The Brief | March 26, 2019

Blending finance with blockchain, streamlining affordable housing, AI-fueled food in Chile, impact bonds in Latin America, co-investing with Backstage

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Featured: ImpactAlpha Original

Bamboo Finance, Moeda and the government of Togo launch tech-driven impact fund for tech-driven companies. A Brazilian fintech startup popular with Chinese millennial investors has joined with the African nation of Togo to backstop a planned €100 million ($113 million) impact fund being raised by a Switzerland-based private-equity firm – all based on blockchain, of course. The transnational effort reflects the intent of the newly announced BLOC Fund to facilitate cross-border investments in tech-driven businesses in energy energy, education, consumer goods, financial inclusion and healthcare. Moeda, the Brazilian blockchain startup, and the government of Togo committed €10 million in first-loss capital to jumpstart the fund, announced by Bamboo Capital Partners at the African CEO Forum in Kigali, Rwanda.

The new fund will invest in companies that use blockchain and other technologies to benefit low- and middle-income populations in emerging markets, the partners said in a statement.

Moeda, which raised $20 million through an initial coin offering in 2017, has facilitated $4.7 million in cross-border loans for farmers and small businesses in Brazil, mostly from millennial investors in China. Randall Kempner, executive director of the Aspen Network of Development Entrepreneurs says he’s optimistic about blockchain’s potential to increase access to capital for smallholder farmers and small businesses. Blockchain-based platforms, he said, “offer an innovative approach that addresses some of the fundamental challenges faced in ag finance – mainly the heretofore high costs associated with transparency and financial transfers.”

Keep reading, “Bamboo Finance, Moeda and the government of Togo launch a tech-driven impact fund for tech-driven companies,” by Jessica Pothering on ImpactAlpha.

Dealflow: Follow the Money

Haven Connect raises $2.4 million to streamline applications for affordable housing. A typical applicant for an affordable housing unit in the U.S. can spend up to 10 years on the waitlist – and can lose their place in line for failing to update their application via postal mail. At the same time, regulations can make affordable housing property managers struggle for weeks to fill vacant units. Haven Connect, based in Austin, Tex., raised $2.4 million to help tenants apply online and ease the process for managers, who manage some 5.5 million units nationally. “We’re working to get more people into affordable housing faster,” Haven Connect’s Caroline Caselli told ImpactAlpha. Deciens Capital, a San Francisco-based fintech investor, led the round, which was joined by EO Ventures, a new impact fund started by Greylock Partners’ Bill Helman, Combine VC and impact angel investors from Austin Impact Capital and SV2. More here.

NotCo raises $30 million to develop alternatives to animal-based products. The Chilean startup uses a combination of artificial intelligence and human tasters to develop plant-based mayonnaise, milk, ice cream, meat and other products. NotCo’s AI platform analyzes the molecular structures of plant-based ingredients for flavor and texture. The $30 million financing was led by The Craftory, a London-based “cause capital” investment firm, and joined by Jeff Bezos’ Bezos Expeditions and earlier investors Kaszek Ventures and IndieBio. NotCo plans to expand into Mexico and the U.S. this year. Share this.

Signals: Ahead of the Curve

Why Latin America and the Caribbean are ripe for impact bonds. Four of the 11 social impact bonds (which are paid off by government based on outcome) and development impact bonds (paid off by foundations or development agencies) in low- and middle-income countries have launched in Latin America and the Caribbean. Ten more deals are in development in Chile, Brazil, Mexico, Haiti, and Peru. Experience in paying for outcomes, relatively good government data and a growing impact investing market have helped drive early adoption of social and development impact bonds in the region.

A program funded by a 2017 social impact bond in Colombia placed 899 young people into jobs, exceeding its target of 766, but fell short of its targets for retention after three- and six months, according to recently released results. Other social impact bonds in the region include a 2015 bond to boost Peruvian Amazon farmer production and livelihoods, a 2018 bond to improve youth employment in Buenos Aires, and a similar employment bond in Cali, Colombia. A total of 136 impact bonds are underway worldwide.

  • Paying for outcomes. In Argentina, Plan Nacer helped improve birth-related outcomes and reduce neonatal mortality with results-based financing. Prospera in Mexico demonstrated promising education and health results. Conditional cash transfer programs have been used in Brazil, Nicaragua, and Mexico.
  • Open data. Latin America scores higher than the Middle East and North Africa, South Asia, and sub-Saharan Africa on the Open Data Barometer, a measure of how governments use open data for accountability, innovation and social impact. Efforts including Mejora tu Escuela in Mexico, Semaforo Escuela in Peru and A tu Servicio in Uruguay have helped encourage open data.
  • Investor capital. Impact investors invested $4.7 billion in Latin America and the Caribbean in 2016 and 2017 (see, “50 deals that signal a growing impact investing market in Latin America).

“Nevertheless, the region’s impact bond market hasn’t grown as quickly as many would have expected,” writes Brookings Institution’s Emily Gustafsson-Wright. Among the challenges: macroeconomic instability, unfavorable tax regulation, legal straitjackets and political uncertainty, including recent elections in Mexico and Brazil.

Agents of Impact: Follow the Talent

Backstage Capital launches Backstage Crowd to let angel investors join Backstage deals… Roots of Impact is looking for ventures focused on vocational skills in Latin America and the Caribbean to test social-impact incentives (see, “Impact-linked financial rewards help high-impact companies attract growth capital)… Next Street is hiring a director of finance and administration in New York… Calvert Impact Capital is looking for a loan administrator, a communications analyst and an investor relations analyst in Bethesda, MD… Terra Alpha Investors seeks an investor relations associate in Washington D.C.

March 26, 2019.