Signaling for Impact: How Social Ventures Attract Follow-on Investments from Government-Private Co-Managed Funds

Purpose: This study examines the signaling strategies used by social ventures that have received initial investments from government-private co-managed impact funds to secure follow-on funding from similar hybrid investment sources. Design/methodology/approach: Applying signaling theory, this study analyzes mission-driven legitimacy and economic signals. The analysis is based on data from 101 South Korean social ventures that initially received investments from government-private co-managed impact funds and subsequently sought additional funding from12 impact investment institutions. Multiple regression analysis was conducted using hand-coded data from pitch decks. Findings: Mission-driven signals—such as the top management team’s impact-related experience, completeness of the impact plan, and receipt of government R&D grants—had a stronger influence on follow-on investment decisions than economic signals. Research limitations/implications: This study is limited to South Korean social ventures and government-private co-managed impact funds, which may affect the generalizability of the findings to other contexts. Future research could explore similar signaling mechanisms in different regions and types of impact investment ecosystems. The findings provide valuable insights for policymakers and impact investors seeking to design more effective funding mechanisms for social ventures. Originality/value: This study contributes to the growing literature on impact investing by focusing on reinvestment decisions rather than initial funding. It highlights the relative importance of legitimacy-oriented signaling in the context of public-purpose funds. This insight offers a novel perspective on how social ventures can strategically communicate their value in hybrid funding environments.