Beyond the myth of impact investing: What comes next

This article by Aunnie Patton Power, Katie Boland, and Brian Boland was first published in Impact Alpha on Janury 5, 2026 in response to an article written by Kevin Starr that was published in Stanford Social Innovation Review on December 11, 2025.

Kevin Starr recently articulated something many in the impact investing field have been quietly wrestling with for years. Writing in the Stanford Social Innovation Review, he declared: “There Is No Such Thing as Impact Investing.”

It is a necessary intervention.

Starr names a real failure at the heart of the field: the comforting fiction of the “win-win,” the belief that we can solve deep-rooted poverty and climate collapse all while reliably delivering market-beating returns to investors. He is right to call out the risk aversion that grips much of philanthropy. He is right to challenge the obsession with “market-rate returns” that has narrowed our collective ambition and constrained innovation at precisely the moment we need it most.

His critique lands and is welcome. But, unfortunately, the prescription that follows remains confined by the very system it seeks to reform.

The limits of the binary

Starr argues that if the “middle ground” of impact investing is a myth, then we must be honest about a binary reality: philanthropic capital takes risk, commercial capital takes scale. In this framing, philanthropy’s role is to de-risk enterprises until they are ready to “graduate” into commercial markets.

This framing feels pragmatic. It is also deeply limiting.

By accepting commercial capital as the destination state, we allow extractive finance to continue defining success. We treat commercial markets as neutral terrain rather than as systems governed by incentives that prioritize liquidity, control, and return maximization above all else.

The problem is not that companies fail to graduate. The problem is the assumption that graduation is desirable.

The graduation trap

When enterprises move from philanthropic or patient capital into conventional commercial markets, the logic of the business shifts. To meet the expectations of extractive returns, pressure is applied somewhere in the system.

Missions drift as prices rise and access narrows.

Value created by workers and communities is extracted by distant shareholders.

Long-term resilience is traded for short-term financial performance.

If philanthropic dollars are ultimately used to build companies that will be sold to traditional private equity or public markets under shareholder primacy, then philanthropy becomes a subsidy for the extractive economy. Not intentionally, but structurally.

This is not a failure of founders. It is a failure of imagination about what capital is for.

The structural missing middle

When Starr argues that accepting lower returns in pursuit of impact is simply “philanthropy,” he assumes that the space between donation and venture capital is largely illusory.

That assumption echoes a much older problem in development finance: the so-called “missing middle” of enterprises, i.e. businesses too large for microfinance, too small or too slow-growing for commercial banks or venture capital.

These are not marginal firms. They are the backbone of local economies.

What’s missing is not demand, talent, or value creation. What’s missing is fit-for-purpose capital.

The same structural failure appears again in impact investing. Capital has been engineered for two extremes: charity on one end, hyper-scalable venture on the other. Everything in between is treated as an exception, a compromise, or a temporary waystation.

But this middle is not empty. It is crowded with viable businesses that generate steady cash flows, create dignified jobs, and anchor communities, as well as with financial instruments designed specifically to serve them. 

Revenue-based financing, redeemable equity, capped-return structures, and long-term stewardship models are not concessions. They are financial architectures built for enterprises whose value is real but whose growth does not follow a Silicon Valley power law.

By framing this space as illusory, we risk repeating the same mistake that development finance has made for decades: blaming enterprises for failing to fit capital, rather than redesigning capital to fit enterprises.

A third path: Stewardship and durable ownership

We do not believe the future lies in choosing between philanthropy and commercial capital. There is a third path: one that builds a new system rather than patching the old one.

That path is stewardship and durable ownership.

Rather than using patient capital to bridge companies toward extractive exits, we can use it to anchor enterprises in structures that protect mission, distribute power, and retain wealth locally. Employee ownership trusts. Steward-ownership models. Community-governed platforms.

Imagine if enterprises like Hello Tractor or Pula were not only commercially investable, but structurally designed to steward the ecosystems they serve.

From exits to endowments.

From users to co-owners.

From growth at all costs to resilience by design.

From “tools” to new norms

Starr describes grants, cheap debt, founder-friendly equity, and revenue sharing as philanthropic tools, useful, but temporary bridges to the “real” economy.

We see them differently.

These instruments are not exceptions. They are the operating system of a just economy.

Grants can fund governance capacity and democratic infrastructure.

Patient debt can enable workers to buy out extractive owners.

Redeemable equity can ensure capital is repaid, and then steps aside.

Revenue-based financing can eliminate the destructive pressure to exit altogether.

These tools do not weaken businesses. They align them.

Holding the line

A familiar objection follows: If we don’t accommodate commercial return expectations, we will never unlock the trillions needed to address global challenges.

This argument mistakes scale for success.

If unlocking those trillions requires us to preserve the very dynamics that produced climate collapse and historic inequality, then the solution cannot lie there. Market rate returns are not neutral, they are a measure of how efficiently value can be extracted until systems break.

We cannot solve systemic crises by catering to the logic that created them.

What comes next

Calling impact investing a myth may clear the air. But it should not send us retreating to binaries that no longer serve us.

The future will not be built by optimizing for commercial exits. It will be built by investing in shared power, durable ownership, and structures that allow enterprises and communities to thrive over the long term.

If commercial investors will not fund these models, that is not a flaw. That is the point.  By using these tools as the new standard, we actively exclude capital that requires the extraction of resources as a prerequisite for investment.

The question is no longer whether impact investing exists.

The question is whether we are willing to imagine and build what comes after it.