Greetings, Agents of Impact!
Series: Investing for Racial Equity
How Living Cities is deploying ‘capital for the new majority.’ Living Cities manages about $80 million and has invested in more than 30 funds and financial institutions. Its $37 million Blended Catalyst Fund is one of the largest explicitly race-focused funds in the market. To broaden access to capital, Living Cities invests through funds and financial institutions that have managers and owners of color. “We must build comprehensive solutions that transform how capital is deployed, companies grow, and jobs are created by people of color,” write Living Cities’ Ben Hecht and Brinda Ganguly in the latest entry in ImpactAlpha’s Investing for Racial Equity. One goal: get more capital to the entrepreneurs who increasingly are creating the start-up companies that generate the bulk of all new jobs. In 1996, three-quarters of new start-ups were founded by whites; by 2014, that percentage had dropped below 60%, even as total new business starts also dropped.
Current institutions—the banks, and private equity and venture funds that provide capital and technical assistance—have a poor track record of serving people of color and women. “If we really want to re-invigorate the American economy and grow jobs, we need to understand why America’s fastest-growing populations, people of color, aren’t starting and growing companies,” write Hecht and Ganguly. Living Cities looks for intermediaries that use alternative underwriting methods to increase inclusion and are building robust ecosystems for people of color. “Without these solutions,” they say, “we will not only fail to grow our economy in the second half of this century but fall even further behind in addressing the significant racial disparities in income and wealth that exist.”
Read, “How Living Cities is deploying ‘capital for the new majority,’” by Living Cities’ Ben Hecht and Brinda Ganguly on ImpactAlpha.
- Also on the “Returns on Inclusion” beat: “How Kellogg Foundation is interrupting racial bias in capital markets.”
Dealflow: Follow the Money
Taz Technologies raises early capital for Kenyan postal service MPost. Kenya’s unreliable postal service hampers deliveries for e-commerce retailers and consumers among the country’s 20 million internet users. Kenyan startup Taz Technologies aims to fill the gap for the majority of Kenyans without a postal box. Taz’s MPost app lets users link their phone numbers to a local or regional postal carrier. Customers receive notifications and can pick up their deliveries from the post office, or pay to have it delivered to them. MPost uses blockchain for security and traceability. MPost has been “ratified” by the Universal Postal Union, the U.N. agency that coordinates global postal systems and policies. Cape Town-based early stage African venture investor Havaic backed Taz in a pre-Series A funding round. Here’s more.
Misfits Market raises $16.5 million to expand ‘ugly produce’ delivery across the East Coast. Sixty million tons of food is wasted even before it leaves U.S. farms. Misfits Market is among the crop of startups trying to reduce waste by helping more of it reach consumers. The North Philly startup buys “ugly” fruits and vegetables from farmers and sells them at a discount to grocery stores via subscription service. Since launching last year, the company’s service area has expanded across Pennsylvania as well as Ohio. Its $16.5 million raise was led by Greenoaks Capital. Baltimore-based Hungry Harvest uses a similar model to buy unwanted produce from grocery stores; Bay Area-based Full Harvest buys up ugly produce from farms on the West Coast. Dig in.
Half of Harvard’s summer i-Lab teams are impact entrepreneurs. Harvard’s Innovation Labs incubator has graduated hundreds of student and alumni entrepreneurs. This summer, more than half of the incubator’s 80 teams are impact entrepreneurs, even though only 18 of the teams were accepted through i-Lab’s “social impact” track. Most of the ventures apply through industry-specific tracks, including ClearView, an assistive tech startup for visually-impaired students; Loro, which is making a robotic companion or people with mobility challenges; and Abraze Manufacturing, which is developing a way to make steel without CO2 emissions. “We have seen a steady increase in teams with social missions applying for the summer venture incubation program,” i-Lab’s Jodi Goldstein told ImpactAlpha. Explicitly social impact participants in this year’s summer program include Ace, a civic engagement app; Hera, a mobile health app designed for refugee women in Turkey; and Tendrel, a support network for social entrepreneurs. Learn more.
Signals: Ahead of the Curve
Catalyzing capital for global health innovation. More innovation, and low-cost risk capital, is needed to meet global healthcare demand. Scaling up medicines, vaccines, bed nets, medical devices and other existing health interventions won’t be enough to meet the 2030 goals laid out in SDG No. 3 (Ensure healthy lives and promote well-being). Earlier this week USAID’s Center for Innovation and Impact and UBS Optimus Foundation convened investors and health innovators in New York to explore ways in which the former can fund the latter. On the agenda was USAID CII’s recent report, “Unleashing private capital for global health innovation.”
- The gap. The investment gap to meet global health goals in low- and middle-income countries is an estimated $134 billion a year. That gap could rise to $371 billion by 2030, suggesting an urgent need for private capital.
- Valley of death. Health innovators especially need early- and growth-stage capital, including patient and concessionary capital in the “archetype” stage; more debt and equity to transition from proof of concept to early scale; and more working capital in the growth and scale stages. Innovators require industry expertise to understand and meet customer demand and refine business models.
- Matching risk and reward. The few investors focused on global health generally target growth-stage ventures. Investors say they need improved risk-return profiles of innovators, better information and dealflow, as well as technical support to build funds.
- Catalytic capital. Two investment vehicles could help match the needs of health innovators and investors. An ‘innovator’ support facility would help increase the number of companies able to attract and absorb private capital. An ‘investor’ support facility could provide low cost risk capital to boost risk-adjusted returns in global health. The goal: “crowd-in’ a wider array of private investors.
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Agents of Impact: Follow the Talent
James Gifford, founder of Principles for Responsible Investment, leaves his impact investing role at UBS… Priscilla Almodovar, ex-of JP Morgan Chase, is the new CEO of Enterprise Community Partners… Scott Nance, previously with ImpactAssets, joins CapShift as vice president of business development… Social Finance is hiring a director of social investment.
— June 20, 2019.