Social entrepreneurs aim to tackle systemic societal issues—such as climate change and clean energy transitions—yet face substantial challenges in attracting investment due to the high resource demands and extended timelines needed for their ventures. Consequently, these ventures are confronted with financial market frictions that make it difficult to align prosocial goals with financial viability. Whereas traditional assumptions about market incumbents assumes they would ignore or hinder social ventures seeking to disrupt their space, our paper published in the Journal of Business Venturing Insights indicates that incumbent firms’ corporate venture capital programs (CVC) actually provide a promising alternative funding pathway for social entrepreneurs by offering long-term, stable support for ventures focused on social impact. This is particularly valuable for entrepreneurs interested in sustainable development, public policy, and investment, as it highlights how CVC funding can facilitate large-scale social change.
Don’t take our word for it
Insights from semi-structured interviews with three major CVCs and eight social entrepreneurs from the energy sector – a field where sustainability and innovation are critical – shed further light on why both parties would seek out one another and highlighted the benefits of these collaborations. Each interviewee was consistent in addressing why these partnerships make sense, and what each party brought to the table. Here, two key themes emerged as the underlying mechanisms driving these investments.
Take all the time you need
The first benefit is classified as temporal benevolence, highlighting the willingness of CVCs to commit to long-term timelines, focusing on creating sustainable solutions rather than immediate financial returns. Unlike traditional venture capital, which demands more immediate returns, CVC allows for longer investment horizons that are better suited to the time-intensive goals of social enterprises. This patient approach is particularly beneficial for social entrepreneurs working on complex issues that require extended research and development, such as alternative energy technologies, improving the sustainability of the food chain or mitigating the effect of climate change. As such, CVC-backed ventures have the flexibility to pursue meaningful change without being constrained by the short-term pressures that often accompany traditional funding mechanisms.
No surprises here
The second benefit that CVC funding offers is resource predictability, which enables social ventures to plan and scale effectively. Large-scale societal issues, such as energy infrastructure and sustainability, demand reliable resources and extensive collaboration across sectors. CVC funding provides a level of resource stability that is difficult to achieve through other funding sources, thereby enabling social enterprises to secure the support they need to grow and achieve their goals. Arguably, this resource predictability has a more important second order impact in that it is likely to garner a level of buy-in from stakeholders like government agencies, industry partners, and community leaders that a single startup could not on their own. As social change often involves system level innovation and coordination, these partnerships create a foundation for social entrepreneurs to build trust and demonstrate the feasibility of their solutions at a scale that can drive real impact.
Forging a new path forward
That these collaborations are not just already occurring, but are fruitful for both parties, challenges commonly held assumptions that large corporations are merely profit-driven entities with little interest in social impact. Instead, CVCs understand the importance of social innovation for long-term industry resilience and public trust. By funding social ventures, corporations can engage in meaningful prosocial actions while positioning themselves at the forefront of industry shifts toward sustainability and social responsibility.
This new perspective is not just relevant for corporate or investment managers but also for policymakers, environmental advocates, and nonprofit leaders seeking to address complex societal challenges. Showing how corporate resources can be mobilized to support sustainable goals provides a roadmap for public-private partnerships that could amplify the impact of social entrepreneurship in diverse areas, from environmental sustainability to healthcare innovation.
For social entrepreneurs, the main takeaway is clear: rather than viewing corporate investors solely as profit-driven entities, social ventures should consider engaging with CVC as a viable and supportive funding source. Traditional funding avenues often limit the scope of social ventures by imposing short-term expectations, but CVC provides the flexibility needed for ventures focused on long-term societal goals. Additionally, policymakers and public sector leaders can use these insights to foster collaborations that align with societal needs. By promoting and supporting CVC partnerships, government agencies can encourage private sector involvement in public initiatives that address critical issues like climate change, sustainable infrastructure, and resource equity.
Read the full paper here to find out more: https://www.sciencedirect.com/science/article/pii/S2352673424000568
Author Bios
Joseph J. Cabral is the E.J. Ourso Assistant Professor of Entrepreneurial Studies in the Stephenson Department of Entrepreneurship & Information Systems at Louisiana State University. His current research interests include the financing of innovation and entrepreneurship, startup—incumbent collaboration, internal resource markets, and behavioral biases of decision-makers.
Shane W. Reid is an Assistant Professor of Management in the McCoy College of Business at Texas State University. His research explores the underlying mechanisms that drive key actions and outcomes across various aspects of entrepreneurship, including new venture fundraising, family business performance, entrepreneurial leadership, and entrepreneur well-being.
Reginald (Reg) Tucker is an Assistant Professor of Entrepreneurship in the Tom Love Division of Entrepreneurship and Economic Development at the University of Oklahoma. His research explores adversity in management and organizations, including how cognitive disability as well as poverty impact all stages of entrepreneurship.
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