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Early movers are getting a jump on opportunity zones – and the future of community investing. A tweak to the tax code has set off a race between rival approaches to investing in some of America’s poorest urban and rural neighborhoods. ImpactAlpha has identified at least 10 impact fund managers that are racing to take advantage of the Investing in Opportunity Act, which allows investors to defer, and even reduce, taxes on capital gains rolled into 8,700 designated opportunity zones.
Among the early moving impact-oriented fund managers: Access Ventures, LISC, Village Capital, Enterprise Community Partners and TPP Capital Management. AOL founder Steve Case’s Revolution venture capital firm is building a team to develop real estate for tech startups in opportunity zones far from the coastal tech hubs. “The first funds to market will shape what comes next for opportunity zones,” Village Capital’s Ross Baird told ImpactAlpha. “The people who wrote and championed the bill intended it to create impact and wealth in distressed communities. We need the impact investment community to rally to create use cases and models the country can learn from.” In contrast, a go-it-alone approach that chases low-risk, high-return investments could attract extractive businesses, create few jobs, drive rent increases and displace existing residents.
Read, “Early movers are getting a jump on opportunity zones – and the future of community investing,” by Dennis Price on ImpactAlpha.
Dealflow: Follow the Money
LeapFrog backs Indian healthcare company Ascent Meditech. The emerging-markets impact investment firm is expanding its healthcare portfolio with a majority stake in Ascent, which makes low-cost orthopaedic products for India’s growing senior population. LeapFrog’s Andrew Kuper recently called on investors and financial services providers to reach the “bottom four billion” by 2030. The collective spending power of such consumers at that point is forecast to top $30 trillion. Here’s more.
LendingTree acquires Student Loan Hero for $60 million. Student Loan Hero has helped 200,000 borrowers manage, refinance and repay $3.5 million in student loans. Online lending marketplace LendingTree paid $60 million for the company to expand its presence in the $1.4 trillion student loan debt market in the U.S. Read on.
Apollo Agriculture raises $500,000 for Kenyan farmers. The Kenyan startup underwrites and provides credit, advice, and farming inputs like seeds and fertilizers to Kenya’s small farmers. It raised the capital from Rabobank Foundation and Dutch development finance institution FMO’s €1 billion MASSIF Fund. Dig in.
Signal: Ahead of the Curve
Circulate Capital brings corporate customers to sustainable-oceans investing. More than half the plastics in the oceans comes from South and Southeast Asia. That presents a high-impact opportunity to invest in the region’s waste management and recycling infrastructure, says Rob Kaplan. With Ocean Conservancy, he has launched Circulate Capital, a spinoff of Closed Loop Partners, to mobilize $150 million for such ventures. Circulate’s roster of corporate partners, including both Pepsico and Coca-Cola, as well as 3M, Kimberly Clark, Dow and Procter & Gamble, have unmet demand for recycled materials. “It is one of the things that will give us more success, having the largest buyers working on this together,” Kaplan told ImpactAlpha. Circulate has looked at 50 ventures in Indonesia, India, the Philippines, Vietnam and Thailand; the firm is circulating an RFP for entrepreneurs seeking financing in the range of $2-$5 million. “I’ve never seen anything like it,” Kaplan said of the growing attention to ocean health and ocean plastic in particular.
- Oceans moment. The boomlet in impact investing in sustainable oceans and seafood includes the $37.5 million first close for Althelia’s Sustainable Oceans Fund; two investments by Pescador Holdings, developed by Encourage Capital; and Aqua-Spark, a Dutch-based aquaculture fund, which has raised more than $20 million.
- Impact tech. The nonprofit Sustainable Ocean Alliance has selected five startups for its first Ocean Solutions Accelerator. They include LOLIWARE, a NY-based making compostable, edible materials from seaweed; Sydney-based BlockCycle, which uses blockchain to help companies, cities and individuals track waste; and CalWave Power Technologies, which is harnessing wave energy. Each company will get a $25,000 investment.
“As more and more people were pointing the the problem, no one was pointing to the solution,” Kaplan said of his jump from Closed Loop to Circulate. “I thought, ‘I have the skill set and experience to tackle this environmental challenge.’”
— July 18, 2018.