The Brief | March 21, 2019

Beyond scandal, CNote’s fund for women-led businesses, New York’s co-investment fund, Oakland’s Hood Incubator

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Greetings, Agents of Impact!

Signal: Ahead of the Curve

The Rise Fund – and impact investing – tries to move beyond scandal. Managers of TPG Growth’s $2 billion impact fund fanned out to limited partners, prospects and influencers to contain the damage from co-founder and former CEO Bill McGlashan’s firing (or was it a resignation?) after his indictment in the Varsity Blues college-admissions scandal. Insiders expect fundraising to slow, but not stop, for The Rise Fund II, targeted at $3 billion. With TPG’s co-CEO Jim Coulter stepping in to lead Rise, no early investors in last month’s $1 billion first close have publicly broken ranks. Those investors include Washington State Investment Board, New Jersey Division of Investment and San Francisco Employees’ Retirement System, according to Bloomberg.

Agents of impact tried to wring some lessons from the debacle (see, “Impact investors struggle to reclaim the narrative). In a post on NextBillion, Blue Haven Initiative’s Lauren Cochran admits to a touch of schadenfreude, but thoughtfully parses the issues. Among her reflections:

  • Due diligence. “It’s important to look beyond superficial markers of virtue,” Cochran counsels. “Anyone experienced with impact measurement tools knows that none of them are perfect, but questioning intentionality remains a cornerstone of good impact due diligence.
  • Potential. “Rise has always had the potential to serve a bigger purpose: The traditional TPG growth equity team working on Rise’s deals may find themselves considering the environmental and social impact of non-Rise deals,” Cochran writes. “If we can get more mainstream equity firms like TPG to infuse even a small amount of impact thinking into their due diligence processes, we have a shot at moving the capital markets needle in a positive direction.”
  • The work ahead. McGlashan’s ethical issues do “not mean impact investing is any less worthy an effort. On the contrary, it reveals an even greater need for the kind of societal change that impact investing hopes to accelerate.”

The Global Impact Investing Network’s Amit Bouri said the episode represents something of a coming of age. “We are looking at a growing and increasingly diverse set of investors,” Bouri told ImpactAlpha. “There will be funds that underperform and funds that don’t deliver as expected. We as a community have to be able to respond to things that don’t go properly, because inevitably that will happen as we look at a large and diverse market.”

Dealflow: Follow the Money

CNote fund aims to boost lending to women business owners. CNote has enabled $18 million in investment and 400 small-business loans since 2017 with its high-yield savings accounts. Now, the company is partnering with small business lender CDC Small Business Finance to launch a $20 million fund for accredited investors that it hopes will unlock more capital for women-run businesses. Women get the short end of the business lending stick, taking only $1 of every $23 in small-business loans, CNote’s Catherine Berman tells ImpactAlpha. The first year of the five-year “Wisdom Fund” will be used to experiment with loan design, marketing and distribution before scaling through an expanded lending network. Berman says the fund – a shift from CNote’s retail investing approach – can drive innovation in small-business lending. Get the full story.

New York City partnership pledges $30 million to under-represented tech founders. The city’s Economic Development Corp. is putting $10 million into a $30 million co-investment partnership to back women and minority-owned tech startups. “We’re relying on our venture-capital partners to perform the due diligence efforts relating to any investments that we make,” the Economic Development Corp.’s Eric Clement told ImpactAlpha. Partners in the initiative include WOCstar Fund, Golden Seeds Venture Fund, Future/Perfect Ventures, Archer Gray, and the Multicultural Innovation Lab at Morgan Stanley, which are collectively chipping in $20 million for the five-year initiative. Here’s more.

Featured: Impact Voices

This Oakland business incubator is helping Black communities benefit from legal cannabis. Lanese Martin is seeking to ensure that it isn’t just the usual white suspects that profit from the budding legal cannabis industry. Martin co-founded The Hood Incubator in Oakland, Calif., in 2017 to train minority entrepreneurs and advocate for communities impacted by the War on Drugs to be prioritized as cannabis goes mainstream. “The difference in California was that there was a new conversation about community reinvestment, equity, the relationship between legalization, prohibition and the drug war,” she told ImpactAlpha. The Hood Incubator has nurtured two classes of entrepreneurs and is now considering launching, or helping others launch, an investment fund. “What folks need more than anything right now is access to capital,” says Martin. “A lot of the black businesses just aren’t seeing that, even with access to permits and licenses.”

Keep reading, “This Oakland business incubator is helping Black communities benefit from legal cannabis,” by Liz Enochs in ImpactAlpha.

Agents of Impact: Follow the Talent

Hollywood actor Leonardo DiCaprio joins ‘conscious bank’ Aspiration as a board member and investor… Backstage Capital’s Christie Pitts takes on operations at Backstage Studio. Arlan Hamilton remains Backstage Capital’s managing partner… New Island Capital seeks a vice president for real assets in San Francisco… IDB Lab seeks proposals from Latin America and Caribbean fund managers to manage a new venture debt fund.

March 21, 2019.