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Turning the renewed power of workers into a lasting pillar of stakeholder capitalism

June 22, 2021

The Brief - Daily Insights into Impact Investing

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Featured: Capitalism Reimagined

Turning the renewed power of workers into a lasting pillar of stakeholder capitalism. These days, American workers could well be saying, as Richard Fariña wrote and Nancy Sinatra sang, “Been down so long it looks like up to me.” Widespread labor shortages are forcing many companies to pay a bit more, offer additional training, expand their hiring pools, and provide steadier shifts, greater flexibility or improved work environments. The modest improvements come after decades of erosion in the economic fortunes of lower and middle-income earners. Such widespread stagnation puts investors at risk as well, by slowing economic growth, deepening recessions and exacerbating political polarization. Inclusive prosperity, then, depends on further enhancing the power of workers to defend and expand on recent gains and demonstrate the logic of driving economic growth from the bottom up. Such power means the ability to secure an increased share of corporate profits for workers rather than shareholders, and to make the ‘S’ in ESG stand for ‘Share the Wealth.’ “We believe that we will have a healthier economy – one that is better for employees, businesses and society – only when working people have greater power, agency and voice at work, individually and collectively,” the Omidyar Network writes in "Our Vision for the Future of Workers and Work." 

Dealflow: Venture Gap

Google for Startups launches second $5 million Black Founders Fund. Google launched its inaugural $5 million Black Founders Fund last year as part of its $175 million initiative to promote economic opportunity for Black Americans (see, "Scaling the ‘capillary banking system’ to expand access to capital"). The fund awarded $100,000 in cash for 76 Black founders, who have gone on to raise more than $38 million, according to Google. The second vehicle will provide $100,000 in non-dilutive funding for 50 additional Black founders.

Impact Voices: Alt-Finance

The why, what and how of structured exits. Impact investing leans heavily on traditional equity and debt financing, even though such capital isn’t a good fit for 99% of impact ventures. In Adventure Finance, Aunnie Patton Power argues for an alternative model: structured exits. Neither equity nor debt, she writes, “structured exits are well-suited to a wide range of businesses due to their adaptability for different contexts and funding needs.” Terms are based on a plan for investors’ eventual exit. India-based GetVantage charges a flat fee for loan-like revenue-based financing for companies with solid revenue projections. Mexico-based Adobe Capital used convertible revenue-based financing to capitalize affordable housing company Provive – and got a guaranteed 2.5x return. Investors offering mezzanine financing can secure modest interest alongside a profit-sharing or warrant-based “kicker” that boosts returns. Says Patton Power: “The opportunity is facilitating funding that is tailored to the needs of entrepreneurs while giving funders a predictable return on their investment.” Wonk out.

Agents of Impact: Follow the Talent

Vegan Investors is soliciting applications from innovative vegan startup companies led by women and founders of color for its fall showcase… The Clean Fight accelerator has opened applications for its second program, focusing on companies working to decarbonize mass-market buildings… WorkRise is requesting proposals for research and ideas that can “build credible and actionable knowledge that strengthens change-makers’ ability to advance workers’ interests and mobility.” (See, “Turning the renewed power of workers into a lasting pillar of stakeholder capitalism,” above).

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