Kevin Starr runs the Mulago Foundation, which funds social enterprises tackling poverty and development challenges around the world. His recent article (https://ssir.org/articles/entry/no-such-thing-as-impact-investing) in the Stanford Social Innovation Review has sparked an important debate. His central argument is deliberately provocative: "There is philanthropic investing, and there is commercial investing, and there is nothing in between."
He goes on to argue that what many call impact investing is often an illusion. Investors either expect commercial returns, or they intentionally accept lower returns in pursuit of social outcomes, and as he puts it, "Intentions without concessions have left that space mostly empty."
It's a compelling argument, and we think he's right. But we also think he's asking the wrong question.
The real question isn't whether impact investing exists. It's what makes an impact enterprise investable in the first place.
We spend too much time talking about capital and not enough time talking about capability. Across the impact ecosystem, we obsess over finance: how much investment was raised, how many funds were launched, how much capital was deployed. These are important questions, but they overlook something fundamental. Capital doesn't create investable businesses. Entrepreneurs do.
The missing middle isn't capital. It's capability.
Over the last decade, The Challenges Group has worked alongside thousands of entrepreneurs across the UK, East Africa, and Southern Africa, helping businesses grow, become investment ready, and create employment. What we've learned is remarkably consistent. Businesses rarely fail because they couldn't access finance. They fail because they weren't ready to use finance effectively. Commercial strategy, financial management, governance, leadership, customer acquisition, market access, and operational discipline aren't nice-to-have skills. They're the foundations of investability.
Our evidence tells a consistent story. In Uganda, through our 10X programme, we supported 350 young women entrepreneurs with tailored enterprise development. The result wasn't simply that entrepreneurs completed training: 270 businesses improved their performance, and those stronger businesses went on to create 562 new jobs. The investment wasn't just financial. It was an investment in entrepreneurial capability.
In Rwanda, almost 200 enterprises received both enterprise support and access to finance. Neither intervention would have achieved the same outcome on its own. Finance created opportunity, and enterprise support helped businesses convert that opportunity into growth.
In Malawi, our work focused on strengthening the beef value chain, not through subsidies or grants alone, but by helping farmers think differently: building commercial relationships between producers and buyers, strengthening farmer organisations, improving financial management, and supporting business planning. As a result, commercial agreements were signed between producer groups and buyers, farmer organisations strengthened their governance, farmers opened commercial bank accounts, business planning became standard practice, and climate-smart production methods improved resilience. Perhaps the most significant outcome wasn't technical but cultural: farmers who had traditionally viewed cattle as a store of wealth began seeing them as a business. That's enterprise development.
Across another programme supporting enterprises in East Africa, we saw the same pattern again. The businesses we worked alongside achieved 419 jobs created, 1,109 new customers, 128 businesses increasing revenue, 121 businesses increasing profitability, and more than $116,000 in external finance accessed. Notice that access to finance appears towards the end of the story, not the beginning.
Investors don't invest in impact. They invest in risk. Every investment committee asks essentially the same questions. Can this management team execute? Do they understand their customers? Are the financials credible? Can governance support growth? Will this business survive unexpected shocks? These aren't just investment questions. They're enterprise development questions, which means enterprise support isn't simply mentoring or coaching. It's risk reduction. Every improvement in financial management reduces risk. Every stronger governance process reduces risk. Every validated customer increases confidence. Every resilient business model makes investment more likely.
We should rethink investment readiness. Too often, investment readiness has become shorthand for a polished pitch deck, a financial model, and a due diligence folder. Those things matter, but they are outputs, not readiness itself. Real investment readiness looks different. It looks like businesses that understand their customers, founders who understand their numbers, leadership teams capable of adapting, operations that can scale, governance that supports growth, and financial discipline that builds investor confidence. A good pitch deck doesn't create those things. Enterprise support does.
Perhaps enterprise support is the real impact investment. Kevin Starr argues there are two legitimate forms of capital: philanthropic and commercial. We agree, but we think there's a third investment that is rarely acknowledge. Not a third kind of capital, but a third kind of investment: investment in enterprise capability. It is this investment that bridges philanthropy and commercial finance. It is what transforms promising ideas into investable businesses. It reduces risk before investment arrives, and it increases the effectiveness of every pound, dollar, or euro invested afterwards. Without it, many businesses never become investable at all.
Maybe we've been measuring the wrong thing. The impact sector often celebrates "we invested £50 million." Perhaps we should also celebrate "we helped 128 businesses increase revenue," "we helped 121 businesses become more profitable," and "we helped create 562 jobs." Because that's the point. Money is an input. Capability is what changes outcomes.
The future of impact investing may not be more capital. It may be better enterprises. If we genuinely want more businesses capable of delivering both commercial returns and measurable social impact, we should spend less time debating whether impact investing exists, and more time asking how we build enterprises worthy of investment. Because the missing middle isn't capital. It's capability. And perhaps the greatest impact investment we can make isn't into businesses at all. It's into the entrepreneurs building them.
Kevin Starr's article challenges the impact sector to rethink its assumptions, and we should accept that challenge. But we should also broaden the conversation. Capital matters, but without investment in entrepreneurial capability, capital alone rarely delivers the positive impact we all want.
