Unitus seeks to back new seed fund managers innovating for the masses in multiple emerging markets

The capital requirements for starting a new and scalable business have dramatically dropped over the past decade thanks to a broad array of modern technologies. However, despite this reduction, one significant problem still remains–the Seed Gap, or Pioneer Gap. As many entrepreneurs have experienced, the Pioneer Gap consists of a lack of appropriately-sized capital investments available to companies in their early stages of operations. It’s a well-documented problem and one that we’re actively addressing through our work with Unitus Ventures as we continue to make seed stage investments in promising entrepreneurs delivering impact for the masses in India.

Read: Impact Alpha Interview on Unitus Launcher with Will Poole, Co-Founder & Managing Partner, Unitus Ventures

As recently as 2013, only 18% of impact investors surveyed in JP Morgan’s Perspectives on Progress report preferred to invest in seed or start-up stage companies. More broadly speaking, the Global Venture Capital Insights and Trends report points out that “VCs prefer to make bigger investments in later rounds after companies have been partially de-risked.” The economics of larger venture funds also drive fund managers towards larger and later-stage deals. Twenty five years ago, Silicon Valley series A rounds were often $1-2M. Today the most exciting companies coming from hot accelerators like Y-Combinator are getting $6-8M in Series A, more than a 3X increase even after adjusting for inflation.

In order to unlock downstream scale-up capital, entrepreneurs need to obtain adequate seed funding to validate their product market fit and prepare for scale. But there are too few firms ready to provide that seed funding. The result is gridlock in the entrepreneurial ecosystem.

Unitus seeks to “launch” up to 10 new seed fund managers in emerging markets

We know that expanding our funds alone will not remotely solve the problem even in India where we are among the most active seed investors. As entrepreneurs ourselves, we see the Pioneer Gap as an opportunity. This is why we are actively exploring what we can do to help catalyze the seed stage ecosystem by supporting up to 10 new fund managers with a particular emphasis on emerging markets. We’ve preliminarily named our new effort “Unitus Launcher”.

New fund managers face significant challenges getting launched. Raising initial capital, setting up the systems necessary for proper fund administration, and having the requisite domain expertise are no small feats. In most cases, it will take up to two years before new fund managers can get started, if not more. Amit Bouri, Managing Director of GIIN, points to the increased demand for strong fund managers as a top challenge for the market’s growth. But where will the fund managers come from and how will they build confidence with investors?

By leveraging more than a decade of learning through the Unitus Group, we believe Unitus Launcher is uniquely positioned to bring smart, flexible capital to new fund managers in coordination with the administrative and technical assistance that is required to help make a fund successful. The World Economic Forum’s “From Margins to Mainstream” report stated “the first overarching challenge that institutional investors experience when approaching the impact investment market is the early stage of the ecosystem.” Challenge accepted.

Activating new fund managers has the potential to bridge the Pioneer Gap while unlocking a new suite of products and services being developed by entrepreneurs that can impact under-served populations around the world. We’re currently talking to industry experts, investment professionals, and people with early-stage investment experience who are considering activating a new fund to better understand what role we might be able to play in accelerating their success.

If you’re interested in connecting to discuss the concept or the challenge further, we hope to hear from you.  You can reach us by emailing us at launcher at usf dot vc (yes vc not com).