What the financial industry perceives to be unchartered territory may, on closer look, already carry the faint footprints of early trailblazers. Across the globe right now, remarkable fund managers are living out the goals of gender lens investing. They have innovated processes, disrupted norms in investment analysis and adapted investment and leadership structures to shift power dynamics. Financial systems are not neutral; they are shaped by practices that perpetuate or dismantle systemic inequities. And this innovation in investment practices – which so often pushes against the status quo in its pursuit of systemic equity – deserves recognition.  

To facilitate this recognition, over the past three years, Criterion has formalized a system of Advanced Practice to shift power in investments, underpinned by four core principles of Will to Act, Integrity, Accountability and Inclusion. The system consists of a coherent and consistent logic that identifies the existing practice in investment, analyzes the power dynamics within that practice, and then names a way to shift it to become a standard of practice for asset owners and managers. We now need to hold up the practices that are already in place amongst leaders in this field.

We have been fortunate to work with many amazing fund managers in Africa and have seen them adopt practices that are fundamentally about shifting power. Below we illustrate three of these and highlight the investment leaders who are already implementing them (and how). We also suggest how asset owners can ask for these practices from their own fund managers.  

1. Changing structures to expand Limited Partner (LP) access

What are the existing power dynamics?

Investment funds have minimum ticket sizes for individuals and institutions. In part, these are set high to mitigate the administrative burden of managing investors. However, they are also a gatekeeping mechanism that restricts wealth creation opportunities to a privileged few. High ticket sizes also prevent many high-net-worth women, who do not always have the permission or full autonomy to allocate capital, from investing in what may be deemed ‘risky’ investments like an alternative asset class. At institutions, a larger ticket size normally requires more stakeholder buy-in, thus disadvantaging those who have the will but not necessarily the power for decision making. These investment norms create an environment where those who have wealth largely shape and influence the investment landscape and by extension, their communities. 

How to shift power  

A lower ticket size expands access to investment and wealth creation opportunities for more non-traditional investors and marginalized populations, while also increasing diversity in the investor base. This practice addresses barriers to entry and shifts power dynamics, allowing more diverse investors to participate in wealth creation. investors to participate in wealth creation.  

Example: HealthCap Africa’s leadership in changing LP requirements  

HealthCap Africa is an Africa-focused venture fund that invests in early-stage fintech and healthtech startups across the continent. In addition to integrating a gender lens into its investments, the fund also carries out ecosystem-building activities aimed at increasing the gender diversity of the pipeline of fund managers and investors in the markets where it operates. In its latest fundraising round, HealthCap decided to lower its minimum ticket size requirement, which resulted in a 5% increase in women’s participation as LPs. They are proactively addressing biases and limitations in the financial system, using their power to change the norms around LP participation (and accepting the burden of more complicated legal work and fees as part of this process).  

HealthCap’s implementation of this practice aligns with all four Advanced Practice principles:

• Will to act: HealthCap is proactively addressing biases and limitations in the financial system, using its power to change the rules and norms around LP participation. HealthCap is willing to have more complicated legal work and process, a cost that they are willing to take on to encourage greater participation of women LPs.  

• Accountability: Smaller ticket sizes invite more individuals to participate in their cap table – which leads to more shareholders able to hold the fund to account, and more partners for HealthCap to rely on. By including these practices as part of their legal and investment process, HealthCap is held to account for honoring this practice.  

• Inclusion: HealthCap is expanding who can become a Limited Partner and participate in investment opportunities. They are building an environment where smaller investors, and more women, have a presence and voice in the investment landscape.  

• Integrity: HealthCap offers the lower ticket size to all those who want to participate. A public statement of this practice is an act of integrity.  

How to ask for this practice

Any asset owner who cares about expanding wealth access through greater LP participation can ask for this practice from your fund managers. However, this will create additional complexity in legal and reporting requirements for them. As an incentive, you can offer to cover back-office legal costs, set up a special purpose vehicle (SPV) or lead a syndicate to offload any potential cost increases. It is important to understand that a lower ticket size requires more investors to fill in the round and can potentially delay fund closing. To mitigate that risk, this practice should be accompanied by a fundraising strategy centered around community and local capital to help drive volume and impact.d any potential cost increases. It is important to understand that a lower ticket size requires more investors to fill in the round and can potentially delay fund closing. To mitigate that risk, this practice should be accompanied by a fundraising strategy centered around community and local capital to help drive volume and impact.

2. Prioritize local investment models and norms

What are the existing power dynamics?

The most common investment model is venture capital, which has become the default way of investing in SMEs globally. However there needs to be a critical assessment of whether a funding model exported from Silicon Valley is always appropriate in the local context. Investors and the type of capital they deploy deeply influence who receives funding, which comes with certain strings attached. Most of the funding for African startups comes from foreign investors and institutions, who may have different expectations, preferences, and risk appetites. The lack of deep contextual knowledge of the African market by foreign funders has often resulted in the replication of global north investment models and systems, without localized adaptions. It has also perpetuated conscious and unconscious biases in the deployment of capital that favor expatriate over African founders: as in the case of using SAFEs (Simple Agreements for Future Equity) as a default instrument, which was popularized by US accelerator Y Combinator. This bias for foreign investment has created systemic barriers for local founders and funders on the continent, skewing expectations around type of instruments, terms, governance, ownership, benchmarks, return profiles, and more.textual knowledge of the African market by foreign funders has often resulted in the replication of global north investment models and systems, without localized adaptions. It has also perpetuated conscious and unconscious biases in the deployment of capital that favor expatriate over African founders: as in the case of using SAFEs (Simple Agreements for Future Equity) as a default instrument, which was popularized by US accelerator Y Combinator. This bias for foreign investment has created systemic barriers for local founders and funders on the continent, skewing expectations around type of instruments, terms, governance, ownership, benchmarks, return profiles, and more.  ‍

‍How to shift power

One way to shift the power dynamics of importing foreign capital models is to design capital fit for the local context by prioritizing local investors who deeply understand that context. By encouraging the local community to participate as investors, you increase access to wealth building and capital flow by ensuring the capital and ownership gains stay local, and the return is shared and re-invested into the ecosystem. Importantly, local capital mobilization means you can finance businesses in local currency and avoid FX volatility and risks. In addition, having more local individuals and institutions invest in your fund allows the market to build confidence in alternative asset classes. Crowdfunding, syndicates, pooled-capital vehicles and angel investing are all examples of local capital mobilization. means you can finance businesses in local currency and avoid FX volatility and risks. In addition, having more local individuals and institutions invest in your fund allows the market to build confidence in alternative asset classes. Crowdfunding, syndicates, pooled-capital vehicles and angel investing are all examples of local capital mobilization.  ‍

‍Example: Mobilizing the Nigerian investment community

WEAV (Women’s Enterprise Acceleration Vehicle) Capital and HealthCap are two Nigeria-based fund managers that have prioritized local capital mobilization as part of their fundraising strategy. They are active ecosystem builders in Nigeria who have prioritized local capital, context and ecosystem development as part of their fundraising.

The implementation of this practice aligns with all four Advanced Practice principles:

• Will to act: HealthCap and WEAV Capital are both willing to use their time and resources to educate local investors, develop local talent, and provide the infrastructure needed to facilitate local capital movement. WEAV Capital focuses on creating strategic partnerships that allow for local exits to provide liquidity. HealthCap has created a free venture capital career program so more women become investors. Both funds are committed to spending their limited resources to developing local talent and economic opportunities.

• Integrity: WEAV Capital’s core value add is its ability to provide market level access and navigation support for its SMEs. This local market focus is aligned throughout its investment practices starting with its LPs all the way to the post-investment support for its SMEs. HealthCap’s extensive involvement in the Africa and global investment ecosystem is consistent with its desire to prioritize local capital while bringing Nigeria to the global stage.

• Accountability: By inviting the local community as funders, both HealthCap and WEAV Capital are opening themselves up to critical assessment and accountability around their deployment of capital and the impact achieved.  

• Inclusion: In approaching almost every one of Nigeria’s high net worth individuals (HNWIs) and engaging them in the investment process, HealthCap is expanding who could become an LP, as many would have never invested in this asset class. WEAV Capital’s market approach in creating strategic partnerships to engineer exits also drives the integration of local funders into the Nigerian capital market.

How to ask for this practice

If localization is important to the change you are creating, you can ask your fund managers to prioritize local investment models and investors, for example through local domiciliation. Asking for this practice requires expertise in helping the fund manager navigate local domiciliation laws and regulations. Asset owners can incentivize this ask by mitigating the legal expenses of local domiciliation or recommending lawyers who can navigate the requirements. Local domiciliation may prolong due diligence and closing timelines, especially if the local laws and regulations are not as familiar with the fund structure. As an asset owner, you can also influence government regulations to provide tax and other incentives for local domiciliation. Local domiciliation may not always be possible, however. Allowing the fund manager to use some of your investment for ecosystem building and offering introductions to more local investors are other ways to use your power to incentivize prioritization of local investment., especially if the local laws and regulations are not as familiar with the fund structure. As an asset owner, you can also influence government regulations to provide tax and other incentives for local domiciliation. Local domiciliation may not always be possible, however. Allowing the fund manager to use some of your investment for ecosystem building and offering introductions to more local investors are other ways to use your power to incentivize prioritization of local investment.

3. Accelerators as trust-building vehicles  

What are the current power dynamics?

Trust is a critical component in a successful investor-investee relationship, yet building it is one of the most challenging things to do. Power is traditionally weighted with the investor, who holds the capital and makes decisions about how it’s used.  They typically define what it means to be investment ready, and the design of accelerator programs reflects this investor definition. This power imbalance creates an environment where investees are constantly asked to make a case for their investment readiness. This creates pressure to only show a company’s best side rather than the challenges hindering their progress. Without a comprehensive understanding of a company’s problems and possibilities, investors cannot make an informed assessment of risks or returns.‍

‍How to shift power ‍

By prioritizing trust-building as a foundational practice, accelerators can create an environment where entrepreneurs feel supported and valued as equal partners, instead of designing programs around the needs of investors. This includes close collaboration with SMEs to deeply understand their journeys - their challenges, goals, and operational realities. The accelerator creates an environment where entrepreneurs are encouraged to be transparent about their experiences and receive customized support, enhancing both confidence and capability. As a collective of businesses, accelerators also have more power than individual enterprises. In a trust-based accelerator framework, accelerators function as allies and can shift power dynamics among investors and investees.

Example: an accelerator that prioritizes autonomy

wCap Fund I is a 100% women-owned gender-lens and impact-oriented investment vehicle focusing on bridging the financing gap in Southern Africa. The fund also runs an accelerator dedicated to increasing SME autonomy. Across four cohorts to date, wCap has consistently provided deeply contextualized support and built trust in the ecosystem. Instead of focusing on gap analysis, this fund prioritizes what the SMEs want and respects their growth trajectory, even if they don’t become “investment ready.” Support provided ranges from creating strategic plans and developing key internal policies which enhance climate adaptation practices, to recommending stock management and accounting systems. As an example of this model working, wCap Fund I recently deployed funds into Zanga African Metrics, a woman owned company based in Zambia, from the first cohort specializing in leadership development and HR data analytics.  

wCap’s implementation of this practice aligns with all four Advanced Practice principles:

• Will to act: wCap is willing to use its accelerator to challenge investment norms by not limiting participants to those investors deem investment ready.  

• Integrity: wCap’s determination to find aligned investors such as CGEF is critical to living out their values in prioritizing the SME’s autonomy over the investor needs.  

• Accountability: Having run four cohorts, wCap asks for – and crucially acts on - feedback from each of its participants to improve the program, which further builds trust. Investment monitoring becomes more efficient if trust and openness are there from the very beginning.

• Inclusion: wCap started by finding out what SMEs need then finds them the right expertise, rather than only accepting SMEs that match their existing set of expertise. This is a clear commitment to prioritizing inclusion.

How to ask for this practice

Running an accelerator is becoming a common way for many fund managers to build access to pipelines and reduce due diligence. However, these reasons put the focus mostly on benefiting investors. Asset owners who recognize the value in fund managers building trust with their community and ecosystem can offer a no-strings attached accelerator where SMEs are able to grow in the way they want, regardless of alignment with an investment vehicle. This then frees the fund manager to build a reputation in the ecosystem. You can carve out funding for the accelerator that is not tied to investment and ensure that its success and reporting is not measured in investment conversion rate. You can also implement different metrics for your fund managers to measure an increase in trust and relationship building, like a net promoter score.

Recognizing early trailblazers who raise the bar for the field

Criterion believes in focusing on possibilities. In a field that often looks at gaps and failures, we want to focus on what’s already being done and what’s worth celebrating. These practices often feel intuitive to fund managers who may have never articulated them through a lens of power. It is our hope that by building familiarity with the system of Advanced Practices, we will elevate the fund managers who are going above and beyond to transform systems while running their fund.  

Documenting Advanced Practices shows that to achieve the impact outcomes the field wants; we must first change how we invest. There are amazing fund managers out there who are already innovating practices that we will hold up as standards. Fund managers who have pushed the envelope and implemented advanced practices will be differentiated, creating a race to the top. It is also our goal that more asset owners will ask for these practices so they are used and valued for the change they can create.  

To find out more about how to apply the Advanced Practices framework and share your experience about shifting investment practices, get in touch with Susie Pan at pan@criterioninstitute.org.  

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