The world of financing is getting ever more nuanced, and in addition to transforming and future-proofing companies, there is a need for catalytic capital to ensure the development of new solutions and ecosystems to solve global challenges.
Catalytic capital is a term used for an investment structured to be more patient, take on more risk, accept a lower return, or be flexible in other ways that differ from conventional capital.
The majority of investments globally are done expecting market-rate returns, what often is referred to as finance-first investments. It is within the finance-first investments where changing capital flows into becoming more thoughtful, sustainable, and impact-oriented will matter the most. Catalytic capital is characterized by being an impact-first investments and hold an important role in the spectrum of capital tools; to de-risk investments for finance-first apital,to act as a door opener. It can be a very powerful as a lever for change but is not sufficient on its own.
Its intention is to catalyse new areas for investment where there is little track record and high impact potential, but also higher risk and longer time frames. With the connection to EQT, with more than EUR 75 billion in assets under management and over 1,500 employees worldwide, the EQT Foundation has a unique opportunity of giving access to relevant expertise and providing catalytic funding for early-stage impact companies.
For every investment made by the Foundation, the entrepreneurs are matched with a Deal Team of EQT employees, providing access to relevant expertise and potential pilot customers in the EQT network, ultimately de-risking the investment for finance-first investors and mobilizing more capital for impact. While the EQT Foundation re-invests any capital gains from its investment activity, EQT’s ability to continue supporting entrepreneurs with capital as they scale is very valuable.