Are There Too Many VCs in Impact Investing? The Real Answer Is More Complicated than a Yes or No.
Ben Thornley is co-founder and managing partner of Tideline, one of the field’s leading research and advisory firms on impact investing. He’s not an investor—he’s the person that the largest limited partners in the world, institutions managing hundreds of billions in assets, call when they’re trying to make sense of a market they don’t fully understand yet.
His answer: the problem isn’t too much VC. It’s not enough of everything else. The capital stack in impact investing is barbelling—institutions piling into later-stage, more proven strategies while early-stage impact sits overcrowded and without much liquidity
EPISODE GLOSSARY:
Barbelling
Technical: A distribution pattern in which capital concentrates at two extremes of a spectrum, leaving the middle relatively underfunded.
In practice: In impact investing, institutional capital is flowing heavily into later-stage, more proven strategies (large private equity funds, public equities with ESG screens) and into very early-stage philanthropic work—while the middle (growth-stage impact, fund II and III managers) goes undercapitalized.
Why it matters: The companies most ready to scale—past proof of concept but not yet large enough to attract big institutional mandates—are exactly where the gap sits. Barbelling explains why the field can feel both overcrowded and underfunded at the same time.
Secondary Markets
Technical: Markets where investors buy and sell existing stakes in private funds or companies, rather than investing directly into new deals.
In practice: If you’re an LP in a private equity fund and you need liquidity before the fund winds down, you sell your stake to another investor on the secondary market. In conventional private equity, this market is large and well-developed. In impact investing, it barely exists—Ben noted you can count impact secondary funds on one hand.
Why it matters: Without a secondary market, every impact investment is effectively locked up until exit. That illiquidity premium makes impact structurally more expensive to hold than conventional alternatives, which rational institutions will price accordingly.
Concessionary Capital
Technical: Capital that accepts below-market financial returns in exchange for social or environmental impact.
In practice: Think of a foundation that invests in an affordable housing fund knowing the returns will be lower than a comparable market-rate fund—because the goal is to produce housing, not just profit. The ‘concession’ is the financial return the investor foregoes.
Why it matters: The field debates how much concession is appropriate—or required—for genuine impact. Ben’s view is that the impact investing community has sometimes made this debate more binary than it needs to be, excluding strategies that produce real impact but don’t meet a specific return threshold.
Lacking Liquidity
Technical: A state in which a market or asset class lacks sufficient liquidity mechanisms (secondary markets, structured exits, revolving credit facilities) to meet investor demand. In practice: An impact fund manager trying to return capital to LPs who need liquidity has very few options compared to a conventional PE manager. There’s no robust secondary market to sell into, fewer structured products to access bridge capital, and fewer exit pathways in general.
Why it matters: A lack of liquidity compounds over time. It makes the asset class less attractive to institutions that need to manage liquidity risk—which restricts the pool of potential LPs, which limits fund size, which limits what managers can do
