The Brief | May 4, 2020

The Brief: 10x challenge and response (replay), eco-crop treatments, value-based healthcare, wind software, PPP’s racial gaps, JPMorgan demotion

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Greetings, Agents of Impact!

Featured: ImpactAlpha Original

Agents of Impact Call No. 16: Impact investors step up to the 10x challenge (replay). A disruptive technology has to be 10 times better than what it’s replacing. Tech venture capitalists aim to recoup 10 times the capital they invest in a company. Management gurus drill acolytes in the exponential mindset needed to solve intractable problems with “big, bold, 10x, moonshot ideas.” ImpactAlpha last week called for impact investors to raise their ambitions by at least an order of magnitude in response to the COVID crisis. “It’s time to 10x impact investing,” we wrote in announcing The Call No. 16: Impact Step Up. More than 400 people signed up to share their initiatives and inspiration. “ImpactAlpha challenges impact investors to scale up their efforts 10x. To which I say: Yes!” tweeted Blue Haven Initiative’s Liesel Pritzker Simmons, who called out the importance of investments in #policy and #civics (to which we say: Yes!) Listen to the replay of last week’s call for a sample of investments and initiatives already underway – and ambitions to do more to meet immediate needs and lay foundations for long-term change.

“Our brand is ‘how can we spot problems and make things happen quickly’,” said Greg Neichin of Ceniarth, which mobilized $14 million in deposits and low-interest loans to help rural community development finance institutions get Payroll Protection Program loans out the door. Nimrod Gerber described Vital Capital’s $10 million emergency fund for agriculture, healthcare and education companies in Uganda and Kenya. Caroline Bressan said Open Road Alliance has $12 million to process about 100 bridge loans. Even 10x those amounts won’t be enough. Networks like Toniic, CREO Syndicate and Gratitude Railroad are mobilizing high-net-worth investors; the Global Impact Investing Network is readying an initiative to coordinate co-investments across such networks. The recovery will be long, but may present unexpected opportunities. Said New Island Capital’s Chris Larson, “My dream is that we’re going to wake up on the other side in a world where we have much more white space to grow these innovative companies that are focused on renewables and on decentralized and broad-based employee-ownership models.”

Keep reading, “Agents of Impact Call No. 16: Impact investors step up to the 10x challenge,” by David Bank, and listen to the replay of Agents of Impact Call No. 16 on ImpactAlpha.

Dealflow: Follow the Money

Breakthrough Energy Ventures and Temasek back Pivot Bio’s eco-crop treatments. Billionaire-backed Breakthrough Energy Ventures and Singapore’s state-owned investment company Temasek led Pivot Bio’s $100 million Series C round. The company is developing a microbial crop treatment to improve yields while minimizing environmental impact compared to chemical-based treatments.

Aledade scores $64 million to expand value-based healthcare. The Bethesda, Md.-based company helps primary care providers shift from fee-for-service healthcare to a value-based model, in which preventative care is emphasized. The company partners with 550 practices and 7,300 providers in 27 states. OMERS Growth Equity led the round, with California Medical Association, Meritech Capital, Echo Health Ventures, CVF and GV.

Small business bank Wise closes $5.7 million round. Wise is a digital “challenger” bank with an app that helps small businesses integrate payments, payroll and cash management. Base10 Partners led the seed round, with backing from Abstract Ventures, Backend Capital and Two Culture Capital.

WindESCo secures $10 million for software for wind farm operators. The Boston area company’s software is designed to give wind turbines a productivity boost and reduce their operating expenses. Its Series B round was led by Wave Equity Partners, which invests in clean energy, water and waste management companies.

Signals: Ahead of the Curve

Closing racial gaps in the PPP’s COVID-19 response and recovery. Smaller businesses are getting a bigger share in the second round of the U.S. Paycheck Protection Program. The average PPP loan size has fallen to $79,000, down from more than $300,000 when the small business relief program first launched in early April. Yet only a small fraction of businesses owned by Blacks, Latinos, and Native Hawaiians or Pacific Islanders stand a chance of receiving a PPP loan. Most small businesses or sole proprietors lack credit relationships with establishment financial institutions, which have favored larger, existing customers in doling out PPP loans. The $310 billion in fresh PPP funds released last week included $30 billion each for small and mid-sized lenders, but did not take other steps to expand access. Lopsided relief could exacerbate a racial wealth gap fueled by decades of discriminatory policies. “The pandemic is really a magnifying glass over structural inequity,” says Connie Evans of the Association for Enterprise Opportunity, a micro-business and microfinance trade group.

  • Plugging gaps. Page 30 of the CARES Act makes clear the “sense of the Senate”: that priority should be given to small businesses owned by socially- and economically-disadvantaged individuals. The Association for Enterprise Opportunity, along with chambers of commerce for Hispanic and Asian/Pacific Islander business owners, formed the Page 30 Coalition to advocate for such businesses. The Local Initiatives Support Corp. and Verizon awarded 225 women and minority-owned businesses the first $10,000-grants from a $7.5 million relief fund for underserved businesses.
  • Call to action. “Let’s interrupt history” of businesses owned by people of color being excluded from relief efforts, says Joe Neri of IFF, a Chicago-based community development financial institution (see, Hacking community lending to interrupt racial bias in ‘appraised value’). Among the interruptions: “Commit that for every 10 customers you help, you will intentionally help three or four or five new customers of color.” Longer term, writes Living Cities’ Ben Hecht, we must support local leaders who value equity, address longstanding power imbalances, and rebuild for the new majority.
  • Proximity matters. Southern Bancorp, a community development financial institution in Arkansas and the Mississippi delta, has processed over a thousand PPP loans totaling more than $100 million. “I’m pushing for communities of color, rural communities, markets without Internet access,” Southern’s Darrin Williams told ImpactAlpha (see, How community banks and local lenders are bridging racial gaps in COVID recovery).
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Agents of Impact: Follow the Talent

JPMorgan Chase stripped Lee Raymond, former CEO of ExxonMobil, of his role as the bank’s lead independent director, just ahead of the bank’s annual shareholders’ meeting on May 19. Climate activists have pressed the bank and its largest shareholders to drop Lee from the board altogether (see, “‘Stewardship’ under scrutiny as shareholder season gets started).

Shaun Kingsbury, former head of the U.K. Green Investment Bank, was named CEO of The Conduit Investment Advisors… Jesse Griffiths, previously with Overseas Development Institute, joins Finance Innovation Lab as CEO… Sandy Boss, ex- of Bank of England, joins BlackRock as head of investment stewardship… Alice Miller, ex- of nonprofit Financing for Development Corp., becomes U.S. International Development Finance Corp.’s first chief risk officer… 3×5 Partners adds Jed Emerson as an advisor.

Prudential’s Tony Berkley is hosting an open call for impact investors to discuss COVID-19 dealflow, Wednesday, May 6, from 9-10:30am ET… Impact Entrepreneur is hosting “Reevaluating Philanthropy and Impact Investing,” with Nonprofit Finance Fund’s Antony Bugg-Levine, Wednesday, May 6, at 12pm ET (see, Agent of Impact: Antony Bugg-Levine, Nonprofit Finance Fund).

Thank you for reading.

–May 4, 2020