Patient access

What Is Patient Access?

In a financial context, "patient access" refers to the ability of enterprises, particularly those with long development cycles or social impact objectives, to secure patient capital. This distinct form of capital is characterized by its willingness to accept longer investment horizons and potentially lower or deferred financial returns in exchange for broader strategic objectives, such as significant social or environmental impact, or the development of groundbreaking technologies. Patient access falls under the umbrella of investment strategy, emphasizing a long-term perspective over immediate financial gratification. It contrasts sharply with traditional capital that often seeks quick returns on investment. Organizations seeking patient access understand that the impact or growth they aim to achieve requires sustained funding without the pressure of a rapid exit.

History and Origin

The concept of patient capital, which underpins the notion of patient access, gained significant traction with the rise of impact investing and social enterprise movements in the early 21st century. While the underlying idea of long-term investment is ancient, its formalization as "patient capital" for social and environmental good is more recent. Jacqueline Novogratz, founder of Acumen, is often credited with popularizing the term "patient capital" to describe investments that bridge the gap between traditional philanthropy and conventional venture capital.¹⁷,¹⁶ Acumen, established in 2001, explicitly designed its investment model around this principle, focusing on businesses serving low-income communities in sectors like healthcare, water, and energy, where financial returns might take longer to materialize but social impact is paramount.¹⁵,¹⁴ This approach emerged from a recognition that neither markets alone nor traditional aid were sufficient to solve deep-seated global poverty.¹³

Key Takeaways

• Patient access means securing capital that tolerates longer investment horizons and prioritizes long-term strategic goals over immediate financial returns.
• This form of capital is crucial for businesses addressing complex societal challenges, developing nascent technologies, or operating in difficult emerging markets.
• Patient capital often involves a higher risk tolerance and a commitment to providing extensive support to the invested enterprises.
• It serves as a bridge between traditional commercial finance and pure philanthropy, aiming for both financial sustainability and significant social or environmental impact.
• Pension funds and sovereign wealth funds are traditional examples of large pools of capital with the potential for patient investment, though the term has evolved to encompass more targeted impact funds.¹²,

Interpreting the Patient Access

Interpreting "patient access" involves understanding the alignment between an enterprise's needs and an investor's willingness to commit capital over extended periods, often with flexible return on investment expectations. For social enterprises or companies developing breakthrough technologies, achieving patient access is a strong indicator that investors recognize the long-term value and potential impact, even if immediate profitability is not guaranteed. It suggests that the funding provider is less concerned with short-term liquidity events and more focused on the sustained growth and mission fulfillment of the entity. This type of capital enables innovators to pursue challenging endeavors that might otherwise be deemed too risky or slow for conventional financing.

Hypothetical Example

Consider a hypothetical startup, "AquaPure," aiming to develop and distribute low-cost water purification systems in remote rural areas. Traditional equity financing firms might be hesitant to invest due to the slow customer adoption rates, high upfront infrastructure costs, and the modest profit margins associated with serving low-income populations. AquaPure, however, manages to gain patient access from a specialized impact investment fund.

The fund provides $5 million with an expectation of a principal return over 10-15 years, along with a modest revenue share, rather than a typical 3-5 year exit via acquisition or initial public offering (IPO). This patient access allows AquaPure to focus on perfecting its technology, building local distribution networks, and educating communities about water safety without pressure to achieve rapid scale or an early exit. Over eight years, AquaPure establishes purification centers in 50 villages, significantly reducing waterborne diseases, demonstrating the power of patient capital in fostering long-term economic development and social good.

Practical Applications

Patient access is increasingly vital across several sectors:

• Impact Investing and Social Enterprise: Many impact investing funds provide patient capital to social enterprise ventures targeting pressing global challenges like poverty, climate change, or healthcare access. These investments support businesses that prioritize social and environmental returns alongside financial ones.
• Deep Tech and Scientific Research: Startups in areas such as biotechnology, advanced materials, or renewable energy often require substantial capital over many years before products can be commercialized or scale achieved. Patient access enables these ventures to navigate lengthy research and development phases.
• Infrastructure and Sustainable Development: Large-scale infrastructure projects, especially those contributing to sustainable development goals in developing nations, benefit immensely from patient capital due to their long construction times and extended payback periods. The Federal Reserve Bank of San Francisco has noted the role of patient capital in sustained investment, particularly in contexts like community development.¹¹
• Long-Term Corporate Strategy: Corporations committed to long-term value creation or significant strategic shifts may seek patient capital or adopt internal capital allocation strategies that mimic patient access, allowing for investments with delayed payoffs but high strategic importance.

Limitations and Criticisms

While patient access offers unique benefits, it also faces limitations and criticisms. One primary challenge is the potential for investors to truly commit to the "patient" aspect, especially when faced with prolonged underperformance or the allure of faster returns elsewhere. Defining and measuring both financial and social returns for patient capital can be complex, leading to ambiguity.¹⁰ Some critics argue that the term "patient capital" can sometimes be used to mask poor investment performance or a lack of clear accountability, especially if the social impact is difficult to quantify.⁹

Moreover, while patient capital aims to bridge gaps, its supply is still limited compared to the vast needs, and securing patient access often requires a strong, compelling narrative beyond just financial projections. Concerns also exist about the "pioneer gap," where commercial investors are still reluctant to invest in companies serving low-income customers, even after patient capital has de-risked early stages.⁸ Issues such as the disconnect between the urgency felt by communities in need and the inertia within mainstream financial institutions also pose challenges for broader adoption.⁷

Patient Access vs. Venture Capital

Patient access to capital fundamentally differs from traditional venture capital (VC) in its core objectives and expected timelines.

While both seek a return on investment, patient access is distinct in its readiness to forgo immediate profit maximization for broader strategic or impact goals, reflecting a different philosophy of capital allocation.,²

FAQs

What types of organizations typically seek patient access?

Organizations that often seek patient access include social enterprises, deep tech startups, renewable energy projects, and infrastructure initiatives in developing countries. These entities generally have long development cycles or prioritize significant social or environmental impact alongside financial viability.

Is patient access a form of grant funding?

No, patient access is not grant funding. It is an investment, meaning the capital provider expects a return of their principal, often with some financial return, even if it's below market rates or takes a long time.,¹ Grants are typically non-repayable funds.

How does patient access benefit society?

Patient access enables the funding of solutions to complex societal challenges—like access to clean water, affordable healthcare, or sustainable energy—that traditional capital might overlook due to their extended timelines or lower immediate financial profitability. It supports innovations that contribute to long-term financial stability and broad-based prosperity.

Can individuals provide patient access?

While large institutions like pension funds and impact investment firms are primary sources, individuals can contribute to patient capital through various means. This includes investing in impact funds, participating in philanthropic venture initiatives, or directly supporting enterprises with a long-term, mission-driven mindset.

What are some challenges in securing patient access?

Challenges include the inherent difficulty in measuring both financial and social returns, the long timelines involved, and the limited supply of truly patient capital. It also requires a strong alignment of values and expectations between the capital provider and the enterprise.