The Brief | May 21, 2019

Generation’s $1B sustainable solutions fund, Sorenson seeds Catalyst’s Opportunity Fund, getting to graduation, diversity in equity crowdfunding

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Generation Investment raises $1 billion to invest in the “sustainability revolution.” A spate of announcements make for a trend in private equity: bigger raises for “impact” and “sustainability” funds, and bigger ticket sizes for deals explicitly targeting global challenges. The latest example: the $1 billion Sustainable Solutions Fund just closed by Generation Investment Management, the $22 billion fund manager founded by Al Gore, the former U.S. vice president, and David Blood in 2004. “Sustainability companies are winning,” Generation’s Lilly Wollman told ImpactAlpha. Beyond climate and low-carbon solutions, the fund will target human health, financial inclusion and the future of work. “The pure investment opportunity is extremely attractive today, and broad,” Wollman says.

The fund is Generation’s third private equity fund, and first to crack 10 digits. Billion-dollar impact and sustainability funds form a small club. TPG Growth raised $2 billion for The Rise Fund and reached a first close of about $800 million for Rise II before pausing fundraising. TPG Growth also manages the $1 billion Evercare Health Fund acquired from Abraaj this month. KKR is targeting $1 billion for its Global Impact Fund. Blackstone and Ares Management have launched funds. LeapFrog Investments last week touted its $700 million third fund as “the largest-ever private equity fund raised by a dedicated impact fund manager.” Generation, primarily a public-equities investment manager, has raised two Climate Solutions funds of $520 million and $680 million. The new Sustainable Solutions Fund will do deals of $50 to $150 million. It has a $60 million stake in Andela, the African tech-talent connector and a $55 million investment in Sophia Genetics, a Swiss firm with an AI platform to improve for medical diagnoses. “We are at the early stages of a technology-led sustainability revolution,” Gore said, at “the scale of the industrial revolution, and the pace of the digital revolution.”

Read, “Al Gore’s Generation Investment raises $1 billion to invest in “sustainability revolution,”” by Dennis Price on ImpactAlpha.

Dealflow: Follow the Money

Catalyst launches $150 million impact-focused Opportunity Fund. Catalyst, Utah billionaire Jim Sorenson’s private equity firm, is looking to raise $150 million in a tax-advantaged Opportunity Fund. Sorenson, an early proponent of Opportunity Zones, seeded the fund with $10 million of his own money, according to Bloomberg. Catalyst aims to invest in real estate projects that boost local residents’ access to quality jobs, healthcare, education and housing. It plans to follow with a second fund to invest in businesses in the same communities, primarily “smaller, out-of-the-way markets that are undervalued and have great potential, but are off the radar of institutional capital,” said Catalyst’s Patrick McKenna. The firm has committed to impact measurement and reporting under the framework developed by the U.S. Impact Investing Alliance and Georgetown’s Beeck Center, which Sorenson helped launch in February. “There are skeptics that feel this is a tax break for the rich, that it’s real estate developers just coming in to do investments that are subsidized by the tax break,” Sorenson told ImpactAlpha at the time. “We really want to counter that.” Read more.

Wagestream secures £40 million ($52.5 million) in debt and equity to quell payday lending. High-cost payday loans are on the rise in the U.K. London-based Wagestream allows workers to access wages as they earn them. “The antiquated monthly pay cycle inflicts huge financial damage on household finances,” Wagestream’s Peter Briffett said. The company’s app allows employers to give employees access to their earned wages without changing payroll cycles, and offers financial education to employees. Wagestream raised equity of £15 million from VC firms Balderton and Northzone, and debt of £25 million from savings and lending bank, Shawbrook. Dive in.

Upswing clinches $2 million to help underserved students complete their degrees. Private equity big shot Robert Smith changed the lives of Morehouse College’s graduating class with his surprise promise to pay off their student loans. Upswing tries to help underserved students graduate in the first place. The Austin-based edtech firm works with universities and community colleges to extend on-campus services, like tutoring and advising, to online student communities. Its 75 university partners include nearly a dozen historically black colleges in the U.S. The $2 million financing was backed by Impact America Fund, Rethink Education, Lumina Foundation and Strada. Upswing previously raised $1.5 million and was a winner of Village Capital’s edtech cohort in 2017. Learn more.

Signals: Ahead of the Curve

Equity crowdfunding changes who gets financed. Three years after the equity crowdfunding exemption in the Jumpstart Our Business Startups, or JOBS, Act took effect, startups and other small businesses have raised a total of $187.5 million via a growing number of platforms. Hundreds of thousands of smaller (and non-accredited) investors have helped companies raise up to $1 million (per year). Now comes research that suggest equity crowdfunding has potential to provide crucial risk capital for women and minority entrepreneurs, who are often overlooked by traditional funding sources.

  • Democratizing fundraising. New research suggests that women have higher success rates than men in regulated crowdfunding. Although men have larger funding targets, women-led campaigns held a 57% rate of successfully reaching their funding target, compared to a 43% rate for men.
  • Early anecdotes. One platform, Republic, touts a base of more than 100,000 investors who have funded 60 companies with average investments of over $500. A quarter of those companies have founders of color (vs. an industry average of 1%); 44% have are female-led (vs. 13% in traditional VC). Wefunder has helped more than 279 startups raise more than $92 million. Of those, 18% are female-founded, also beating the venture capital average.

Driving the growth: “Funding platforms like ourselves have made a dedicated effort to get both the public and entrepreneurs excited about the new regulations,” Republic’s Chuck Pettid told ImpactAlpha. Though equity crowdfunders earn a return, says Wefunder’s Jonny Price, who earlier led KIVA U.S., “their motivations to invest are so much broader.”

Keep reading, “Equity crowdfunding changes who gets financed,” by Roodgally Senatus on ImpactAlpha.

Agents of Impact: Follow the Talent

ClearlySo in London is looking for an investment banking deal manager with fixed income experience… Also in London, Big Society Capital is hiring an investment manager… The Smallholder and Agri-SME Finance and Investment Network and Organisation for Economic Co-operation and Development are calling for case studies on blended finance in agriculture and rural finance.

May 21, 2019.