The Finance System of Patient Capitalists : A Framework for Analyzing Risk-Taking and Incubation Structure

This paper aims to provide a framework for analyzing the finance system — fundraising, risk-taking and investing styles — of patient-capitalists. It examines the mechanism that enables the risk-taking style of patient capitalists who support high-risk businesses’ incubation function that makes a social impact. It examines the mechanism that enables patient-capitalists to support businesses that take high risks to make a social impact. Patient-capitalists may be more tolerant of return on investment than other capitalists who rely on traditional investment models. However, when assessing the value created by the investee entities, they do not overlook the maximization of economic returns to themselves as investors. The paper demonstrates that while accepting some trade-offs between the creation of social impact and the maximization of economic return, the patient capitalists aim to establish and sustain the circulation of funds to create social impact. The paper also explores the mechanisms that make this type of investment possible by examining the relationship between the non-profit sector, charity, and corporate philanthropy.