This year I have spent a lot of time at events discussing catalytic capital. What started as a technical exercise to understand creative financing structures for our portfolio companies and fund, has turned into something more complicated: a broader thought process for the smallest intervention needed to remove specific bottlenecks and unlock high-potential innovation that drives social progress.

Capital is the immediate, accessible answer. But the more conversations I’ve had, the more I realize that capital isn’t the full story. Money matters, but creative thinking can reduce its psychological hold to unlock value.

This is an early framework, and I am sharing thoughts as they crystalize and to invite others to think and build with me! Andrew Chang…  

The Philosophy

At its core, catalytic capital asks a simple question. What is the big risk that must be eliminated to unlock value that would otherwise remain impossible? Sometimes that intervention is capital. But more often than not, it’s policy, technical assistance, insurance, a warm introduction, a paying customer, or simply better information. Each one removes a stubborn constraint, that enables an option with tremendous value.

This matters more now than it used to. Drivers of innovation face headwinds. Wealth is increasingly concentrated, research is more herd mentality, taking risk costs more money for the average person, and access gaps are widening.

The Catalysts

Most Founders I know and/or work with think about catalytic capital in available terms. They look for a sponsor and a check. The instinct is correct but incomplete.

My goal for this thread is to widen the toolkit, stretch the imagination, so that the market place for Catalysts and Builders can become more efficient. I have grouped the catalysts into four families, from a broad and macro lens to a focused aperture: system, financial, market, and human.

My examples come from real conversations I’ve had with people that lit a bulb in my thinking. I invite collaborators in this thought process.

System Catalysts? These reshape the environment in which markets operate, before individual ventures are even formed.

 Policy — Market formation risk

During New York Tech Week, my good friend JC Jung convened a small group of investors and policy leaders to discuss climate innovation. John Raskin, the CEO of Spring Street Climate Fund shared an example that transformed how I think about alpha. A modest $2M investment in a lobbying effort helped pass Local Law 154, which requires most new buildings in New York to be all-electric, unlocking $10s of billions of investment in new construction. For comparison, the cost to fix existing buildings is $100s of billions.

Government Programs — Commercial adoption risk

In recent years, the US government has invested heavily in programs to fund “American Dynamism” – nuclear energy, defense innovation, and geopolitical competitiveness. Japan has taken a parallel approach to invest in renewable energy, partnering with large corporations to support and commercialize new entrants. These programs show that governments are picking their competitive advantages and enabling private industry to compete globally. When run well, governments often provide the lowest cost of capital and in many cases are early customers, enabling proof of concept.

Access — Discovery and access risk

President Lyndon Johnson once said: “It's not enough just to open the gates of opportunity. All our citizens must have the ability to walk through those gates.” At the time, this proposition was for civil rights, but today as access narrows across races, this now resonates at a catholic level.

Before AI, thoughtful cold emails from prepared and qualified applicants were powerful. Today, technical capability can be outsourced, transparency has led to flooding of inboxes. For example, I reached out to an elite investor I thought Faibridge was qualified for and she castigated me for being silly for reaching out without a warm intro because my email was one of 400 she receives daily. Fortunately, technology now offers the capability to assess merit at scale. Astia, one of my new favorite funds published a compelling white paper on their methods that I highly recommend.

Credit Ratings — Sovereign risk

The market's assessment of a country's macroeconomic risk establishes a baseline cost of capital for every business operating within it. A government seen as lower risk powers local entrepreneurs on the global market. Strengthening a sovereign's credit profile through fiscal discipline, stronger institutions, transparency, is catalytic.

Financial Catalysts: These make promising opportunities investable by reallocating or absorbing a specific form of risk.

Insurance — Project execution risk

At a recent Foundation House event on catalytic capital, Kyle McEneaney, Program Director for Climate Tech at the Schmidt Family Foundation, shared an example that stuck with me. shared an example that illustrates the power of risk transfer. An entrepreneur was raising approximately $100 million for a pioneering infrastructure project. Investors were comfortable with the opportunity but hesitant about one specific technical risk. The breakthrough came when an insurer in Bermuda, familiar with the underlying technology, agreed to underwrite that risk for a modest premium. Once the critical downside was covered, capital that had been waiting on the sidelines was able to participate.

Guarantees and Collateral — Credit risk

A guarantee transfers a defined slice of investment risk from commercial investors to a catalytic provider. By improving the credit quality of a transaction, it lowers the perceived downside for private lenders and allows capital to reach projects that would otherwise stay underfinanced. And, because it improves the risk-adjusted return on commercial capital, a guarantee can unlock investment at a multiple of the original commitment.

Market Creation — Market participation risk

Also at Foundation House, Adanna Chukwuma described how CARE acts as a market catalyst. CARE builds on-ramps for women entrepreneurs to qualify for and participate in capital markets through technical assistance, de-risking early transactions, reducing information asymmetries, and working with governments on enabling policy that unlocks capacity for debt and equity investment.

The clearest example is CARE's Village Savings and Loan Associations. At first glance these look like simple savings groups. In practice they are market infrastructure. CARE organizes women into trusted financial groups, builds governance structures, trains members in financial management, and generates demonstrated repayment histories that opens unlimited flow of capital in the markets of value. Once those groups mature, banks, insurers, fintechs, agribusinesses, and input suppliers suddenly have investable customers they previously could not reach. This program has since been spun out into a billion dollar+ credit fund.

Bridge and Validation Capital — Commercialization risk

Prime Coalition has built one of the most compelling models for deploying catalytic capital at scale. Prime deploys philanthropic capital as a market-building instrument to take first-loss equity, recoverable grants, and concessionary debt to absorb the risks that conventional investors cannot yet underwrite. By bridging the commercialization gap, Prime lets promising technologies earn the validation they need to attract institutional capital. Over the past decade the model has mobilized more than $322 million, supported 57 companies, and engaged over 120 philanthropic investors. The output is a repeatable financing architecture that turns charitable capital into a force for market formation.

Working Capital — Liquidity risk

In the world of traditional manufacturing today for small brands, working capital bridges the gap between paying for production upfront and waiting up to 120 days to get paid. That gap has sunk many otherwise sound companies.

Working capital also funds the operating costs that establish credibility in illiquid markets like asset management  where the “sample” is more expensive i.e., teams cost more, fundraising is harder, and real track record takes longer to demonstrate. This reality has especially kept many talented managers of color on the sidelines, resulting in lost DPI.  

Blended Finance — Risk-return mismatch

I have watched many Family Offices use Donor Advised Funds (DAFs) to lower their cost of capital. In this setup, the investor supports a cause they care about while deploying real capital toward market formation, having their cake and eating too. Capital like this comes with a duty to articulate the mission clearly, define how it will be measured, and show how it complements cash returns. Blended finance is actually a mature and very complicated industry that I look forward to learning more about.

Market Catalysts: These create the conditions for buyers, sellers, and capital to interact efficiently.

Customers — Demand risk

I had an especially illuminating conversation with my new friend Eva Koehler. When I asked her why One Acre Fund has been so successful, she articulated the focused on building a product that farmers were genuinely willing to pay for. And, as product-market fit took hold, that customer revenue steadily reduced the organization's dependence on donor funding.

Balance Sheet Innovation — Operating capital risk

One of Fairbridge’s portfolio companies Seal the Seasons’s creativity with its balance sheet has allowed the company to weather difficult market cycles. STS has convinced vendors to become investors, negotiated to pay manufacturers a bit more if they wait until receivables are paid (vs. PO financing) etc. Some of this is the founders’ ingenuity, but most of it is trust and mission alignment.

Last Mile Financing — Adoption risk

I had an energizing conversation with my good friend Andrew Chang about catalytic capital for deep tech companies, especially those building hardware, where proof of concept costs real money. Pilot programs and products with key customers require heavy investment to build the prototypes. This coupled with long sales and working capital cycles creates a real challenge. Andrew and Aimee are building in this space, helping deserving STEM founders bring critical products to market.

Technology — Productivity risk

Fabrice Grinda was the speaker at ERA 214 and laid out a philosophy of technology I intend to borrow. He has created a digital twin with a series of agents that multiply his efficiency. For example, while he is a solo GP, he is able to review 300+ companies a week and invest in 5. He also completely outsources his intricate travel expeditions to his virtual self.

Human Catalysts: These increase the capabilities and resilience of the people driving innovation.

Family and Friends — Household financial risk

Recently, I attended an event at Astia on how founders transition from surviving to thriving. A piece of advice that was both funny and true: it’s tremendously helpful to have a spouse who can finance the household in the “surviving” phase. In these formative stages of Fairbridge, that has been our reality at home.

Sponsors — Trust and credibility risk

A single sponsor can change the trajectory of a project. Whether they believe in the builder, or in the larger story she is a part of, that endorsement matters because it solves the cold start problem. People back people before the numbers exist, and even in the future when things are challenging and numbers are ruining the good story.

The advice I keep hearing is that in the age of AI networks become net worth. Sometimes, I find this advice problematic. A world that runs on networks quietly locks out qualified people who cannot easily reach them; those of different economic class, language, culture, foreigners etc. I am working on a piece on strategies for building networks based on my experiences moving here as an immigrant and feeling extremely insecure in crowds, with my accent, and stature. Stay tuned.

Education and Health — Human capital risk

At Fairbridge, we believe the ultimate catalyst is social progress itself. Our work aims to help create a baseline from which as many people as possible can reach good health, access economic opportunity, and enjoy a livable planet. We believe these are critical entry points to participate in the game of human flourishing.

In Summary: Every breakthrough begins with eliminating the bottleneck.

The more I’ve learned about catalytic capital, the clearer it becomes that this is a topic of bottlenecks. Every market, company, founder, and community runs into some constraint that holds progress back. That constraint is the opportunity for Catalysts.

At Fairbridge we draw superior imagination, capital, and energy to social progress. This post is meant to stir imagination for the creative ways to unlock small interventions that unlock risk-taking at scale and build resilience.

This framework is a moving target. If you have a catalyst I have missed, a sharper version of one I have named, or feedback that complicates the picture, I want to hear it.

Please refer to this graphic for visual expression of this framework

Join our Mission

Please share this post with builders, catalysts, and policy people in your networks!!

If you would like to explore collaborating on this topic and partnering with Fairbridge in our work for accelerating social progress, I'd love to hear from you. And if you are a founder, you can apply for funding.

And thanks to our sponsoring partner this week!

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