Market creation: building the pumps and pipes of investment

Across emerging markets, many young and growing businesses struggle to find suitable finance. Financing individual businesses can help, but lasting access to capital also depends on stronger markets, capable financial institutions, effective investment vehicles, and enabling market conditions. 

Market Creation focuses on how donors, DFIs, investors, governments, and market builders can address these barriers together and build the conditions that enable investment to flow. The resources below provide a shared language, practical frameworks, and real-world examples to help organizations understand their role and coordinate their efforts.

Building the pipes and pumps

For capital to reach young and growing businesses, the right channels, institutions, and market infrastructure need to be in place. Like water or energy networks in a city, investment flows where infrastructure directs it.  

Market Creation focuses on building that infrastructure, while addressing both the needs of businesses seeking finance and the conditions required for investors to provide it. The goal is not simply to move capital today, but to strengthen the systems that allow investment to flow in the future. 

Using this metaphor, the framework outlines four phases through which markets and investment ecosystems develop. The four resources correspond to the four phases of Market Creation, providing both a practical introduction to the framework and real-world examples of how markets develop over time. 

1. Breaking ground by testing demand and demonstrating what is possible;
   Explore: Market Creation Overview, which introduces the Market Creation framework, the pipes and pumps metaphor, and the role of market creation in supporting young and growing businesses.
2. Setting the conditions through evidence, standards, incentives, and institutional support;
   Explore: Case Study: The Mexico VC Market, which shows how the conditions for a new venture capital market were established over time.
3. Forging the channels through investment vehicles, platforms, regulation, and market capabilities;
   Explore: Case Study: Ci-Gaba Funds of Funds, which illustrates how market infrastructure and investment vehicles can connect capital with underserved market segments.
4. Mobilizing flow at scale as risks and transaction costs decline and investor confidence grows.
   Explore: Case Study: The Microfinance Industry, which demonstrates how market infrastructure can mature to enable capital to flow at scale.

Lasting change depends on strengthening both demand and supply. Businesses need access to appropriate finance to grow, while investors need viable opportunities to invest in. Market Creation helps both sides develop together.

By helping market creation actors understand their roles, align their efforts, and coordinate action, the resources support a more coordinated approach to addressing investment barriers. This helps strengthen markets and creates the conditions for more young and growing businesses to access the finance the need to grow. 

This work was conducted by Snowmelt and supported by the Growth Firms Alliance and FMO through the IYBA Market Creation Platform, financed by the European Union as part of the Team Europe Initiative on Investing in Young Businesses in Africa.