Greetings, ImpactAlpha readers!
Year in Review: Inclusive Economy
Middle America is an engine of innovation. Low-income communities are investable. Immigrants are assets, not liabilities. Inclusive prosperity is a pro-growth strategy. In cities and towns across the U.S. and around the world, business and civic leaders are building local ecosystems to help residents thrive in the global economy. We call them The New Revivalists.
These New Revivalists know place, they know talent and they know tech. They know how to build local businesses and create good jobs. We’re going all-in to tell their stories in 2018. Here’s what they were up to in 2017.
#Featured: Returns on Investment Podcast
How will Steve Case know whether the rest are rising? First came the bus tour that took AOL founder Steve Case to 33 cities far from the coastal enclaves that usually command the attention of tech titans and venture capitalists. Then came the $150 million Rise of the Rest fund, to which Case attracted a Who’s Who of limited partners. And then came a dust-up over whether Rise of the Rest is or isn’t an “impact fund.” As Case himself wrote in his response on ImpactAlpha, “My passion for what we’re doing with Rise of the Rest lies in the idea of leveling the playing field, so everybody, everywhere has a shot at the American Dream.”
But Case said the fund is so focused on getting money out the door quickly that it won’t be measuring that impact by tracking things like the creation of good jobs, improved livelihoods or economic inclusion. Our latest Returns on Investment podcast takes up the question of whether any fund, impact or not, can avoid such accountability. “As an investor, why would I give you my money if you’re not measuring and reporting?” asked roundtable regular Imogen Rose-Smith. Added ImpactAlpha’s David Bank: “We haven’t heard the last of this debate.”
Get the whole story (and listen to the podcast),” in “How will Steve Case know whether the rest are rising with his $150 million fund?,” by David Bank on ImpactAlpha.
#Inclusive Economy on ImpactAlpha
1. Inequality is a problem. Fixing it is an opportunity. Countries with lower levels of inequality are more politically stable. That creates a better operating environment for business and investment. Including historically excluded parts of the population expands the customer base. A new tool from Morgan Stanley shows businesses how getting more people participating in the economy can boost financial performance and investment returns. Tap the inclusive growth opportunity.
- Nonprofit Finance Fund introduces loan fund for California nonprofits
- Chan Zuckerberg Initiative invests in affordable housing for teachers
- Michigan Good Food Fund has deployed $10.5 million to food startups in the state
- Village Capital aims to rethink skills training to match job needs
- FinLab winners share $3 million for inclusive fintech solutions
2. The growth market in racial equity. By 2044, “minorities” will be the majority in the U.S. Overcoming racial disparities is “one of the biggest opportunities of our time for driving innovation and growth,” say researchers from FSG and PolicyLink. The supermarket chain ShopRite, for example, brought high-quality, fresh produce — and even in-store health clinics — to 250,000 people, mostly of color, in Philadelphia’s “food deserts” — and tapped a $250 million market. Gain a competitive advantage through racial equity.
3. Immigrants are an asset…The 40 million immigrants in the U.S. represent 13.3 percent of the population and generate nearly 15 percent of U.S. GDP. They account for half of startup founders for companies valued at more than $1 billion and for 31% of software engineers. Between 1996 and 2010, immigrants contributed more than half of the increase in the U.S. labor force. More on immigrants and the American economy.
- See also: How Dreamers boost the American economy
4. …Helping newcomers adds value. The state of Massachusetts has launched a social impact bond to support refugees and workforce development. IKEA is eyeing refugee entrepreneurs as future suppliers. Here are some companies and funds investing in refugees and immigrants:
- Massachusetts social-impact bond to fund immigrant, refugee workforce development
- IKEA creates a pathway for refugees to join its supply chain
- Kois Invest to move ahead with livelihood bond for Syrian refugees
- Kiva fund will give refugees access to loans
- In the Middle East, VilCap and MetLife select 11 new fintech prospects
- Emerson Collective to incubate innovation in immigration advocacy
- Unshackled Ventures seeks $25 million to fund foreign-born entrepreneurs in the U.S.
- Envoy Global lands $21 million for foreign-worker services
5. Middle America is an engine of innovation. A handful of investors are actively looking for companies to back such between-the-coast cities as Cincinnati, Des Moines, Tulsa and Charlottesville. Ross Baird, founder of Village Capital, writes in “The Innovation Blindspot” that investors who look for companies and entrepreneurs in overlooked geographies and demographics perform just as well as those on the coasts — and pay roughly half for their stakes in equivalent companies. Listen to Ross (on the podcast) and overcome your innovation blindspot.
6. The rise of local entrepreneurial ecosystems. Not waiting on capital from the coasts, civic and business leaders in states, cities and towns across the U.S. are testing new models to finance inclusive, local entrepreneurship.
- Virginia is for Entrepreneurs’ aims to streamline funding for local startups
- ‘Chicago Model’: MacArthur, Calvert and Chicago Community Trust Launch $100 Million Local Fund
- Philadelphia leaders commit $15 million to one-stop investor for social startups
- Neighborhood Economics: Local funding for entrepreneurs without a rich uncle
- How the Northwest Area Foundation creates good rural jobs
- Morgan Stanley, Urban League replicate Cleveland small-business fund in Florida
7. A private bond market emerges for low-income community development. Not long ago, most investments in community-development finance institutions came from banks that needed to satisfy legal requirements under the Community Reinvestment Act. This year, a raft of public bond market and other fixed-income options give institutional and retail investors a way to put their money to work in affordable housing, small businesses and community-development projects in low-income communities. Read on about the new private capital markets for low-income communities.
8. Banking on cities. JPMorgan Chase and its urban-investment program claimed the top spot on Fortune magazine’s Change the World Top 50 list. The bank started with a $100 million investment in Detroit shortly after the city declared bankruptcy; three years later, it re-upped with $50 million more to support businesses and nonprofits. JPMorgan Chase is replicating the model in Chicago and Washington, D.C. Among JPMorgan’s urban commitments this year:
- JPMorgan Chase adds $50 million to finance revitalization in Detroit
- Detroit-based Entrepreneurs of Color Fund nearly triples to $18 million
- JPMorgan replicates Detroit community revitalization commitment in Chicago
- JPMorgan adds D.C. to its urban-renewal roster
9. Imagining a trillion-dollar moonshot for American entrepreneurs. A “jobs bond” could provide liquidity to private investors in startups and small businesses based on the number of jobs created. Aggregating community banks into a “super-regional” bank could provide a bridge between large capital providers and organizations that create entrepreneurial ecosystems. Those are some of the ideas from a two-day design lab convened by the Kauffman Foundation to imagine ways to jumpstart U.S. entrepreneurship. Let your imagination run wild.
10. Rise of the global rest. Move over London, Beijing and even Mumbai. Just as new cities are attracting venture capital in the U.S., so too are once-overlooked global centers. Frontier startup cities like Jakarta, Dubai, Vienna, Istanbul and Kuala Lumpur represent opportunities for impact investors. Here’s more on how to support the “rise of the rest” globally.
11. Measuring what matters. A new economic measure introduced at the World Economic Forum suggests inequality is not a natural byproduct of globalization, but a choice countries make through investments and priorities.The Inclusive Development Index uses living standards, not gross domestic product, as a signal of a nation’s economic health. GDP fails to capture how wealth is distributed. Read all about it.
Onward! Please send news and comments to TheBrief@impactalpha.com.