catalytic capital

Definition

Patient, flexible funding that accepts below-market returns to achieve social impact alongside financial returns, pioneered by organizations like Omidyar Network. Capitalism with a conscience, or venture capital with lowered expectations, depending on your perspective.

Example Usage

The impact fund deployed catalytic capital at 5% expected returns to prove the market existed before traditional VCs would enter.

Origin

Impact investing terminology, popularized in the 2010s

Fun Fact

Catalytic capital often fills the 'pioneer gap' in emerging markets or social enterprises, taking initial risks that enable later conventional investment at commercial terms.

Source: Impact investing and social venture capital

Related Terms

Intermediate

moats

In medieval times, a water-filled ditch that kept invaders at bay; in modern business, the metaphorical competitive advantages that protect a company from rivals trying to steal its lunch money. Warren Buffett popularized this term to describe sustainable competitive advantages like strong brands, network effects, or regulatory barriers. The wider the moat, the harder it is for competitors to storm your castle and the more VCs will swoon over your pitch deck.

🚀 Startup / VC

Intermediate

soft circle

Verbal commitments from investors to participate in a round that aren't legally binding, giving founders a sense of momentum that may evaporate when term sheets arrive. It's Schrödinger's capital raise.

🚀 Startup / VC

Intermediate

churn

The startup world's euphemism for customers abandoning ship, measured as the rate at which subscribers cancel or stop using your service. It's the metric that keeps SaaS founders up at night, because acquiring new customers is expensive but losing existing ones is devastating. High churn is basically your business slowly bleeding out, but with spreadsheets.

🚀 Startup / VC

Advanced

preferred return

The minimum annual return (typically 8%) that limited partners receive before general partners can claim carried interest, functioning as a hurdle rate to ensure LPs get paid first. Think of it as making the GP eat their vegetables before getting dessert.

🚀 Startup / VC

Advanced

Blitzscaling

The strategy of growing a company at breakneck speed while intentionally ignoring efficiency, profitability, and the screams of your finance team. It's named after the German military tactic because both involve advancing recklessly and hoping the supply lines hold.

🚀 Startup / VC

Beginner

Key Metrics

The numbers a startup tracks to measure success, carefully selected to be whichever ones happen to be going up. When those numbers go down, they become vanity metrics, and new key metrics are discovered.

🚀 Startup / VC

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