Greetings, ImpactAlpha readers!
#Featured: Returns on Investment Podcast
BlackRock to CEOs: Get a long-term purpose, stat! It was the letter read ‘round the world. The annual letter from BlackRock CEO Larry Fink sent corporate chieftains scurrying to their investor and public relations managers to find a purpose, and fast. The latest episode of ImpactAlpha’s Returns on Investment podcast pulls apart not only Fink’s letter, but the strong reactions to it. To corporate raider Sam Zell’s comment, “I didn’t know Larry Fink had been made God,” podcast regular Imogen Rose-Smith replied, “I think BlackRock’s $6.3 trillion in assets made Larry Fink God.”
Most striking in Fink’s letter was his concern with demands from short-term “activist” shareholders for the return of ever-greater amounts of corporate cash, especially in light of the US corporate tax cut. Buybacks can starve companies of capital that could be invested in worker productivity or growth. According to Bill Lazonick, an economics professor at UMass Lowell, companies that have been in the S&P 500 for the last decade spent a total of about $4 trillion on buybacks and another $2.9 trillion on dividends, or 93% of all net income in that period. “It’s the main driver of extreme concentration at the very top, of the disappearance of the middle class,” Lazonick told ImpactAlpha. “It’s becoming serious enough that people are saying, let’s do something about it.”
In that context, Fink’s call to CEOs to articulate a long-term purpose may be about defensive strategy as much as aspirational pursuit. As Returns on Investment host Brian Walsh put it, “He’s saying, ‘I’m looking out for you. I’m trying to help. I’m trying to protect you from these corporate raiders and activists, from the pressures you may face.”
Check out ImpactAlpha’s readers reactions to Larry Fink’s letter and listen to the latest Returns on Investment podcast, “BlackRock to CEOs: Get a long-term purpose, stat!” And then subscribe to all of ImpactAlpha’s Returns on Investment podcasts.
#Featured Event: Impact Investing, Doing Good and Doing Well
A fireside chat with Bill McGlashan, CEO of TPG’s The Rise Fund. ImpactAlpha’s David Bank will sit down with the head of one of the biggest, most talked about impact funds at the Commonwealth Club, Wednesday, Feb. 7. How did McGlashan raise $2 billion from superstar LPs? And how much impact is he having? Register here for tickets.
#Series: New Revivalists
Bryce Roberts and Tim O’Reilly: VCs that help startups raise revenue, not rounds. In an age of bloated venture capital funds and startups that are long on valuations and short on profit models, investor Bryce Roberts and media entrepreneur Tim O’Reilly are getting back to basics. Through an approach they dubbed Indie.vc, Roberts and O’Reilly are surrounding founders with the resources and networks that other VCs offer, but without the baggage and sky-high expectations. The team has backed 16 firms with investments of between $100,000 and $500,000, with a focus on cash flows and sustainability rather than mega funding rounds. “Entrepreneurs need to recognize that there are other paths available for building something of impact than the blitzscaling model of Silicon Valley VCs,” Roberts told ImpactAlpha. “Sometimes, the worst things can happen when you are trying to grow so fast, when you worship at the altar of scale.” Read, “Bryce Roberts and Tim O’Reilly: VCs that help startups raise revenue, not rounds,” by Amy Cortese, on ImpactAlpha.
New Revivalists is a series from ImpactAlpha and Village Capital profiling the people, places and policies reviving entrepreneurship — and the American Dream.
Bryce Roberts and Tim O’Reilly: VCs that help startups raise revenues, not rounds
#Dealflow: Follow the Money
Twilio social fund backs edtech venture Edovo. Half of US inmates return to prison within three years of release, and education programs significantlyreduce the odds of recidivism. Chicago-based Edovo provides educational content on secure tablets for people in prison, seeking to reduce recidivism. Inmates receive certificates and entertainment options when they complete lessons. Edovo is currently available to 50,000 of the US’s 1.5 million inmates. Edovo secured a $250,000 investment from cloud communications company Twilio’s non-profit impact fund. Twilio launched its impact fund last year,pledging 1% of its equity to the fund.
Oregon Community Foundation makes three investments from impact fund. The Portland-based foundation invested (paywall) $3.75 million in housing lender Network for Oregon Affordable Housing, small business lender Micro Enterprise Service of Oregon, and local lending agency Community LendingWorks. Oregon Community Foundation, with a $1.7 billion endowment, is comprised of seven philanthropies that support Oregon social organizations. The foundation has raised $20 million for its Oregon Impact Fund since launching last year. The fund supports job creation, affordable housing and delivery of basic services in underserved communities. It makes investments of $500,000 to $2 million.
Upsie raises $1.7 million for product-warranty app. Upsie is an app that allows customers to comparison shop for product warranties. The 2016 Village Capital Fintech and 2017 Techstars Retail participant raised the funds from Techstars Ventures, Matchstick Ventures, Gopher Angels, M25, Village Capital Investments and Syndicate Fund. VilCap’s Victoria Fram describes Upsie as “a solution to an often overlooked problem that affects people and their financial health every day, brought to market by a passionate and relentless founder.” Founder Clarence Bethea is now among the 1% of black entrepreneurs who get venture backing. Black Enterprise describes Upsie’s fundraise as “a remarkable feat, especially for a tech entrepreneur of color.”
Bush Foundation standing up social business seed fund. The St. Paul, Minnesota-based foundation with $950 million in assets is seeking proposals to set up and operate a new fund that invests in social businesses in Minnesota, North Dakota, South Dakota and the 23 Native nations in those areas. The goal: Establish Minneapolis-St. Paul as a destination to start and grow businesses seeking both social impact and financial returns. The foundation will seed the fund and aims to attract other investors. To apply: Download the RFP and respond to Frances Dougherty at [email protected] by close of business on Feb. 23, 2018.
See all of ImpactAlpha’s recent #dealflow. Send deal tips and news to [email protected].
#Signals: Ahead of the curve
Local journalism is impact. It’s a well-known story by now. Daily newspapers are withering as advertising revenue moves to Facebook and Google. The damage has been severe, with small papers around the country laying off staff and cutting coverage. Less well-known are the new models reviving truly local news. A few media companies and pioneering investors are leveraging community roots to build sustainable local news organizations.
Berkeleyside, a local news website in Berkeley, Calif., has raised more than $800,000 through a “direct public offering.” The offering allowed California residents to buy a stake in the company for as little as $1,000. Now, the community that supported the offering is directly invested in Berkeleyside’ssuccess. Co-founder Frances Dinkelspiel told ImpactAlpha many readers were eager to support Berkeleyside because they felt media is under attack and independent, reliable sources of local news are disappearing. A local competitor, The East Bay Times, laid off its Berkeley reporter just this week, she noted.
Omidyar Network, the Media Development Investment Fund and other impact investors are championing the idea that “journalism is impact” by helping local and independent media outlets test and grow sustainable business models. In the UK, Omidyar Network made a £200,000 grant to The Bristol Cable from its $100 million media investment program. The cooperative media outlet makes community members partners in editorial and business decisions, a “radical departure from the traditional model of local news media.” In a post, Omidyar’s Kitty von Bertele writes, “At its most effective, this kind of journalism also engages people, represents their interests, and gives them the information and opportunity they need to hold decision makers to account.”
#2030 Finance: Long-termism
The ‘digital divide’ is narrowing. The world is on track to achieve the UN Sustainable Development Goal for universal and affordable Internet access in the world’s least-developed countries by 2020, according to a new UN report. Significant progress has been made in the 47 poorest countries, which have all now launched third-generation (3G) mobile services. Around 700 million of the 880 million people in these countries now have access to a mobile network and about 60% are covered by 3G service. The internet access target is part of SDG №9 (Industry, innovation and infrastructure), a goal meant to ensure the poorest nations have the infrastructure to foster innovation and boost GDP growth.
Internet access and infrastructure helps achieve other Global Goals including education, health and financial inclusion. Consulting firm Accenture says such goals could push global ICT industry revenues up 60 percent, to $2.1 trillion, by 2030. It’s not unlike what’s happening in sustainable food and agriculture, with mobile-Internet connections boosting innovations in finance, logistics and data analysis.
But access alone doesn’t guarantee uptake, notes the UN. The least-developed countries still require investments in information and communications technology (ICT) skills, education and gender equality to fully capture the gains of Internet access. At current growth rates, according the UN, less than one-quarter of the population in the poorest countries will be online by 2020.
Thank you for reading. Onward! Please send news and comments to [email protected]