The Brief | January 15, 2019

Carbon credits and cacao in Peru, BBOXX’s off-grid growth capital, underpriced microfinance, matching money to mission

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Greetings, Agents of Impact!

Featured: ImpactAlpha Original

Can carbon credits and cacao outcompete gold mining and deforestation in Peru’s Amazon? An investment in a project to restore degraded areas of Peru’s Amazon was supposed to demonstrate how the sale of forest carbon credits could be harnessed to finance large-scale conservation and boost the livelihoods of local farmers. Instead, the Althelia Climate Fund’s investment in the Tambopata project highlights how nimble project managers can make such conservation projects work even in the absence of a robust global market for such carbon credits. The project has supported a smallholder cooperative developing fair-trade, organic cocoa that can fetch premium prices.

The $6.5 million deal was “dissected” in a panel at last week’s 6th annual Conservation Finance conference at Credit Suisse in New York. Two investors, Axa Investment Management and the European Investment Bank, said they had been overly optimistic about the development of “voluntary” carbon markets (their risks were reduced, however, by a partial guarantee against portfolio losses from the U.S. Agency for International Development). Both investors said the deal underscored the need to invest in fund managers able to adapt when conditions inevitably diverge from plans.

Read, “Can carbon credits and cacao outcompete gold mining and deforestation in Peru’s Amazon?” by David Bank on ImpactAlpha.

Dealflow: Follow the Money

BBOXX raises $31 million to fuel East Africa off-grid solar expansion… The investment from an infrastructure – rather than “impact” – fund signals a new level of maturity for BBOXX and the broader off-grid energy market. U.K.-based BBOXX has sold 150,000 pay-as-you-go solar home kits for low-income African households without electricity since 2010. Now, BBOXX is positioning itself as a “next generation” utility company with a goal of reaching 20 million people by 2020. The company is expanding to solar systems for community and commercial institutions and exploring water, gas and internet services. BBOXX says the investment from South Africa’s Africa Infrastructure Investment Managers will “turbo-charge” its growth. Here’s more.

  • BBOXX also was named a winner, for energy, of the Zayed Sustainability Prize, announced on the first day of Abu Dhabi Sustainability Week. The prizes carry $600,000 awards. Other winners include We Care Solar (health), Sanku (food) and Ecosofft (water).

…and SunFunder helps SolarNow raise $9 million to finance off-grid customers in Uganda. Kampala-based SolarNow sells modular off-grid solar systems and appliances for East African households and businesses. Solar financer SunFunder helped the firm secure $9 million from impact investors Oikocredit and responsAbility (see, “Impact investors unlock off-grid energy financing with first-loss protections”). SunFunder’s Structured Asset Financed Instrument, a type of off-balance sheet financing, allows SolarNow to offer credit to customers while minimizing its own need for working capital. Learn more.

‘Value investor’ Magallanes raises €12 million to invest in global microfinance. Madrid-based Magallanes looks for opportunities it believes are under-priced by the market, typically publicly listed companies in Europe. In a letter to investors, the firm says microfinance is one such underpriced sector. The Magallanes Impacto fund, launched in October, has raised $13.8 million to invest in microfinance providers worldwide. Microfinance, which targets the more than 1.7 billion unbanked adults worldwide, “links diversification to a sustainable social impact that is measurable over time,” Magallanes’ wrote. Dig in.

Signals: Ahead of the Curve

Startups are looking beyond venture capital for money that matches their mission. Revenues over rounds. That’s the ethos of a growing movement of entrepreneurs, investors and advocates who are rejecting the high-flying venture capital model in favor of financing that allows them to pursue real revenues, operate ethically and growth organically. “A new set of investors are working with companies to craft financing and ‘stakeholder’ structures that work for more entrepreneurs and share economic gains with the community and employees as well,” we wrote in ImpactAlpha’s year-end roundup of “the opportunity alpha.”

The movement gained attention with reporter Erin Griffith’s feature in The New York Times last week highlighting groups familiar to ImpactAlpha readers, including Zebras Unite, Village Capital and “The tool of venture capital is so specific to a tiny, tiny fraction of companies,” Mara Zepeda of Zebras Unite told Griffith. “We can’t let ourselves be fooled into thinking that’s the story of the future of American entrepreneurship.” The search for alternatives is leading entrepreneurs to the kind of models impact investors have been incubating.

  • Buying out investors. Software companies Wistia and Buffer are using debt and profits, respectively, to buy out their VC backers in order to pursue sustainable, profitable growth. “The VC path forces you into this binary outcome of acquisition or IPO, or pretty much bust,” Buffer’s Joel Gascoigne told the Times. “People are starting to question that.”
  • Right to succeed. Black & Brown Founders’ Aniyia Williams, a co-founder of Zebras Unite, says the venture-funded system is particularly unfair to black, latinx and women founders who “are rarely afforded the opportunity to fail, period.”
  • Right-fit capital. Earnest Capital offers equity investments that companies can repay as a percentage of profits. Lighter Capital, Purpose Ventures, TinySeed, Village Capital, Sheeo, XXcelerate Fund and all offer variations of revenue- or profit-based financing.
  • Reality check. Such models represent a tiny percentage of the broader start-up funding market.
  • Join the conversation. Zebras Unite is hosting a ‘Zebracast’ today at 5pm ET to share what’s next. Save your spot.
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Agents of Impact: Follow the Talent

Elizabeth McGeveran is the new director of investments of the McKnight Foundation… Leapfrog Investments is recruiting an investment officer in Singapore and a head of impact in London… Big Society Capital is hiring an interim portfolio director and an interim deputy chief investment officer… Sydney-based Social Ventures Australia is looking for a fund administrator… The Rockefeller Foundation is hiring a program associate for its innovative finance team… The Schmidt Family Foundation is seeking an investment associate in Menlo ParkAccion is hiring in Bogota, Mumbai and Washington D.C.

January 15, 2019.