Greetings, Agents of Impact!
Double Feature: Impact Tech
1. Fifty Years’ $50 million fund signals tech’s turn toward impact. The mission-driven San Francisco venture capital firm has two impact strategies: finding tech entrepreneurs tackling the world’s biggest problems, and reshaping global capital flows by showing such companies can be huge successes. Partners Seth Bannon and Ela Madej have closed a $50 million Fund II, after demonstrating the theses with a $5 million first fund. “There’s so much promise in Silicon Valley and tech in general. But Silicon Valley is also one of the greatest examples of misallocation of resources the world has seen,” Bannon told ImpactAlpha. “The climate crisis. Disease. Malnutrition. These are what the best and brightest should be focusing on solving. This is where capital should be flowing.” Bannon sees the tide starting to shift: investors in the new fund include founders of companies like Skype, Github, Google Brain, Minecraft and Baidu. “We want to be for impact tech what Netscape was for the internet,” Bannon says, “a wakeup call that this is real, this is happening and they better jump on board.”
- Future of food. Fifty Years (the name comes from Winston Churchill’s 1931 essay, “Fifty Years Hence”) seeks to follow, rather than direct, entrepreneurial founders. But Bannon and Madej (along with new principal Shuo Yang), are keen on plant-based and lab-grown protein and synthetic biology. Alt-protein investments have gone mainstream with the growth of Beyond Meat and Impossible Foods; Fifty Years is invested in Memphis Meats and Rebellyous Foods. “Every single animal product is being replaced with products that don’t come from animals,” Bannon says. Microbes and bio-manufacturing are likewise reshaping sectors from chemicals to energy to food.
- Bigger tickets. Fifty Years’ first fund made $100,000 investments, on average, in 32 startups, most of them graduates of the Y Combinator accelerator. The second fund has already made 20 investments of between $500,000 and $1 million. “We’re just running the same playbook, with larger checks.”
- New new thing. Top talent and new funds looking for tech solutions to social challenges include Sarah Cone’s Social Impact Capital, Sofia Hmich’s Future Positive Capital and Ev Williams’ Obvious Ventures. Techstars Impact targets the Sustainable Development Goals; Breakthrough Energy Ventures, climate tech; and Generation Investment Management, sustainability tech.
- Theories of change. Bannon says 50 Years seeks business models aligned with impact, but that most portfolio companies are too small to implement true impact measurement. Of 50 companies, a couple have missed the mark on impact, he says. “If it was 30% or 40%,” he says, “that would be concerning.”
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2. On the frontiers of Impact tech: 21st century moonshots for people and the planet. Reversing climate change while ensuring that people thrive is the 21st century’s biggest challenge. Tech breakthroughs like lab-grown protein, mobile credit and insurance, and genome editing for vaccines will be key. “The speed and scale of the transformation we need—at the pace of the Carbon Law—has no historical precedent,” write Manuella Cunha Brito, Ludovic Sinet and Benjamin Tincq of Good Tech Lab, a Paris-based research firm (the Carbon Law holds that exponential climate solutions make it possible to halve emissions every decade, a reduction of about 7% per year). “Science, technology, and system entrepreneurship could be our wildcards.” Their report, “The Frontiers of Impact Tech,” maps 180 trends and 500 projects delivering against the 2030 Sustainable Development Goals with “impact tech” – the intentional use of science and technology to benefit people and the planet.
- Impact mapping. The report catalogs tech advances for all 17 SDGs and many of the 169 sub-targets. For SDG No. 16 (Promote just, peaceful and inclusive societies), for example, Good Tech Lab rounds up breakthroughs in “civic tech.” Taking aim at target 16.7 (Ensure responsive, inclusive, participatory and representative decision-making at all levels) are blockchain-based signature certification tool Mudamos (Brazil) and phone-based action platform Grassroot (South Africa). For SDG No. 2 (Zero hunger), the report tracks “ag tech” solutions for target 2.3 (double the agricultural productivity and incomes of smallholder food producers) including digital farmer marketplaces and content platform including M-Farm (Kenya), WeFarm (UK) and Digital Green (India).
- Dynamic tension. Impact tech innovators have to juggle impact depth vs. scale, low-tech vs. deep-tech, innovation vs. replication, platforms vs. applications. Impact tech requires deep understanding of problem and context. Corporate impact efforts may offer scale, while social enterprises can go deep. Moonshot thinking: all of the above. Historic examples include the Internet and GPS, Wikipedia and the electric light bulb.
- Dark side. Mitigating tech risks requires diligence from entrepreneurs and investors, as well as standards and regulations. One concern: algorithmic discrimination. Crime prediction software has been biased against people of color. AI recruiting tools have discriminated against women. Engineers, researchers and activists are organizing a global response around fairness, accountability and transparency principles.
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Dealflow: Follow the Money
Wunder Capital sells loans to free $200 million for solar financing. Wunder Capital aims to ramp up U.S. solar capacity by speeding up project financing. Alternative asset investor Fundamental Advisors is partnering with Wunder to drive an additional $200 million to the sector by buying up Wunder’s loans. Wunder’s Bryan Birsic told ImpactAlpha the company will bundle and sell to Fundamental loans for commercial, industrial, and community solar projects, as well as “MUSH” projects for municipalities, universities, schools and hospitals. Wunder has financed more than 100-megawatts of new commercial solar capacity since 2013 (disclosure: Wunder has been a sponsor of ImpactAlpha’s Returns on Investment podcasts). The company is ramping up community solar financing so homeowners and businesses can buy into utility-operated systems rather than installing their own solar panels. Community solar is “having a moment,” says Birsic, and “allows people and businesses to benefit from energy cost savings while supporting low-carbon energy.” Here’s more.
Australian pension fund Christian Super takes stake in responsAbility. Swiss impact investing firm responsAbility has built a $3 billion portfolio of global impact investments across 15 funds since 2003. That attracted Christian Super, a pension fund for Australia’s Christian missionary and education organizations with AUS$1.5 billion (US$1 billion) in assets. The fund, which allocates 10% of its portfolio to impact investing, has taken an undisclosed but “significant” minority stake in responsAbility, becoming its first international shareholder. Christian Super’s Ross Piper said the acquisition “signals our continued commitment to the growth of the impact investment market.” Consilium Capital advised on the deal. Read on.
- ESG. London-based alternative asset manager Trium Capital is rolling out an ESG equity fund to capitalize on the “impact delta” of companies shifting to cleaner energy strategies.
- Early funding. Finland’s CollectiveCrunch raised €600,000 ($677,000) for an AI-powered platform to assess forestlands… London’s Qualis Flow secured €808,000 ($912,000) from seed investors to forecast environmental risks for the construction sector.
- Media matters. Czech Media Invest sold independent Polish radio company Eurozet to SFS Ventures, a partnership between Sourcefabric and Media Development Investment Fund, and Polish media company Agora.
Agents of Impact: Follow the Talent
Assets at donor-advised fund manager ImpactAssets’ Giving Fund reach $1 billion after more than doubling in the last six months… The European Venture Philanthropy Association is looking for a CEO in Brussels… Haas School of Business at the University of California is recruiting a director for its new sustainable and impact finance initiative… 60 Decibels is hiring an associate in Mumbai… Capria seeks a content writer… The “Sustainable Investing in Emerging Markets Summit” from Emerging Markets Private Equity Association convenes in London, Oct. 8.
— July 2, 2019.