Accessing catalytic capital for your climate startup

Catalytic capital can be pivotal for your climate startup, bringing flexible money to the table with the intentional goal of making other investors follow suit. But just because it’s impact-focused doesn’t mean catalytic money is any easier to get ahold of. So, what does it actually take to prepare for these conversations?

Daniel Wanjira is Managing Director of Strategic Initiatives at Blue Haven Initiative. We sat down with him to unpack the different players in catalytic capital, and the key pieces you need to put in place before you approach them.

What counts as catalytic capital?

Typically catalytic capital is defined as financing that accepts disproportionate risk and/or concessionary returns relative to a conventional investment in order to (a) generate impact and (b) enable other investment that otherwise would not be possible.

The concessionary terms can be purely financial (i.e. more risk/lower return) or they can be non-financial. An investor might be getting the same return and same risk as other players, but their early participation acts as a signal that brings others on board when they otherwise wouldn’t. For instance, if a family office leads a round that 200 investors have passed on, with fair, non-extractive terms, that’s catalytic. 

Catalytic investment can take any form: equity, debt, grants, recoverable grants, or even guarantees. Plus, while you might hear investors describe themselves as impact-first rather than catalytic, these two groups often overlap, and impact-first investors will typically understand what you’re asking for if you come looking for catalytic capital.

The two types of catalytic capital providers

Asset owners 

This group includes: 

• Family offices 
• Foundations
• Government 

Others will provide catalytic capital as a one off, without it being a programmatic focus: for example, if a family office that's an equity investor in your business gives you a cheap, short-term bridge. Then there’s family offices, like Blue Haven, or foundations like MacArthur Foundation, which explicitly have catalytic capital programs.

That distinction matters for how you approach them: a one-off provider is reacting to a relationship they already have with you, while a programmatic one has criteria, a mandate, and often a pipeline process you need to enter through.

Intermediaries 

These are private platforms that raise capital from asset owners like foundations or family offices, and pass it down to entrepreneurs in a catalytic way. Intermediaries include:

• Specialized Funds (Prime Impact Fund, Energy Catalyst Fund, Tertiary Impact, LACI Debt Fund, others) 
• Specialised Fund of Funds (Trimtab Impact, Social Finance)
• Donor Advised Funds (ImpactAssets, Impact Charitable)
• Donor Collaboratives (Zero Gap Fund, Catalytic Climate Facility)

If you do not have a direct line to an asset owner, an intermediary is often the faster path — they've already done the work of aggregating catalytic dollars and typically have a more standard intake process than a family office's ad hoc pipeline.

What to know before approaching catalytic investors 

Understand how they engage

First, you need to know how the asset owners you’re targeting actually engage with companies on your level. For instance, some will only interact with fund managers, so a meeting simply won’t be on the cards. 

Look at their LinkedIn and website to understand the nuances around how to approach them, and whether you should approach them at all. If those are opaque, try and find transactions they’ve done in the past and reach out to their portfolio founders/fund managers.

Prepare for rigorous diligence 

Catalytic capital doesn't mean easy money: it often comes with the same level of diligence as a traditional investor – if not more, because catalytic investors have to be sure their investment brings this crucial component of additionality. 

You need a concrete answer to "what does this money unlock that wouldn't happen otherwise?" A weak answer is "it gives us more runway." A strong one names the specific thing on the other side of that runway — a regulatory approval, a pilot result, a match from a specific commercial investor who's told you they're waiting on that milestone. If you can't point to the thing your catalytic dollar unlocks, that's the gap to close before the pitch, not during it.

Be open to change

Initial conversations might center on a specific instrument, like a loan, but the final deal can shift toward a grant or equity if that better serves what you actually need. 

Maintaining flexibility is key. Come in anchored to the outcome you need (runway, de-risking a specific milestone, unlocking a match from another funder) rather than to a specific instrument, and collaborate with your investor on the structure that's actually fit for purpose.

Avoid a Catch-22

You might hit a wall where catalytic investors want to see commercial interest before they'll commit, and commercial investors want to see the catalytic money first. To avoid stalling, figure out your sequencing before you go to market.

In practice, that often means asking each side for a conditional commitment: a term sheet or letter that says "we're in for $X once you've closed $Y from elsewhere." That conditional paper can help break the deadlock — it gives the other side something concrete to underwrite against instead of just your word that the other conversation is going well.

Line up the right resources

Make sure your lawyers are well-versed in catalytic funding, so they don't end up blocking the deal.

 But you’ll also need someone – not a lawyer – who can help you think through the commercial and long-term implications. Cover your bases: for instance, make sure that taking this catalytic money won't prevent you from taking commercial money later, and figure out how to structure a grant so it doesn't distort your unit economics.

Plus, make sure you get your main stakeholders – including your board and your lead investor – into the process early, so they’re fully up to speed on what you’re doing and what the process entails.

Get the terms straight

Make sure you have a solid understanding of the mechanisms by which these investors deploy catalytic capital. Know the difference between program-related investing (PRIs) and mission-related investments (MRIs), because they come with different requirements. And get comfortable with the criteria around DAFs, so you're not caught off guard if an investor asks whether you can receive money from these funds.

Demonstrating this knowledge to investors will put you at an advantage over those who are going in blind. And if you’ve ever received PRI or DAF dollars before, make sure your deck makes that clear.

Where to study up

Prime Coalition has extensive resources available:

• Renaissance Philanthropy’s catalytic capital playbook
• The Catalytic Capital Consortium, which lays out real deal examples and how they've been structured
• The GIIN’s writing on catalytic capital
• Blue Haven's own published research and writing 

You can also check out Enduring Planet’s previous Insight with Lara Pierpoint.

Plan for extra legal costs

Catalytic financing can come with immense legal complexity, including side letters and custom terms that are built around what the investor needs to make the deal work.

If you’re looking for a grant or a recoverable grant, and you are a for-profit, line up a fiscal sponsor before you start having those conversations. At minimum, even if you don’t get one in place, do your homework about who fiscal sponsors are, what services they offer, and how much they cost, so you’re not blindsided when the time comes.

Be careful who you listen to

Different institutions will view catalytic capital in different ways. Some think it can be endlessly adaptable – structured or deployed in any way, with any return or risk profile. Others believe it only works as a specific type of instrument in certain situations.From the latter camp, you'll sometimes hear "you can't use a PRI to do X" or "a grant can't be structured that way." This is sometimes just that investor's house view because of their historic practice. It is always worth checking with one or two other catalytic investors before you take it as settled — we've seen structures get built that a previous investor swore weren't possible.

Daniel Wanjira is Managing Director for Strategic Initiatives at Blue Haven, an innovative Family Office dedicated to putting wealth to work for competitive returns and meaningful impact. In his role, Daniel seeds, scales, and sustains impact centered ideas needing patient capital to solve social and environmental challenges. Before joining Blue Haven, Daniel was a Strategy Consultant for the International Finance Corporation, and a Senior Advisor for Rural Energy Electrification in Africa. He holds a Masters in Foreign Service from Georgetown University, and an Actuarial Science Bachelors from Strathmore University