Catalytic Capital | October 27, 2020

Impact America’s $55 million second fund is hunting for unicorns in the disruption of systemic racism

Dennis Price
ImpactAlpha Editor

Dennis Price

ImpactAlpha, Oct. 27 Kesha Cash has raised $55 million to look for technologies that address one of the largest market inefficiencies of our time: systemic racism. Impact America Fund’s thesis: Solutions to structural racism represent a series of multi-billion dollar investment opportunities. 

Cash, the fund’s sole general partner, attracted more than 65 limited partners to her second fund, including the MacArthur, Ford, California Wellness, Kellogg and Surdna foundations. Wealth managers betting on Cash include Cambridge Associates, Veris Wealth Partners, Caprock, Trillium Impact Partners and Monticello Associates. 

Next generation market leaders are disrupting racism “by deploying technology where an injustice intersects with a multibillion-dollar market opportunity,” Cash and team wrote in an email. “We’re building toward a future where every person of color in the US can participate in the economy fully and on their own terms.”

Investing in racial justice by shifting narratives, power and capital

A growing dialogue around racial justice in financial markets has put a spotlight on investment managers that can deliver. 

“There’s no shortage of bold ideas and investible businesses coming from these communities,” Cash said in an earlier interview. “The shortage is of investors with the cultural fluency to find and fuel these opportunities with capital and access.”

MacArthur Foundation, one of the largest investors in the fund, made the investment as part of the Catalytic Capital Consortium (see, “Indispensable element in many impact investments: ‘catalytic capital’”) “We need capital that aims for justice,” said MacArthur’s Debra Schwartz said this summer, when the investment was announced.

Call No. 22 replay: Rooting out racism as a systemic risk (audio)

Impact America is among the fund managers seeking “inclusion alpha” in overlooked founders and markets where they can help unlock value and execute deals that others can’t. 

Others include Lightship Capital, Backstage Capital, Harlem Capital and Kapor Capital. Last year, Kapor disclosed the performance of its fund to demonstrate the outperformance of its strategy to ‘close gaps’ for communities of color. 

Impact America’s best-known investment is in Mayvenn, which has helped tens of thousands of hair stylists boost bookings and income. The firm has attracted follow-on investment from Andreessen Horowitz, Essence Ventures and other venture firms. 

Mayvenn’s success highlights both the financial and impact potential of businesses driving efficiency and transparency in what Impact America’s Kesha Cash calls “billion-dollar pain points” in overlooked and marginalized communities. “We’re calling it out as social signaling, so that folks see that our companies are successful because of their diversity,” Cash said in 2018.

Other portfolio companies include SMBX, a marketplace helping everyday bond investors back local small businesses and caregiver upskilling startup CareAcademy. In June, the fund notched its first exit when supplier management software company Coupa acquired ConnXus, which helps corporations diversify their supply chains. 

Agents of Impact toppling systemic racism in finance

“These companies locate their opportunities within the biggest systemic challenges,” say Cash and team, who reject the idea that “impact” is associated with “small” or “charity.” Nine of the 11 investments from the new fund are led by founders of color; eight are Black-led. Impact America doesn’t explicitly invest in diverse founders. We search for founding teams who are familiar with those problems — and joys! — in the daily lives of low and moderate income communities of color.”

Cash, who grew up in Orange County, Calif., was the first in her family to graduate college. At Jalia Ventures, a $5 million impact fund she co-founded with Josh Mailman, Cash backed Red Rabbit, Schoolzilla, and ConnXus. With Impact America’s $10 million first fund, she made early investments in Mayvenn and small business lending platform Camino Financial. 

The Impact Alpha Report: Private funds managers deliver outperformance by driving impact

“This is about all of us,” Impact America says on its website. “Economic disenfranchisement impacts everyone, not just those of us at the margins.”

For all of society to thrive, says Cash’s firm, “we must make real economic participation and agency possible for all people of color—entrepreneurs, consumers, workers, everyone.”