Entrepreneurship | May 9, 2017

Catalytic seed funding, a moonshot for U.S. entrepreneurship, making democracy work, feeding China

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Welcome back, ImpactAlpha readers! Let’s jump right into #Dealflow. Please send us yours, to [email protected].

#Dealflow: Follow the Money

Bridges-backed Unforgettable attracts strategic investment from McKesson. File this under “catalytic seed capital.” James Ashwell, formerly with the impact asset manager Bridges Fund Management, launched Unforgettable last year to serve the 850,000 people in the U.K. living with dementia. Bridges became one of Unforgettable’s early backers, investing in its £1.5 million ($1.9 million) seed round alongside Impact Ventures UK. Now, Unforgettable has closed £2.3 million ($3 million) in funding, led by McKesson Ventures, the venture capital arm of U.S. healthcare giant McKesson, which put in £1.3 million ($1.7 million). Unforgettable’s platform sells products including alarms, GPS trackers, puzzles and healthcare guides to support patients and their families. McKesson, ranked fifth on the Fortune 500, launched McKesson Ventures in 2014.

Calysta raises another $40 million for of sustainable animal feed. There is a pressing need to produce more sustainable feed sources to meet the growing global protein demand. Calysta, based in Menlo Park, Calif., has been developing a low-cost, environmentally-friendly protein called FeedKind, a fishmeal and livestock protein substitute made from naturally-occurring microbes grown through fermentation. Calysta has closed a $40 million Series D round, led by Mitsui & Co., the Japanese trading firm, and Temasek, Singapore’s state investment fund. Earlier investors re-upped, including agriculture giant Cargill and Aqua-Spark, the sustainable aquaculture venture fund based in the Netherlands. Mike Velings, co-founder of Aqua-Spark, said Calysta has made “a simply gargantuan effort” to develop FeedKind, which is expected to go into commercial production in 2019. Fish meal is no longer a commodity, but a strategic component of aquaculture, the world’s fastest-growing agricultural sector and a larger protein provider than the global beef industry.

Spanish bank BBVA expands in Mexico with electronic payments and blockchain. Internet giants like Alibaba and Softbank are on the hunt globally for mobile-money and electronic payments platforms, increasingly built on blockchain technology. BBVA, the big Spanish bank, is moving to bolster its own such offerings in Mexico with the acquisition of Mexican payments platform Openpay and the launch of a money transfer service using blockchain technology from Ripple. With a network of 15,000 payment points in Mexico, Openpay processes one million transactions each month for more than 1,000 small businesses and large corporations. With Ripple’s software, BBVA expects the move to cut the time it takes to complete an international transfer from four days to a few seconds. Ripple estimates its software could cut costs for customers by up to 81 percent. Banks are increasingly looking for fintech partners to help them ride the ongoing disruption in financial services.

Schoolrunner raises seed funds to expand edtech from charter to district schools. Public schools are where 90 percent of the kids are. “From both a mission perspective and a growth perspective that’s where we’ve got to be,” Schoolrunner’s Charlie Coglianese said in an interview. The Denver-based edtech startup has raised $500,000 to promote its administrative software within public schools. The company launched in 2012 with a package aimed at providing charter school teachers and administrators with an “alternative to using spreadsheets” for tracking student progress, including assignments, grades, attendance, and behavior. Schoolrunner’s software package, which costs an average $10,000 per year, has been adopted by 73 schools in 11 states. Schoolrunner raised its first $1.5 million in 2015 from venture capital firm Colorado Impact Fund, which also contributed to this round. After two years of profitability, the startup is back in the red as it seeks to expand its market.

See all of ImpactAlpha’s recent #dealflow.

#Signals: Ahead of the Curve

Moving beyond “one size fits all” to boost U.S entrepreneurship. U.S. startups and small businesses need new capitalization models that include revenue-share-, dividend- and royalty-based financing. A “jobs bond” could provide liquidity to private investors in startups and small businesses based on the number of jobs created. Aggregating community banks into a “super-regional” bank could bridge between large capital providers and organizations that create entrepreneurial ecosystems. Those are some of the ideas surfaced in a two-day Kauffman Foundation-mobilized design lab to imagine ways to jumpstart U.S. entrepreneurship, report Village Capital’s Ross Baird and Access Ventures’ Bryce Butler, who participated. The design lab also included Morgan Stanley, JPMorgan Chase, Blackrock, Omidyar Network, Ford Foundation and Kiva. Kauffman promoted the initiative as a trillion-dollar “moonshot” for investment in entrepreneurship, which is at a 30-year low in the U.S., despite the hype in Silicon Valley and the unprecedented success of a few “unicorns.” How would you generate a trillion dollars for America’s entrepreneurs? Village Capital wants to know.

Making social progress to restore trust. Restoring trust to make social progress. The Global Philanthropy Forum jumped its usual schedule of two convenings in Silicon Valley followed by one in Washington, D.C., in order to meet in the U.S. capitol in the early days of the new administration. Last month’s conference was organized around trust, “the societal glue that holds us together to be able to solve large problems together,” as the forum’s founder and CEO Jane Wales put it. The quick-cut day one, day two and day three wrap-ups have insightful nuggets, and the deeper dives into early-childhood success (moderated by Peter Laugharn of the Hilton Foundation) and criminal justice reform (led by Adam Foss, a prosecutor in the district attorney’s office in Boston) are worth a longer look. “Not everything has to fall victim to hyperpartisanship,” Wales told ImpactAlpha. Early childhood development and criminal-justice reform “are two examples where cross-sector collaboration can lead to outcomes, reminding us that our democracy can work.”

#2030: Long-Termism

As China’s food security goes, so goes the world’s. By population, China is triple the size of the United States. Food, which generally costs more in China than in the U.S., makes up one-quarter of Chinese household expenditures. Meeting China’s demand for food will be a boon for domestic agriculture businesses, and a test for sustainable food production worldwide. One issue to watch closely: the ongoing land-grab in Africa, which has much of the world’s unused arable land.

In China, tech adoption and environmental sustainability are progressing quickly, says Alex Zhang, cofounder of Hosen Capital, based in Beijing. New government policies tax food producers that negatively impact the environment, creating opportunities for products that reduce or eliminate synthetic pesticides and fertilizers, for example. There are additional opportunities in tech that improves the traceability of food and ways to connect farmers, suppliers, and distributors is another opportunity. “There should be a data infrastructure to support mechanization and to make sure we have the right information flowing from the farm to the plate,” Zhang told AgFunderNews, adding China requires basic infrastructure upgrades.

Zhang says four of five of the world’s food companies, like four of five of the world’s internet companies, will be Chinese by 2027. Hosen has invested more than $300 million in China-based or China-serving food and agribusiness-related companies and recently closed its third fund at $440 million with investments from institutions in the U.S., Europe, the Middle East and Asia. “The whole industry is modernizing at a speed we haven’t seen in Chinese food industry history,” Zhang said. “We will see more trade sales and large Chinese food companies will continue to go global.”

Onward! Please send any news and comments to [email protected].