Featured: ImpactAlpha Original
Seizing the opportunity to finance small businesses in new opportunity zones. The easy money is in shovel-ready real estate in the more than 8,700 new zones that qualify for hefty capital-gains tax benefits under last year’s tax bill. But in terms of job creation and local wealth-creation, the real “impact alpha” may lie in bridging the small-business capital gap that leaves more than four of five enterprises without formal access to capital. Two out of three net new jobs are created by small businesses. Minority entrepreneurs are more likely to hire other minorities. Women-run companies, despite raising less funding, generate more revenues.
Investors are beginning to mobilize around the opportunity to tap at least part the vast pool of unrealized capital gains – more than $6 trillion by most estimates – for small-business creation. That effort includes tapping the knowledge and networks of organizations and ecosystems already finding and supporting overlooked entrepreneurs. Impact investors also are lobbying the Treasury Department to remove barriers to business investing in forthcoming opportunity zone regulations. The challenge, says Chris Montgomery of Four Points Funding, a Colorado angel investor syndicate, is “how to invest capital in areas that wouldn’t otherwise see it.”
Read, “Seizing the opportunity to finance small businesses in new opportunity zones,” by Dennis Price on ImpactAlpha.
Dealflow: Follow the Money
DiCaprio-backed Kingo secures $15.5 million in debt to expand off-grid solar. The Guatemalan company has sold prepaid home solar systems to more than 60,000 low-income, off-grid households in Guatemala, Colombia and South Africa. Kingo’s $15.5 million loan, issued in local currency, comes from the Dutch development bank FMO, Oikocredit and the Infrastructure Development Fund. Kingo closed an equity investment from actor Leonardo DiCaprio in April; earlier investors include the French utility ENGIE and Colombian utility EPM. Read on.
Enterra raises Series B financing to expand insect-based animal feed. The British Columbia-based insect farming business is opening three new facilities to turn black soldier fly larvae into feed for farmed fish, livestock and pets (see, “Now we know why she swallowed a fly”). The growing market demand for Enterra’s sustainable, alternative animal feed attracted Hong Kong-based ADM Capital, which led the round. An unnamed Canadian investor and prior investors PHW Gruppe, Wheatsheaf Group and Avrio Capital also participated. Dig in.
Brazilian impact crowdfunding platform Incentiv raises seed funds. Incentiv helps socially-minded organizations expand revenues by linking them with companies and individuals eligible for tax deductions on social, economic and educational investments under Brazilian law. Three angel investment funds—Harvard Angels, Insper Angels and Anjos Do Brasil—provided an undisclosed amount of capital. Learn more.
Signals: Ahead of the Curve
Stocking the pipeline of sustainable seafood investments. Impact investors had a hard time finding deals in sustainable seafood when ImpactAlpha started covering the sector several years ago. Today’s solid pipeline of investible companies is due in no small part to the Fish 2.0 competition, which has helped dozens of companies hone their business plans and connect with investors. The new round of the competition includes tracks for traceability, tuna and aquaculture, as well as regional awards for Australia, Pacific islands and California. New products, supply chains and technologies are emerging “even faster than we expected,” says Fish 2.0’s Monica Jain. “The problems in seafood are solvable and they are being solved.”
The recent boomlet in impact investing in ocean health includes the $37.5 million first close for Althelia’s Sustainable Oceans Fund; two investments by Pescador Holdings; and Dutch-based Aqua-Spark, which has raised more than $20 million for aquaculture investments. Closed Loop Partners’ Rob Kaplan has launched Circulate Capital to mobilize $150 million for recycling and waste management ventures in South and Southeast Asia, the source of more than half the world’s ocean plastics. Applications for Fish 2.0’s global tracks are due Oct. 28; winners will be announced next fall.
Agents of Impact: Follow the Talent
Howard Buffett and William Eimicke talked “Social Value Investing,” the title of their new book, in an interview with NextBillion…Rockwood Leadership Institute’s Akaya Windwood and Renewal Funds’ Joel Solomon discuss “Financial Activists and 21st Century Leadership,” with Liz Maxwell on SOCAP’s Money + Meaning podcast…Glenmede and BRAVA Investments are hosting “Invest in Women, Affect Climate Change,” Sept. 26 in New York.
— September 5, 2018.