New research from Durham University Business School argues that social innovation ventures often fail not because capital is unavailable, but because founders and impact investors struggle to stay aligned as a business grows. According to the researchers, misunderstandings over expectations, value creation, accountability, and growth can weaken relationships over time, leaving promising projects unable to realise their full social or environmental potential.
The study said initial investment is not the central problem. Instead, the challenge lies in sustaining the relationship after funding begins. Professor Pablo Muñoz, who co-authored the research, said: “Impact investors are reportedly willing to back such projects with over US$1.571 trillion in assets to scale social innovation. But despite growth in funding, many social ventures struggle to translate ambitious impact commitments into sustained investment relationships.”
To address that problem, the researchers developed what they call the impact investment relationship builder, a tool designed to help social venture leads and impact investors coordinate over time across three areas: impact, accountability, and revenue. The aim is to move the conversation away from one-off readiness tests and towards a more continuous process of negotiation, trust-building, and reassessment as a venture develops.
Muñoz said: “Investment allocations should not be decided based on a one-off venture readiness assessment, but from a progressive relational process. Understandings of impact, accountability and revenue should co-evolve over the duration of an investment relationship to avoid the de-coupling of aims and objectives.”
The research team said the tool was developed through interviews with investors, consultants, fund managers, academics, and a London roundtable with B Corps. The wider project also reviewed more than 500 historical impact investment relationships, examined the investment processes of 55 social ventures, and analysed 70 video interviews with founders in the US.
The paper, The Impact Investment Relationship Builder: A New Artifact to Improve Market Coordination in Social Innovation, has been published in Technovation.
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