The Brief | July 8, 2019

Impact Tech: South Africa, African DNA biobank, Bridges’ wind-energy stake, small-business bump, Lok backs insurance in India

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Greetings, Agents of Impact!

Series: Impact Tech: South Africa

Three tech startups boosting livelihoods and good jobs in South Africa. News outlets are using terms like “broken,” “urgent,” and “shock” to describe economic results in South Africa. The negative growth rate is the worst in a decade. The youth unemployment rate is the highest in the world. Business and policy initiatives to improve South Africa’s dire jobs situation and economic inequality have indeed been slow to show progress. So local entrepreneurs and engaged communities are taking the lead in addressing financial inclusion and upskilling the country’s low-wage, informal and otherwise vulnerable workforce. The Bertha Centre for Social Innovation and Entrepreneurship at the University of Cape Town, in partnership with Investec, is spotlighting South African companies leveraging technology and innovative finance to meet the Sustainable Development Goals.

In the first episode of a new ImpactAlpha series, Impact Tech: South Africa, three ventures are building platforms in support of SDG No. 8: Decent work and economic growth. SweepSouth has matched and supported more than 50,000 un- or under-employed domestic workers with households seeking professional cleaning services. Mama Money is trying to shake up the $529 billion global remittance market with a mobile-based money transfer service. Abalobi is helping small-scale fisherman command fairer wages while improving seafood supply-chain transparency. Traditional and angel investors have mostly financed these locally-birthed social enterprises. Writes Bertha Centre’s Natasha Dinham, “As these tech-for-good companies prepare to scale, we see significant opportunity for impact investors to get involved.”

Read, “Three tech startups boosting livelihoods and good jobs in South Africa” by Bertha Centre’s Natasha Dinham on ImpactAlpha.

Dealflow: Follow the Money

54gene raises $4.5 million to increase African genetic material in medical research. Most human genomics data used to advance drug therapies and medical research is based on Caucasian DNA samples, which represents an increasingly small share of the global population. To diversify medical and health discoveries, Nigerian startup 54gene has raised $4.5 million in funding to build an African DNA biobank and is seeking 40,000 samples this year. “The genomic revolution has taken place everywhere except for Africa,” said 54gene’s Abasi Ene-Obong. Launched six months ago by diagnostics startup Stack dx, the company is partnering with 10 hospitals in Nigeria in research on oncology, cardiology, neurology, endocrinology and sickle cell disease. 54gene, part of the Y Combinator accelerator, also is backed by Fifty Years, Better Ventures, KdT Ventures, Hack VC and Techammer. Check it out.

Bridges acquires Maven Capital’s stake in wind energy company GEV. GEV Wind Power literally keeps the turbines turning in the 565-gigawatt global wind energy market. The U.K.-based maintenance and repair company has serviced 3,000 turbines to date. Bridges Fund Management took a stake in anticipation of 8% annual growth in active wind turbines. “With the cost of wind energy production now comparable to the cost of producing energy from fossil fuels, it is becoming an increasingly attractive option,” Bridges said in a statement. The impact investment firm bought out existing investor Maven Capital Partners, a U.K.-based private equity fund. Bridges made the investment, its first in the wind sector, via its £80 million ($101 million) Sustainable Growth Fund IV. Power up.

Lok Capital backs India insurance startup RenewBuy. Mumbai-based Lok Capital invests in companies delivering quality products and services to the low-income masses. Lok’s first foray into insurance is Gurgaon-based RenewBuy’s $19 million Series B round. RenewBuy is targeting India’s growing insurance market, which is expected to nearly triple to $280 billion by 2020. The company’s online insurance platform launched in 2015 and now serves one million customers in 450 Indian cities and towns with auto, health and life policies. RenewBuy aims to reach 10 million customers in 1,000 locations by 2022. Lok invested in Renewbuy alongside IIFL AMC and prior investor Amicus Capital. Take a look.

Signals: Ahead of the Curve

Bounce-back in small and growing business investing. Last year, at least 56 new investment vehicles launched raising $1.2 billion in capital to invest in small and growing businesses around the world. That represents an uptick over the prior year’s 47 vehicles and tops the annual average of 51 new vehicles over the last decade (see, “Emerging-markets impact investors turn away from small businesses, at their peril). That’s according to the annual “State of the SGB Business Sector” report from the Aspen Network of Development Entrepreneurs, which defines the sector as businesses with five to 250 employees, capital needs from $200,000 to $2 million and growth potential. Nearly one in five investment vehicles have an explicit gender mandate.

  • Small is beautiful. In emerging markets, private capital vehicle investment jumped 27% to $70 billion in 2017. While less than 1% of the total capital went to deals under $2 million, small deals represented a greater proportion of the total number of deals. In Latin America last year, deals under $1 million made up more than half (335 out of 610) of all private investments.
  • Gender alpha. The number of new gender-lens focused funds and vehicles is the largest since ANDE began tracking (see, “Female fund managers make the case for ‘gender alpha’ in emerging markets). ANDE backed NESst, MEDA and Agora Partnerships, and Root Capital and Value for Women to incorporate gender lenses into impact measurement (see, “Capturing the alpha in gender inclusion).
  • Divide and conquer. Segmentation is key to closing the $940 billion financing gap for small and growing businesses, according to the Collaborative for Frontier Finance (see, “The four ‘missing middles’ among small and growing businesses). Also key: Overcoming risk perceptions. “More data and experimentation are needed in order to better understand the relative risk of these businesses, and therefore the commensurate return requirements,” the collaborative’s Drew von Glahn told ImpactAlpha (see, “Financing inclusive growth at Palladium’s Positive Impact Summit).
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Agents of Impact: Follow the Talent

Congruent Ventures, Closed Loop Partners and Social Impact Capital join the Impact Capital Managers network (see, “Private funds managers deliver outperformance by driving impact)… The Bertha Centre for Social Innovation and Entrepreneurship seeks a senior project manager in Cape Town (see Impact Tech: South Africa, above)… The Aspen Network of Development Entrepreneurs is hiring a communications manager (see, Signals, above)… The International Union for Conservation of Nature is seeking investment managers to implement the CPIC Conservation Finance Initiative… The REDF Accelerator is recruiting entrepreneurs to help their employees transition to long-term employment.

— July 8, 2019.