Each year, MIT Solve seeks entrepreneurs and innovators that have solutions addressing global issues like pandemics, refugee education, maternal health, and more. We seek solutions from people living in, and serving, the communities most impacted. The most promising solutions to these Global Challenges are selected to join the annual Solver class and are given resources to scale.
A staple in the Solve community are the social impact leaders like Burhan Jaffer, Global Head of Corporate Development at Hitachi, who lend their industry expertise to Solve to determine the focus of our Global Challenges, choose solutions, and resource these innovators in scaling.
Before Hitachi, Jaffer oversaw a corporate venture arm dedicated to investing in early-stage exponential technology like AI and drones. He also stayed engaged in the venture ecosystem by serving as an advisor and partner to boutique firms, which is how he stumbled upon Solve in 2018.
Since then, Jaffer has been a Member of Solve and has helped the organization determine the most promising solutions poised to address Solve’s annual Global Challenges. He served as a Challenge Leadership Judge for three challenges including the 2023 Climate challenge focused on ecosystems and housing. Recently, Solve met with Jaffer to learn about the funding gap stunting social impact entrepreneurship and his vision for how venture capital (VC) can evolve.
Why are impact entrepreneurs or frontline entrepreneurs under-invested? Can you share solutions to this issue?
First, traditional VC models are not well-suited for them because VC focuses primarily on financial returns. The expected return for impact investments hasn’t been normalized in mainstream markets, and there’s a lack of an established framework for assessing social returns. Once venture capitalists understand how to evaluate impact organizations based on their unique yardstick of returns, investing in such ventures will become more mainstream.
Secondly, while nonprofits may be a viable medium to direct resources for social good, in terms of their effectiveness as democratic, competitive and market oriented tools for driving social innovation, there remains a meaningful gap in fostering the kind of impact solutions that can urgently address the consequences of climate change and conflict. This has fostered growth of alternative investment mechanisms.
Solve has also made significant progress in pioneering a donor-advised fund, which allows donors to allocate capital towards impactful solutions with the expectation of positive downstream effects. However, there is a need for further innovation in how capital is mobilized.
A movement is emerging to convert traditional philanthropic dollars into commitments for a new breed of impact-focused VC firms. These firms seek limited partners as part of their fundraising efforts, traditionally consisting of family offices, high-net-worth individuals, and institutional money. By repurposing philanthropic funds as investment-style capital, the focus shifts from seeking the same financial returns as regular VCs to achieving social returns and generating impact. This transition will lead to greater accountability in measuring social returns as capital shifts from traditional grant-making and philanthropic donations toward philanthropic funding models.
Are there specific innovations and sectors most poised to pilot venture philanthropy capital solutions?
I think the two areas well poised for this innovation are climate-focused solutions and agricultural—food tech more broadly.
I’m thinking about climate solutions that focus on carbon sequestration, like large-scale kelp farming as a way to sequester carbon in marine ecosystems.
I also think reducing emissions or even addressing ethical mining is critical because there is already a focus on battery technology and electrification. There isn't enough attention to the minging of very resources that make battery tech and electrification possible.
There’s a huge funding gap between what is required and what is available to make these solutions possible. Philanthropic dollars can step in and quite significantly reduce that gap.
Time flexibility is critical for major change. Solutions like sequestration and regenerative agriculture are long-term investments. Traditional VC has a short cycle of return or commercialization–three to five years. In these instances, the time horizon for scaling climate ideas as I mentioned, and getting to a more commercialized self-sustaining business or operating model is probably seven to 10 years, but it’s essential.
What have you enjoyed and learned from being a judge for Solve’s Global Challenges and more broadly being part of the Solve community?
MIT Solve has cracked the puzzle of running a very structured programmatic initiative around how we solicit incredible ideas and how we validate them. Ultimately, we curate a select few ideas that precisely address global issues and use the convening power of MIT Solve to bring stakeholders together.
We spend time with frontline entrepreneurs—people with solutions to important problems like food security, sustainability, social justice, financial inclusion, and areas that are under-invested in. Climate change, political instability, and polarization are increasing inequality, especially in economically disadvantaged societies. Solve is doing a great job of bringing together entrepreneurs in this substrate of society and marrying them with foundations and individuals that can support them financially.
Solve comprises a mix of people passionate about impact, impact investing, and using tech for good to solve some of our most progressing problems. It’s been a great learning opportunity for me to interact with founders and entrepreneurs, but equally with a tribe of people with varying skills and perspectives in service of the common good.
If you’re interested in becoming a Solve supporter and helping social impact entrepreneurs scale, learn more today.