Why Social Impact Investing is the Future of Philanthropy

The following content originally appeared on the Mission Investors Exchange blog.

A Q&A with Hala Hanna, Executive Director, MIT Solve

Q: Where Do You See the Biggest Opportunities in the Philanthropic Field?

There's a striking disconnect in today's impact landscape. While social entrepreneurs are developing viable solutions to global challenges, they often lack the resources to scale. Consider this: more than $251 billion sits in Donor Advised Funds (DAFs), yet we face a $4 trillion gap in achieving sustainable development goals. Through MIT Solve's open innovation competitions, we've seen firsthand that the challenge isn't a shortage of ingenuity – but connecting capital to promising solutions at the right time. The opportunity lies in strategically mobilizing this philanthropic capital across the funding continuum, from early-stage grants to growth investments.

Q: How Is MIT Solve Leveraging This Opportunity?

We've built a two-pronged approach. First, we provide non-dilutive seed funding through grant prizes to help innovators validate their solutions. Second, we created Solve Innovation Future, a DAF-structured investment vehicle that deploys venture philanthropy through debt and equity investments. This structure allows us to support entrepreneurs throughout their growth journey. By acting as both funder and advisor, we can be more flexible and risk-tolerant than traditional investors while ensuring our support aligns with each enterprise's stage of development.

To our donors, we ensure every dollar goes further. To our Solvers, we derisk the investment for others.

Q: How Is This Approach Disrupting Traditional Philanthropic Norms?

We're reimagining how DAFs can be used for maximum impact. Through Solve Innovation Future, we take early, catalytic positions in pre-seed to Series A rounds. On average, this unlocks 4x additional funding from other investors, often through introductions we broker. What's unique is our pay-it-forward model – all returns are reinvested into future Solver teams, creating a sustainable funding cycle. The impact is tangible: in just over three years, we've made 18 founder-friendly investments across 10 countries, spanning climate, learning, economic prosperity, health, and Indigenous Communities. Take Brastorne for example, a platform on a mission to connect 760 million Africans by enabling users to access information and markets through their existing telecom networks, ultimately bridging the digital divide and fostering economic resilience. In collaboration with Solve, they secured over half a million dollars, including an investment from Solve Innovation Future. Together, we decided that a revenue share agreement aligned with their shared incentives. Solve Innovation Future is repaid as Brastorne grows. If Brastorne grows quickly, the investment is repaid quickly, with a cap to ensure that the investment does not burden the maturing company. If the work grows slowly, repayment occurs in line with that growth. This entrepreneur-friendly structure is core to the Solve Innovation Future philosophy: using flexible structures to help investees like Brastorne remain focused on impact.

With nearly 60% of our for-profit and hybrid innovators actively raising blended capital from aligned investors, there are so many opportunities for patient capital to make a mark.

Q: How Do You Determine Which Solutions to Invest In?

We evaluate three key components: growth potential, investability, and impact. But more importantly, we look for opportunities where our capital can play a catalytic role. Rheaply, a 2020 Solver, exemplifies this approach. Founded by Garry Cooper during his Ph.D. studies at Northwestern, Rheaply began as a solution to reduce waste in research labs. The platform evolved into a comprehensive circular economy solution for tracking and reusing assets across organizations. When Rheaply needed funding to develop its carbon reporting platform, we joined as a minority investor in a $2.2 million round led by the Microsoft Climate Innovation Fund. Rheaply has since raised more than $30 million dollars, and the results speak for themselves: $4 million in value recaptured, 1.6 million pounds of waste diverted, and 1.91 million kg of CO2 emissions avoided in the past year alone.

Q: How Does the Structure Close Gaps in Philanthropic VC?

We're demonstrating that philanthropic capital can be both impactful and sustainable. By taking early positions and bringing aligned co-investors to the table, we're proving that DAFs can achieve both impact and returns. Each successful investment validates our thesis that we can prioritize impact alongside financial sustainability. More importantly, we're showing that philanthropic capital can be deployed more strategically to support social enterprises at critical growth stages, ultimately helping bridge the massive funding gap in achieving sustainable development goals.