ImpactAlpha, Apr. 4 – A disruptive technology has to be 10 times better than what it’s replacing. Tech venture capitalists aim to recoup 10 times the capital they invest in a company. Management gurus drill acolytes in the exponential mindset needed to solve intractable problems with “big, bold, 10x, moonshot ideas.”
ImpactAlpha last week called for impact investors to raise their ambitions by at least an order of magnitude in response to the COVID crisis. “It’s time to 10x impact investing,” we wrote in announcing The Call No. 16: Impact Step Up.
Agents of Impact answered The Call. Within days, more than 400 people signed up to share their initiatives and inspiration. “ImpactAlpha challenges impact investors to scale up their efforts 10x. To which I say: Yes!” tweeted Blue Haven’s Liesel Pritzker Simmons, who called out the importance of investments in #policy and #civics as well (to which we say: Yes!).
The Call rounded up investments and initiatives, and networks and conversations, that already are well underway, along with ambitions to do more to meet immediate needs and lay the foundation for longterm change.
“Clearly what COVID has done is highlighted lots of the places where our roof is leaking,” said Ricardo Bayon of Encourage Capital. “I think the time is now to use some of the tools that we’ve been building up over the last 20 to 30 years to fix that.”
Getting sh*t done
“Our brand is ‘how can we spot problems and make things happen, make things happen quickly’,” said Greg Neichin of Ceniarth, which has helped mobilize $14 million in deposits at rural community development finance institutions that can be used to get payroll protection program loans out the door. Candide Group’s Olamina fund and Money in Motion, along with the David and Lucile Packard Foundation and Schmidt Family Foundation, have joined Ceniarth in the facility.
Open Road Alliance has received requests for $50 million (across 530 inquiries) for its bridge loans, said Open Road’s Caroline Bressan. The firm has $12 million to deploy and is actively processing about 100 bridge loan requests, she said. Previously, Open Road’s loans bridged enterprises to certain capital sources. “We recognize that we have to take on more risk right now,” said Bressan. In some cases, she says, “We’re just gonna have to bridge to jello.”
Vital Capital established a $10 million emergency fund for agriculture, healthcare and education companies in Uganda and Kenya.
Networks like Toniic, CREO Syndicate (for cleantech, renewable energy and environmental opportunities), and Gratitude Railroad have been scanning for opportunities. Prudential’s Tony Berkley has hosted biweekly calls for impact investors to share dealflow.
The Global Impact Investing Network previewed an effort to streamline coronavirus-related dealflow across such investor networks. “The initiative is looking to coordinate impact investments more efficiently toward priority financing needs that are addressing the effects of COVID,” said the GIIN’s Katrina NGO.
Cathy Clark of the Case Center at Duke University said her COVID Capital Relief database has topped one trillion dollars.
The recovery will be long, but may present unexpected opportunities. Said New Island Capital’s Chris Larson, “My dream is that we’re going to wake up on the other side in a world where we have much more white space to grow these innovative companies that are focused on renewables, on decentralized and broad-based employee-ownership models, and so on.”
Defense and offense
The 10x Challenge means not only financial capital, but also an order of magnitude acceleration of speed, collaboration – and accountability.
“If the impact investing community is thinking about stepping up 10 times,” said Gillian Marcelle of Resilience Capital Ventures, the community needs to “get 10 times better at thinking deeply about what accountability looks like and how we improve our ability to act with accountability.”
Go local, says Laurie Spengler of Courageous Capital. “Proximity to place matters,” she says. “As we expand the number of actors that can contribute and be part of that plumbing infrastructure, ensure that we’re focusing on those who are already there.” Many local managers are showing their resilience and adaptability. “They are looking at new ways to bridge to the offense,” says Spengler.
Jed Emerson said that in addition to “respond, recover and resilience,” he would like to hear that the pandemic is an opportunity for reflection. “If all we do is 10x everything we’re all already doing without addressing some of the shortcomings of impact investing, without addressing the fundamental deficiencies of modern financial capitalism,” he said, “We will accelerate the growth and expansion of systems that we know are not sustainable.”
Join the conversation
Funding the spread. “In our market, we just launched Save Our Startups – 0% loans to young portfolio companies and a small number of technology development grants for innovation that can make a difference in this ‘post-COVID’ world. But for that we need contributions as one can’t live on the spread of a 0% loan,” said Margaret Bradley of Ben Franklin Tech in Philadelphia. “We’d love to attract return-motivated investors but first need to stabilize.”
Changing risk perceptions. “If one of the long-held barriers has been risk-management/risk perception, how do you convince private capital to act now? Credit enhancement from Federal gov like PPP?” asked Rachel Reilly of Economic innovation Group
Volume guarantees. “What’s the need for and the possibility of a consortium of impact investors funding an advance market commitment (of the sort that Gates did for vaccines and contraceptives) to incentivize companies to develop, say, Covid tests?” asked Stanford’s Paul Brest.
Proximity matters. “Picking up Laurie Spengler’s point on proximity mattering, is there a role for locally rooted NGOs and other actors to identify those effective organisations to speed up the match between investor and those needing resources to deliver effectively?” asked Felicity Jones.
Social mobilization. i(x) investments’ Trevor Neilson said the Coalition for Sustainable Jobs is a “new coalition focused on bringing together a surprising coalition of groups (investors, entrepreneurs, evangelicals, climate activists, young republicans, anglers, hunters) around bi-partisan legislation that creates sustainable jobs—first in the next round of stimulus and then later through congressional action.”