Overheard at SOCAP18: The OZ opportunity, corporate impact VC, the impact backlash



San Francisco, October 24 – It’s the halfway mark of the annual impact festival known as SOCAP18. ImpactAlpha has fellows Emma Kulow and Tiago Gomes, digital producer Roodgally Senatus, marketing director Tracy Barba and editor David Bank in San Francisco to capture a slice of the activity. Here’s a snapshot:

SOCAP18 l Photo credit: Roodgally Senatus

1. The impact backlash.  “This is why we’re here, supposedly, to change the way we do finance. And yet the gap just gets wider and wider,” Konda Mason, the director of the Runway Project, said on a panel about investing for social justice. Elsewhere at SOCAP, others grappled with the same issue. “If impact investing continues making the rich richer, isn’t it just deepening the social issues?” one Twitter user posited during another panel. Is an impact investing backlash brewing? – Roodgally Senatus and Emma Kulow

  • The time for not costing-out externalities is over. “We can’t be very nice anymore,” said Clara Miller of the Heron Foundation. “[We] need to make it clear that if you use shared capital – air, water, labor – capital that we own together, you owe us for it.”
  • Impact investing needs more inclusive decision-making when it comes to committing capital, argued Andrea Armeni of Transform Finance; community members, investees, customers, and regulators need a bigger say.
  • Kiva’s clues. On Kiva’s platform, business owners and students pitch their funding needs. Organizations like OPIC, as well as individuals, can choose to back them and how much to give. One million Americans have invested through Kiva’s platform. A $10 million loan from OPIC in 2017 has catalyzed $26.4 million in lending via 98,000 microloans to 200,000 small business borrowers. Eight in 10 were women.
SOCAP18 l Photo credit: Roodgally Senatus

2. Corporates turn to impact. They started in corporate social responsibility, but today more and more corporations are getting into impact investing.  SoftBank, Salesforce, Orange and many others are shifting some of that capital towards impact. (Here’s a round-up of recent corporate VC deals.)

  • Business-driven. Many corporates are being driven by their own business strategy. The “alternative protein” sector is a good example. Meat industry giants like Tyson and Cargill are following consumption trends and backing a growing number of lab-grown and “vegetarian meat” companies.
  • Leading from behind. Not all corporate venture funds are taking the lead on impact deals. Yet “they add strategic and technical expertise that other co-investors might not possess, potentially leading [investees] to quicker progress,” says ImpactAlpha fellow Tiago Gomes. Companies like Schneider Electric and drone-maker Parrot are lending much needed technical expertise alongside cash, for example.
SOCAP18 l Photo credit: Roodgally Senatus

3. The “opportunity” of Opportunity Zones. The Opportunity Zones provision in the new tax bill is could generate hundreds of billions of dollars in new investment for low-income U.S. communities. Impact investors want capital to reach entrepreneurs, not just real estate investors. Why? Because entrepreneurship has a big impact on poverty and the social ills that come with it. But “the average entrepreneur is seen to be too risky for a loan and not high-growth enough for venture capital,” said Ross Baird of Village Capital, which just made its 100th investment. “Good businesses in Opportunity zones are stuck like this.” —Roodgally Senatus

  • Stay current on ImpactAlpha’s industry leading Opportunity Zone coverage, here.

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