IDB Lab, the venture arm of the Inter-American Development Bank Group, invested $2.5 million in El Salvador-based Innogen Capital’s first Central America-focused fund, one of the few venture vehicles dedicated exclusively to the region (view Innogen’s profile on Impactalpha Edge).
Innogen Delta Fund I will back 25 early-stage companies in El Salvador, Guatemala and Honduras, with a focus on financial inclusion, healthcare and agriculture tech. At least one-quarter of the fund’s capital will go to women-led enterprises. The fund has surpassed its initial $10 million target, reaching $11 million to date, with a revised target of $15 million.
Innogen has brought regional corporates into its LP mix, including Grupo Agrisal and Grupo Steiner, with the aim of turning them into strategic partners as portfolio companies expand beyond Central America into other markets in the region.
“We can hack scalability in Central America by having them jump into other countries alongside already big corporations,” Innogen’s Christián Quiñónez told ImpactAlpha. “The whole idea is that companies can start by prototyping with corporates in their core market and, if that works, scale much faster.”
Each corporate LP holds voting rights on deals within its respective industry on the fund’s investment committee. The structure is also designed to create clearer paths to exit, including potential acquisitions.
The US International Development Finance Corporation was an early investor in the fund, seeding it with $2.5 million in 2004.
Corporate partnership
The corporate partnership model is picking up steam among Latin American impact investors. Solfium, based in Mexico City is leveraging a partnership with Coca-Cola to provide solar solutions to its small-business distributors, helping reduce energy costs. In Peru, Lululemon, among other fashion brands, is supporting Cotton Nation to finance its growth while also sourcing cotton for its clothing.
This trend, some believe, is central to the ecosystem’s growth.
“One of the ecosystem’s major flaws is that we who are inside it tend to be too radical about the work that needs to be done by major corporations,” Felipe Fernández of CO_ Capital told ImpactAlpha.
CO_ Capital is a Mexico-based impact investor that manages funds, supports accelerators, and works to mobilize family offices and corporates into impact investing.
“We push them away as if they’re the enemy that has to disappear. In reality, they’re the organizations we need to leverage and catalyze. Many impact companies avoid talking to big corporations because they see them as evildoers, but we need to integrate them into this way of thinking,” he added.
