Problem addressed

Strong barriers to funding in the social enterprise market exist: difficult involvement of institutional investors in pre-seed & seed investments, high transaction costs, incentives for funds to give larger tickets to fewer companies, lack of impact-related knowledge and expertise from investors.

For instance, investing in social enterprises and impact projects in the seed stage is highly complex and requires strong involvement of investors and high transaction costs and for 3 main reasons:

-       Seed investment implies lower tickets but the time spent by the investment teams to structure each deal remains equivalent to larger investment tickets ;

-       Founding teams behind impact project are usually less knowledgeable about investment processes, meaning they need to be supported thoroughly and throughout the investment process ;

-       Impact assessment requires a strong involvement from the investors during the whole investment process.

We identified a consensus on the need for seed impact financing and its insufficient coverage, with an order of magnitude of several tens of millions of euros missing per year for impact companies in the seed phase only in France. Several factors play a role in the access to funding: geographical location of the projects, their development potential, the type of impact sought, the form of innovation on which the project is based, the legal form of the project but also the type of customers and end users (BtoC, BtoB, BtoBtoC, etc.), the sectors of activity, or the type of solution developed (digital, hardware or both). Innovative commercial companies with very high development potential tend to align with the logic of successive capital raisings at the detriment of others.

More specifically regarding Business Angels involvement, we found out that access to financing remains difficult for young impact projects in France, despite strong availability of capital, popularization of impact investment and societal trends that are favorable to their emergence and their development, and that Business Angels have a key role to play : founding teams behind impact project are usually less knowledgeable about investment processes, which tends to lengthen the investment processes & requires additional support from investment teams. Impact assessment requires a stronger involvement from the investors with many more criteria to analyze. Therefore, funds alone  struggle in the impact pre-seed stage and can greatly benefit from associating with Business Angels who have much more time to allocate to support the startups as board members and/or operating partners.

On the other hand, angel investors pursue human and entrepreneurial adventure through their investments, have a low aversion to risk but a relatively small investment capability and quite often no follow-on capability (contrary to investment funds). A distinctive characteristic lies in the fact that they offer unpaid support to the investees, put their expertise and network at the service of the company, and build a working and trusting relationship with the founders. In addition, the strong involvement of angels as volunteers allows to overcome transaction cost challenges associated with detailed impact assessments and deal structuring.

Innovative solution

The theoretical financing chain starts with grants and love money, then business angels and finally multiple investment rounds from VCs (venture capital funds). However this model has its own flaws and in difficult financing markets (such as 2023, 2024 or 2025), it is not robust as startups need to convince for each round a new type of investor with diverging interests between the founders, the past investors and the new investors.

 Therefore, we want to mix BA and VC investments to support social enterprises and impact startups.

 Funds alone struggle in the impact pre-seed and seed stages and would benefit from associating with Business Angels, each of them bringing free sectoral expertise and know-how and unpaid support to the projects they invest in, which cannot be provided by funds. Greater collaboration between angel investors and funds would therefore be desirable insofar as it meets a need and provides better support to entrepreneurs while bridging what is commonly referred to as the valley of death.

 Our aim is to provide investments towards social enterprises and impact projects from both Business Angels and Investment funds while lowering the high transaction costs by relying on pro bono work by angel investors in every step of the investment process. The association of angel investors and funds facilitates the involvement of Business Angels and allows the pulling of the best from both worlds: expertise & support from angel investors to investees and professionalism, follow on capacity & support functions from funds.

Key results and benefits

As of june 2025, Impact Business Angels and Groupe SOS Participations supported 22 social enteprises with a total of ca. € 3.5 M invested. PULSE's teams led capitalization works allowing the initiative to be replicated EU-wide.

Regarding the promotion of impact investment and co-investment schemes between BA and VCs, the consortium conducted various communication activities, participated to various events and organized a series of webinars.

We also launched our VC micro fund / investment vehicle, named "Impact Seed Ventures", which aims to Support and assist ambitious, impact-driven projects from the seed stage onwards, with the aim of creating a more inclusive and sustainable society. The sectoral focus will be on i) transition and sobriety ; ii) social cohesion iii) Sustainable consumption with a transversal focus on: i) economic performance; ii) impact and iii) social coherence.

Under the EPSI - Empowering Partnerships for Social Impact in Bulgaria project, we act as mentors and knowledge transfer partners contributing to the activities  and developing financial instrument and more specifically helping the set up of an impact investment community led by Business Angels.

Potential for mainstreaming

We plan to promote our BA-VC funds partnership framework in France and Europe and increase the overall asset under management dedicated to impact investment, and are already working with European partners to establish similar BA networks dedicated to supporting social enterprises outside France.