayable loan as a PRI from the PATH Foundation.

“As a mission-driven company looking to align our long-term capital partners with our mission, that extra time is worth it,” McDougall affirms. “With these partners, we not only don’t have to sacrifice our mission, rather, we get to double down on it.”

Tom from 4P Foods carrying food donations

Tom from 4P Foods carrying food donations

Frustrated by the lack of mission-alignment with some traditional venture capital, McDougall welcomed the chance to work with a family foundation. 4P Foods was able to highlight their impact first and foremost, instead of having to relegate it to an appendix. The process with the Bainum Family Foundation took over six months, but was, for them, well worth it.

3. Build your network.

Networking is critical to raising business capital. However, you will need to think beyond your own network of  friends and family. New platforms, such as Nexus Global, Big Path Capital and Mission Investors Exchange, can be important resources. These platforms aim to make the sourcing and investing of funds easier for both sides, as foundations are notoriously difficult to “cold call.” Connectors like FoodFutureCo and Watervine Impact are also essential in making introductions and helping both sides prepare for productive relationships between investors and businesses or nonprofits.

Keep in mind that networking happens in all directions. Pure financial investors, especially those who are already interested or invested in your multi-bottom line company, will welcome seeing this type of non-dilutive financing. PRI and MRIs, similar to government and philanthropic grants, are more than general validation from others for traditional investors. This type of  financing is effectively a type of catalyst funding, making your business “investment ready” through its de-risking. It can propel your company into the next stage, opening up more interest.

4. Make the Impact Case.

Most philanthropic impact investors are interested in mission first—they want to see your impact before anything. Regardless of your company’s projected return on the capital, make sure you are clear with investors about your social impact. They may consider varying levels of return, but you can be sure that the mission-driven aspects of your company will need to be well-articulated.


In sum, mission-related investment and program-related investment are two powerful tools in the fundraising toolkit for enterprises. If your nonprofit or social enterprise company is mission-driven, has clear revenue streams, and needs capital with built-in flexibility, foundation investments should be on your short list.