Infrastructure pipe dreams (podcast), catalyzing employee ownership in Cleveland, Vulcan backs Capria, filling capital gaps in Opportunity Zones



Greetings, ImpactAlpha readers!

Featured: Returns on Investment podcast

Infrastructure hopes spring eternal. What’s impact got to do with it? It has become a biennial ritual to loft “infrastructure” as one of the few issues on which bipartisan cooperation is even imaginable in the current U.S. political climate. The pipe dream found new life after last week’s midterm elections. Democrats dutifully trotted out infrastructure as near the top of their legislative agenda (and actually do have a good idea: a national infrastructure bank to finance investments in energy, water, transportation and broadband). President Trump renewed his own call for an infrastructure bill. “Maybe we’ll make a deal, maybe we won’t,” he said. “But we have a lot of things in common on infrastructure.”

The latest episode of ImpactAlpha’s Returns on Investment podcast put the kibosh to the infrastructure-bill fantasy. “I don’t think there’s much cause for optimism in Washington,” said roundtable regular Imogen Rose-Smith. Yet state- and local-level experimentation is already underway. And that’s where impact investors may have a role to play. Water markets, for example, can help allocate a scarce resource towards its most valuable uses, but also challenge established ideas of water as a public good shouldn’t be privatized. “Coming up with solutions to those problems is something that impact investing can help solve,” Rose-Smith said. Public accountability and democratic governance will be key to successful projects, suggested ImpactAlpha’s David Bank. “We can model some of the structures and processes and projects themselves, such that when the time comes time for there to be an infrastructure bill, there’s a good body of work to point to about how to do it right.”

Read on, and listen in, to “Infrastructure hopes spring eternal. What’s impact got to do with it?” Subscribe to ImpactAlpha’s Returns on Investment podcasts on iTunes, SoundCloud, Stitcher or wherever you get your podcasts.

Dealflow: Follow the Money

Evergreen Cooperatives launches fund to catalyze employee ownership. The Cleveland-based cooperative employs and trains 250 low-income, low-skilled workers through three employee-owned business. Now, Evergreen Cooperatives is raising a fund to help existing businesses convert to a cooperative model, reports Next City. The Fund for Employee Ownership is targeting the 63% of U.S. private businesses owned by Baby Boomers who may be looking for a succession plan (see, “Building a 21st-century economy that works for working people”). The fund has raised $5 million in convertible debt from an unnamed investor to buy out current owners and convert the business to cooperatives. Dive in.

Capria Fund raises $33 million to invest in early-stage emerging-market funds. The fund’s first close was anchored by $20 million from Vulcan Capital, the family office of Microsoft co-founder Paul Allen, who died last month. (Microsoft’s other co-founder, Bill Gates, is also an investor.) The Capria Fund will invest in the network of funds in Africa, Asia and Latin America that have gone through its fund-manager accelerator program; its first two commitments are to Mexico’s Adobe Capital and Chile’s Fen Ventures (see, “Capria seeks ‘network effects’ in emerging-market small-business investing). Other new investors include Omidyar Network, Ford Foundation and Resonance Impact Fund. Capria is recruiting for its next cohort of fund managers. More.

MFS Africa raises $14 million to connect mobile money services. The nine-year old fintech company connects mobile money users in Africa with payment service providers. One in ten African adults has a mobile money account from more than 160 mobile money services. MFS Africa makes it easier to transfer money between services and financial institutions. The company has raised $14 million in equity to expand to rural areas. The round was backed by Chicago-based Equator Capital Partners, China-based Lun Partners Group, Dutch impact investor Goodwell Investments, and U.K.-government backed FSD Africa. Read on.

Signals: Ahead of the Curve

Filling capital gaps and finding investable opportunities in Opportunity Zones. Investors and fund managers developing place-based investing strategies may ask, “Where is my capital needed most?” A new report from the Urban Institute helps track capital flows to communities and businesses to help investors and other community developers identify projects in need of financing and design needed financial products. “This a way to quantify and operationalize,” needs and opportunities in specific locations, says Urban Institute’s Brett Theodos.

  • Meeting real needs. Opportunity Zone advocates have stressed the importance of aligning investments with community needs. “Not just, Do we need capital? but, what actual basic services are required? Do we have enough grocery stores? Day care seats?” says Theodos. For example, the Urban Institute identified opportunities in affordable housing in Minneapolis and St. Paul where the stock of low-rent housing is less than half what’s needed.
  • Access to capital. The think tank scored investment flows into all tracts eligible for Opportunity Zone designation based on commercial lending, multifamily lending, single-family lending, and small business lending. It then ranked the tracts within states. Less than a third of more than 8,700 Opportunity Zones selected were located in tracts with the lowest levels of investment; nearly as many are in tracts that already have the highest levels of investment. Track county-level flows for yourself.
  • Filling capital gaps. An Urban Institute analysis of investment flows into real estate projects in Detroit found an outsized role played by mission capital from community development finance institutions, philanthropies and public agencies. The capital gap: Detroit neighborhoods outside central business district, Lower Woodward and Middle Woodward, which contain most of the city’s jobs. Share this post.
  • Go deeper: Join the Urban Institute webinar, “Tracking Capital Flows and Gaps in Communities,’ Dec. 3.

Agents of Impact: Follow the Talent

DB Microcredit Development Fund seeks “expressions of interest” from partners to deploy approximately $5 million in developing markets… Alliant Capital’s Dudley Benoit joins the board of directors of the Reinvestment Fund… Visa is hiring a director of impact assessment… Impact data platform MIX is looking for a lead for digital financial services and fintech intelligence… The Ground_Up Project is hosting an online summit for zero-waste businesses, November 20-21.

November 14, 2018.

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