Patient capital can be described as long-term capital where the investor does not expect a quick profit and results but forgoes the immediate return for a more substantial result such as social impact. For financial investors patient capital sits between traditional venture capital and traditional philanthropy; between development and foreign direct investment.
Earlier this month four of us from IBEC joined about sixty others in Minneapolis for a three-day focus on Business as Mission (BAM). Overseas entrepreneur Peter S led several sessions focusing on BAM topics including BAM best practices, getting started in BAM, capitalizing a BAM business, defining success, and BAM investing. One item especially caught our attention: seven forms of patient capital! Here’s an overview:
Human Capital – the “boots on the ground” personnel making things happen. This includes the entrepreneurial groundbreaker types as well as business builders who manage, direct and develop the business using the fundamentals of business inputs, processes and outputs. It takes a team of people committed to the business and its financial rewards and social outcomes to achieve organizational success. As critical as the entrepreneur/creators are to a BAM businesses, the BAM community may need ten builders with professional and managerial skills for every one creator/entrepreneur.
Intellectual Capital – mentoring, consulting, coaching is critical to success. This is the capital that IBEC brings to the mix. IBEC consultants bring consulting services from the initial idea and opportunity stage to launch stage and onward to the growth of the company. This coaching service includes multi-disciplinary analysis and research, stimulus toward on-going learning, commercial and spiritual mentoring and a multi-dimensional value-add. You can learn more about IBEC’s services, processes and people on our website: www.ibecventures.com.
Natural Capital – related to the natural environment and ecosystem. Every analysis of the business opportunity requires an understanding and utilization of natural resources, raw materials and sourcing systems for this capital. Business stewardship of God’s creation (sometimes referred to the 4th item of the “Quadruple Bottom Line”) is an important and necessary capital component.
Infrastructure Capital – the system of man-made structures for communication, transportation, social services and energy. Every business must take into consideration how energy is acquired, how workers are educated and trained, how the product is brought to market and how to communicate with customers, vendors, employees, authorities and others in the supply chain and market chain.
Social Capital – what the World Bank calls, “…institutions, relationships and norms that shape the quality and quantity of society’s social interaction.” Social capital is the glue that holds an institution together, its culture. The leaders of every BAM business must understand the language, beliefs, customs, worldview and behaviors of the culture – as represented in their unique educational, governmental, familial, religious, and ethnic distinctives. While a foreigner will never be totally ‘native’ – and in many ways may forge a “Third Culture” – social capital understanding is fundamental to success.
Spiritual Capital – the faith, trust and commitment that people will do what is right in the eyes of God. It is “…showing integrity, being accountable and honest, offering hope, being loyal and trustworthy, loving and encouraging others, exhibiting good stewardship, being fair, creating order and serving others…” (Eldred in God is at Work, 2005, p. 98). When this is institutionalized in a business, it leads to a morally based DNA, which leads to life transformation and Jesus followers, which leads to kingdom living.
Financial Capital – according to Peter S, financial capital is to business what blood is to the body. We don’t think about blood too much, but it is vital to life. Sources of financial capital come to businesses differently at different stages and face unique challenges at each stage, but for startups the capital usually originates with an individual’s savings and personal collateral plus “love capital” (family, friends and fools).
These seven forms of capital are all vital and require research and understanding. It is difficult to isolate any one of them as more important than another, but common wisdom would likely concur that human capital and financial capital are two the biggest challenges. Getting the right people in place and the financial foundation at the beginning is much harder and more important than most would admit.
Investors who want to realize social change, transformed lives and long term success must opt for patient capital and make an investment aligned with the values of such a timeline. In time patient capital in its long-term application has the greatest potential to make followers of Jesus, bring social uplift and change to communities which start to build the kingdom of God.
Larry W. Sharp, Director of Training, IBEC Ventures