The hunt for new customers and new innovations is drawing corporate multinationals toward entrepreneurs who are driving impact on the ground with banking services, farm technology, mobile clinics and off-grid energy sources for the billions of people around the world that still lack those services.
Delivering these products and services aligns with the goals of impact investors. New corporate partnerships could help scale an array of high-impact firms around the world.
“The power of entrepreneurship is pretty significant,” Rob Tashima, head of Village Capital Innovations, told ImpactAlpha. Village Capital, the Washington DC-based venture firm, announced the new line of business to help corporations connect with and learn from such entrepreneurs. “If you’re a corporation wanting to plug into the sheer power of economic activity of small businesses in emerging markets, or a foundation looking to how problems are being solved, you need to connect with entrepreneurship.”
Microsoft, for example, turned to Village Capital when it wanted to support local entrepreneurs working to connect to the internet the world’s remaining unconnected communities. The venture firm tapped its global network and entrepreneurship accelerator program to identify and train 10 firms and establish a network of peers, mentors and investors to help the companies grow.
When JP Morgan Chase and the Gates Foundation wanted to stock the pipeline of young fintech firms reaching the poor in emerging markets, they tapped financial inclusion specialists BFA. Their multi-million dollar Catalyst Fund has backed 13 firms in 10 countries including ESCALA Educación in Colombia and Paygo Energy in Kenya.
Corporate innovation and impact
Long before BlackRock’s letter to corporate CEOs calling for them to define their purpose, corporations were palling around with impact firms and investors looking for the “impact alpha.” Global consumer goods company Unilever has partnered with solar energy firm d.light since 2014, purchasing solar lanterns to place in small shops that sell Unilever products, allowing the shops to remain into the evening. Acumen, the global impact investor, has helped connect firms like Dow, Unilever, SAP and GE to its portfolio companies, helping the multinationals build more inclusive and sustainable supply chains.
Some corporations are giving conventional corporate venture funds an impact mandate. Consensys, the Brooklyn-based blockchain upstart, has created a $50 million in-house fund to back startups building distributed-ledger technology solutions to global challenges like refugee assistance, distributed energy, and supply-chain tracing. Cloud-computing giant Salesforce has put $50 million into the Salesforce Impact Fund to back companies like Angaza, a pay-as-you-go platform for off-grid energy products using Salesforce software.
Others corporations are turning to their peers — and shared interests — for collaborations that support entrepreneurship. Mars and Danone, two large multinational food companies, launched the Livelihoods Fund for Family Farming, an investment fund meant to restore degraded ecosystems through large-scale sustainable farming practices. Walmart, Coca-Cola, Nestlé and a half-dozen other giant consumer companies have backed the $100 million Closed Loop Fund, a project finance fund that backs recycling programs and infrastructure in the US.
“Entrepreneurs bring drive and vision about what needs to change in the world. Too often they lack the financial and/or technical and sales expertise to turn vision into reality,” writes James Mawson, editor-in-chief of Global Corporate Venturing, in The Practitioner’s Guide: Steps to Corporate Investment, Innovation and Collaboration. The 2016 report from the Multilateral Investment Fund and Big Society Capital explores the many models in which companies are engaging with local entrepreneurs. “Corporations bring the cash and support and gain insights into how the world will change.”
The Innovations team at Village Capital grew as requests from new and existing partners piled up. Tashima was recruited from Oxford Business Group to execute the Innovations strategy. With the new program, Village Capital will go outside the geographic mandate of its $17 million venture fund to help connect corporations and other global organizations to entrepreneurs in regions including the Eastern Europe, the Middle East and Southeast Asia.
Over the last decade, Village Capital has partnered with Metlife on financial-health innovations in Turkey and the Middle East, Habitat for Humanity on “sheltertech” in Mexico, PayPal on fintech in India and others aiming to gain an edge through impact.