Greetings, ImpactAlpha readers!
#Featured: Returns on Investment podcast
Ross Baird on bridging the entrepreneurial gaps that divide the U.S. Rather than living in the golden age of entrepreneurship, we are in the midst of a 40-year decline in the rate of new business starts. Not coincidentally, the vast majority of VC funding goes to usual hotspots like the Bay Area, Boston and New York, and only tiny percentages fund entrepreneurs who are women or people of color.
In his new book, The Innovation Blind Spot: Why We Back the Wrong Ideas―and What to Do About It, Ross Baird, founder of Village Capital, shows how investors who look for companies and entrepreneurs in overlooked geographies and demographics can pay less and achieve equal or greater returns. Baird sees the makings of a popular, even populist, movement to restore hollowed-out American cities with local entrepreneurs backed by community banks and new forms of capital. “The big battle line in the next decade is not left versus right or liberal versus conservative,” he says. “It’s big versus small and medium.”
Listen to David Bank’s conversation with Ross Baird about his new book, “The Innovation Blind Spot: Why We Back the Wrong Ideas―and What to Do About It.”
Subscribe to ImpactAlpha’s Returns on Investment podcasts.
#Sponsored: Content from Tideline
Scaling impact for U.S. communities. Impact Community Capital is on a five-year strategic plan to grow its highly-regarded investment platform. IMPACT, owned by a dozen insurance companies and financial institutions, delivers quality investments to institutional investors seeking to add impact to their investment portfolios. Since 1998, IMPACT has provided nearly $1.5 billion in financing to benefit low-income families and communities in 38 states and the District of Columbia. IMPACT and its owners developed the strategy in collaboration with Tideline, a consulting firm that provides tailored advice to clients developing impact strategies and solutions. Read more about Tideline’s work with IMPACT.
#Dealflow: Follow the Money
Tienda Nube raises $7 million to bring Latin American small businesses online. Small businesses are the backbone of the region’s economies, but they lack the resources to connect to the region’s booming e-commerce market. That dampens their prospects for growth, says Johanna Posada Gil, co-founder of Elevar Equity, which led the Series B financing round. Latin American e-commerce revenues are expected to reach $85 billion by 2019, up 17% per year since 2014. Tienda Nube (Nuvem Shop in Brazil), launched in 2010, enables businesses to create online shops, manage payments and fulfill shipments. The company has 16,000 registered businesses, mostly in Brazil and Argentina, and plans to expand to Mexico. IGNIA Partners, NXTP Labs, FJ Labs and Kaszek Ventures participated in the financing.
Beneficial Returns includes impact incentives in loan to Iluméxico. The loan fund launched earlier this year to help social enterprises gain access to debt and credit. It extended a small loan to Iluméxico, which launched in 2010 to offer affordable home solar systems to Mexico’s three million citizens living off the electricity grid. The secured, five-year loan will help Iluméxico provide credit to low-income women to buy the refrigerators for their shops. The company has installed 10,000 solar panels and has expanded its range of products to include “productive use” technologies like solar-powered refrigerators for small businesses. Beneficial Returns has agreed to waive the last month of Iluméxico’s loan payment if it adds another 20,000 solar panel installations over the next five years — a goal Iluméxico itself set. “If you really care about impact, put your money where your mouth is and reward the folks that are actually delivering the results,” Beneficial Returns’ Ted Levinson told ImpactAlpha. “In 59 months we’ll know how things pan out, but I don’t think other investors need to wait that long to incorporate these kind of rewards into their business models.”
An Israeli testbed for senior-care startups. A joint venture between Tech for Good and Matav Association will incubate ventures working to improve at-home senior care. Israel’s over-65 population is projected to grow to 15% of Israel’s population by 2035, from 10% today. Life expectancy is also expected to rise. “All the figures show that it is worthwhile for senior citizens to grow old at home and in their community,” says Lior Strassberg, CEO of Matav Association, a nonprofit nursing-care organization. The incubator will provide startups with office space and access to Matav’s social-worker network for help with piloting pilot products and services; Tech for Good will offer business consulting. “The question of correct aging will attract the attention of the entire economy in the coming decades,” Strassberg says. Greensleeves Care, in England, recently raised a $41 million “retail charity bond” to build new elderly care centers.
See all of ImpactAlpha’s recent #dealflow.
#Signals: Ahead of the Curve
Inside Unilever’s epic experiment in corporate sustainability. Environmentally friendly soaps, water-pump installations in sub-Saharan Africa and advertisements without gender stereotypes. And a belief that promoting health and happiness in emerging markets will create millions, or billions, of new customers. Unilever, the $170 billion consumer goods giant, is experimenting with impact at the “greatest of industrial scales,” write Bloomberg’s Thomas Buckley and Matthew Campbell in a deep dive into the company’s strategies. Unilever beat back a $143 billion takeover bid earlier this year from the Kraft Heinz Co. (controlled by private equity firm 3G Capital with Warren Buffett’s Berkshire Hathaway). The firm is now locked in an existential pursuit to show that “sustainability” can, literally, deliver the goods. By 2020, Unilever aims to cut its environmental footprint in half and double sales by encouraging health and hygiene in emerging markets. Unilever’s green brands, such as Seventh Generation, accounted for 60% of sales growth in 2016. Energy use per metric ton of production is down 25%, saving $472 million. Water use has fallen even more. The company sends zero garbage to landfills across 600 factories and offices — reaping savings of $240 million. Is that enough to hold off the raiders? Since CEO Paul Polman took over in 2009, sales have climbed to nearly $63 billion from $48 billion, with profit margins of around 18%, “healthy, if unspectacular.” Its stock, which trades under the NYSE ticker “UN,” is up over 100% in the last five years (excluding dividends). The key to the corporate experiment: the long-term sovereign-wealth and pension funds that are Unilever’s largest investors.
China’s fossil fuel-free car future. China, the world’s largest car market with over 25.5 million cars and light vehicles sold in 2016, has signaled an end to production of fossil fuel-burning vehicles — someday. There’s no timeline for the timeline for China to stop making internal-combustion vehicles. But China has set goals for electric and plug-in hybrid cars to make up at least one-fifth of Chinese auto sales by 2025. Shares of Tesla jumped 5.6% on the news, to $362.73, and stocks tied to lithium and other materials for electric vehicles surged.
China is poised to lead the EV transition. Its pollution problems are legion, with as many as one-third of deaths related to smog. Registered sales of EVs topped 352,000 in 2016 and are projected to double in 2018. (That’s more than double the 159,000 electric vehicles that have been sold in the U.S., more than half in California.) Add in Chinese sales of plug-in hybrids, and the total rises to more than 500,000 “new energy vehicles.” The Chinese government in June introduced draft regulation for a credit system to compel manufacturers to produce more EVs by 2020; automakers that don’t meet the goals can buy credits from other manufacturers.
Foreign car manufacturers are taking heed by shifting EV design and production to China. GM is making China the hub of its EV research and development, while Renault-Nissan and Ford have set up electric-car joint ventures. Volvo Cars, now owned by Chinese automaker Zhejiang Geely Holding, plans to build its first electric vehicle in China beginning in 2019.
Onward! Please send any news and comments to [email protected].