In today’s Brief: Look out Bangalore, Chennai is earning startup cred with a statewide VC fund and recent food, health and fintech deals…Global investors are excited about a Nairobi-based pay-as-you-go clean energy provider to poor households…Mobile money is big in Tanzania, too…Credit guarantees can unlock capital for education, health and conservation investments…And sustainable aquaculture is a $100 billion global market (that’s big).
#Dealflow: Follow the Money
Tamil Nadu establishes VC fund to promote entrepreneurship. The Indian state eventually plans to invest $77.4 million through a venture capital fund to support local startups and proposes enlisting industry leaders to help run the fund. The state also plans to spend $1.5 million for an annual entrepreneurship fair. Tamil Nadu’s capital, Chennai, has long been a manufacturing hub in India, but Bangalore in the neighboring state of Karnataka is the recognized startup and tech center. Lately, though, Chennai has been gaining traction as a place for entrepreneurs. Between 2014 and 2016, 70 Chennai-based startups have secured $467 million in funding, Inc24 reported. More recently, Diabetes Specialities Centre, a healthcare-services company, raised $10 million; Waycool, a fresh-food distributor, raised $2.7 million; and CreditMantri, a financial-tech firm, raised $7.6 million. All three deals were featured in The Brief!
Kenyan startup Paygo Energy taps seed funds to expand clean energy to poor households. The Nairobi-based company has developed a smart gas meter and a pay-as-you-go service to help poor households switch to cleaner and more efficient liquid petroleum gas for their cooking needs. Its customers pay as little as 50 cents a day, and would otherwise depend on dirty and expensive sources like charcoal and kerosene. In this seed funding round, Paygo raised $1.43 million from Novastar Ventures, Energy Access Ventures, Village Capital, Global Innovation Fund, and Global Partnerships/Eleos Social Venture Fund. The round, a mix of equity and debt, will finance development of Paygo’s software platform and its next-generation smart meter, and be used to expand outside of Nairobi.
The interest rate on a Philips loan will rise and fall with its sustainability rating. The Dutch health technology giant has been granted a €1 billion ($1.1 billion) credit facility with an interest rate tied to the company’s sustainability rating. The deal, arranged by ING on behalf of a consortium of 16 lenders, is believed to be the first corporate financing tied to sustainability metrics. Sustainalytics, a sustainability research and ratings firm, provides Philips’ performance benchmarking based on a variety of environmental, social and governance measures. The loan’s interest rate will rise or fall based on fluctuations in Sustainalytics’s rating for Philips. Other terms of the facility weren’t disclosed. It replaces a prior €1.8 billion ($2 billion) line of credit that Philips had not tapped into.
PosiGen lines up $28 million in loans for home solar installations. The Calvert Foundation contributed $3 million to the deal, which was also backed by the McKnight Foundation and others. The funds will be used to finance residential installations in PosiGen’s home state of Louisiana and to expand in other states. PosiGen launched in 2011 and has been part of the rapidly expanding home solar sector in the U.S. Its systems have been installed in 10,000 homes in Louisiana, New York, Connecticut and Florida.
See all of ImpactAlpha’s recent #dealflow.
#Signals: Ahead of the Curve
Low-cost mobile money increases access to financial services in Tanzania. Mobile money platform M-Pesa has been credited with helping lift two percent of Kenyans out of poverty. But mobile money’s impact in neighboring and more populous Tanzania is also significant. A report from the World Bank has found that digital money in Tanzania has helped expand access to financial services from 11 percent of the population in 2006 to 62 percent today (the whole of sub-Saharan Africa is about 10 percent). When M-Pesa launched in Tanzania in 2008, a year after Kenya, there were 112,000 mobile-money subscribers in the country; today there are 53.3 million accounts and 17.6 million active users in a population of 49 million. Unlike Kenya, Tanzania has a highly competitive mobile-money sector — all five of the country’s main mobile operators offer mobile-money services. Because these services transact between each other, the movement of money between individuals is more fluid. Mobile-money transactions amount to 43 trillion Tanzanian shillings ($20.7 billion) annually — that’s 47 percent of the country’s GDP.
Sustainable aquaculture is a $100 billion opportunity for feed producers. Farm-raised fish every year devour 30 million tons of wild-caught fish worldwide. With seafood consumption hitting record levels in recent years — more than 20 kilograms per person per year, according to the latest FAO research — it will take 20 to 30 new feed products to achieve a sustainable seafood industry this century, says Mike Velings, co-founder of Aqua-Spark, an aquaculture investment fund. “The 200–300 million tonnes of additional aquaculture feed we’ll need to find each year by the end of this century is a massive challenge, especially as it typically takes two to three decades to develop a new feed alternative from beginning to scaled production.” Aqua-Spark has been backing feedstock innovators, including Calysta, which makes a microbe-based non-animal protein, and eFishery, which uses monitors to manage feed usage and prevent waste. Alternative feed varieties themselves could be worth a $10 billion slice of the global aquaculture feedstock market. See all of ImpactAlpha’s #FinancingFish coverage.
More loan guarantees could mean more capital for education, health and conservation investments. Credit guarantees, typically provided by philanthropic organizations, are designed to encourage new investors or commercial capital to enter “risky” or undercapitalized investment sectors. Although not a new tool in impact investing, guarantees are “extremely underutilized,” according to a new report from the Global Impact Investing Network (GIIN). Recent examples show their promise: A $5 million Kresge Foundation credit guarantee to the Collaborative for Healthy Communities helped bring in $132 million in healthcare investments to low-income communities by easing investor fears about the risks of a new sector and geography. A $12.5 million purchase agreement from the MacArthur Foundation for the Housing Partnership Equity Trust enabled the trust to purchase more than $244 million in affordable housing by guaranteeing liquidity for senior investors. GIIN, which looked at 58 deals, recommends better standardization for guarantee structures and suggests that dealmakers focus on five metrics: objectives of the guarantee, type of risk, coverage level, expectations for financial returns and triggers for the guarantee to pay out to investors.
Sustainable agriculture in Africa is key to meeting Zero Hunger goal by 2030. It may sound obvious, but the underlying logic is unavoidable. Close to two-thirds of sub-Saharan Africa’s one billion people and 90 percent of the continent’s extreme poor make their living from agriculture, according to the latest Global Hunger Index. To fight hunger and help those most vulnerable, “stakeholders at all levels must continue to find ways to improve agricultural productivity, along with dietary diversity and environmental sustainability,” the report’s researchers write (see, “Small farmers are the future of global food security”).
For decades, the African continent has had the highest hunger rate in the world. But Africa’s hunger rates are dropping, according to a report on the GHI. In 1992, Africa registered an “alarming” rate of hunger, scoring 47.9 on a scale of 100, with 100 representing the worst undernourishment observed worldwide. (The scale is based primarily on hunger’s impact on children under the age of five: wasting, or being dangerously thin for one’s height; stunting; and mortality.) As of 2016, the continent registered a “serious” 30.1 points.
Eradicating hunger by 2030 — the second of the global Sustainable Development Goals — will require an acceleration of efforts. “If this region were to reduce its hunger levels between 2016 and 2030 at the same pace of reduction it experienced since 2000, it would still have GHI scores near the border between the moderate and serious — falling far short of the goal to reach Zero Hunger by 2030,” the report states.
Reaching the goal will require more productive, sustainable agriculture. That depends on something else: ending conflict and fostering political stability. War-torn South Sudan and its headline-making manmade hunger crisis highlights the link between conflict and hunger. Other countries featured in the Hunger Index also illustrate the inverse relationship between stability and food security. Ghana, Rwanda, and Senegal have become some of the most stable and increasingly prosperous countries on the continent, and all have reduced their GHI scores by more than 50 percent since 2000. Rwanda has made the biggest progress in child mortality and wasting.
Onward! Please send any news and comments to TheBrief@impactalpha.com.