The Brief | May 18, 2020

The Brief: 10x Community Capital call, COVID business pivots, shifting from crisis to growth, Goldman’s Folio, Development Finance Corp.’s domestic mandate

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Greetings, Agents of Impact!

10x Community Capital. Agents of Impact Call No. 17 will feature strategies to expand the flow of capital for small businesses and nonprofits seeking to re-open and recover from the COVID crash. Calvert Impact Capital’s Beth Bafford and Community Reinvestment Fund’s Patrick Davis will discuss one such “recovery vehicle” for community development financial institutions. Join representatives of CDFIs and other Agents of Impact on Thursday, May 21 at 10am PT / 1pm ET / 6pm London. RSVP today.

Double Feature: Impact Voices

How high-impact businesses in emerging markets are pivoting in the COVID crisis. Local textile manufacturers in North and West Africa are pivoting to meet demand for personal protective equipment. Flower growers in Kenya are switching to grow basic foodstuffs. “We are helping them think through their pivot strategies so that they can align with the new sources of demand in the economy,” says Jake Cusack of CrossBoundary, a frontier market investment advisory firm. CrossBoundary is part of USAID INVEST, a network of advisory firms, NGOs and other intermediaries that help deliver such capital and transaction advisory assistance. In guest post ImpactAlpha, USAID INVEST’s Kristin Kelly Jangraw and Emily Langhorne talk with advisors about the short and long-term needs of small businesses in emerging markets. “Without immediate support,” Yunus Social Business’s Saskia Bruysten told them, “many social businesses and impact-first companies working to end poverty and implement sustainable development will be wiped out.”

  • Supply chains. Food warehouses in North and West Africa have been unable to get protective gear for their workers, says Matthew Meredith of LixCap, a Morocco-based advisory firm. “They are not designated as critical-needs businesses, even though they are,” he said. “We really need to see some businesses within the supply chain convert to ramping up the local production of PPE.”
  • Flexible capital. Capital from local banks has dried up, leaving businesses struggling with liquidity issues. Immediate relief can come in the form grants or zero-interest loans. Mezzanine financing can attract lenders with higher-interest payments and allow them to convert their debt to equity stakes in the event of default. “A lot of investors are actually sitting on cash, waiting to see what will happen,” says Vanessa Holcomb Mann of USAID INVEST. The quicker businesses can get this capital, “the more robust and resilient they’ll be.”
  • Keep reading, “How high-impact businesses in emerging markets are pivoting in the COVID crisis,” by Kristin Kelly Jangraw and Emily Langhorne on ImpactAlpha.

Eyes on the time horizon: Five shifts to watch in moving from crisis to growth. For entrepreneurs and investors, the “immediate” response to the COVID crisis may last a few more months. But “evolving, adapting and even establishing market leadership requires shifting the timeframe to the medium-term,” write Jyotsna Krishnan and Vipul Rawal of Elevar Equity, which has raised more than $285 million and invested in three dozen companies in India and Latin America. In a guest post on ImpactAlpha, Krishnan and Rawal identify five shifts every organization must navigate. “We are already seeing some of our entrepreneurs making ‘easier said than done’ look possible,” they write. “Perhaps, that is what being a market leader is about.”

  • Shifts in the lives of customers. What would add value to the customer’s life in the new environment? Where will customers prioritize their ‘spends’? Do current product propositions still make sense?
  • Shifts in distribution models. Modes of communication have changed and noise levels have increased. What does this mean for the distribution strategies of the future?
  • Shifts in solution possibilities. Developing products and services that cater to revised customer priorities and wallet-share is critical, say Krishnan and Rawal. “In the case of our portfolio companies, this has meant innovation in terms of capital and liquidity.”
  • Shifts in organizational design. Some teams are “huddling towards an inspirational, common purpose,” they write. At the same time, “some employees are burning out, while others are significantly under-utilized. There is a need to ensure an even flow of adrenaline.”
  • Shifts in baseline assumptions. As organizations grow, new talent tends to be execution-oriented. In a time of change, how can that execution bias be balanced with the need to revisit fundamental strategies and assumptions?
  • Keep reading, “Eyes on the time horizon: Five shifts to watch in moving from crisis to growth,” by Elevar’s Jyotsna Krishnan and Vipul Rawal on ImpactAlpha. 

Dealflow: Follow the Money

Goldman Sachs to acquire online wealth management platform Folio. The purchase follows Folio’s acquisition of responsible robo-investing firm Motif’s retail accounts (Motif’s technology was sold to Charles Schwab). The deal will expand Goldman’s services for environmental, social, and governance-based (ESG) investment advisors.

Peer-to-peer relief lending platform CoVida20 launches for Brazil’s small businesses. Brazil’s online lending platform MOVA is hosting the loan fund, which will make low-cost, flexible loans to businesses that commit to maintaining employment and income for their workers. Priority goes to businesses with annual revenues of less than 5 million reais ($912,000).

Microfinance holding company Gojo raises $22 million in equity. Japan-based Gojo invests in microfinance companies in Asia, including India-based Ananya Finance and Satya MicroCapital and Cambodia-based Maxima Microfinance. Gojo’s Series D round was backed by Seven Bank, Credit Saison and SBI Group and will enable the company to expand in Cambodia, Myanmar, Sri Lanka and India, and build a pipeline in Africa.

Resilia secures $8 million to help nonprofits manage their operations. New Orleans-based Resilia’s software helps nonprofits manage finances and fundraising and boost overall tech capabilities. The Black, woman-led company secured early-stage funding from Louisiana-based Callais Capital and L.A.-based Mucker Capital.

Signals: Ahead of the Curve

White House stands up an impact investing arm to finance COVID-response suppliers. The U.S. International Development Finance Corp., which typically provides loans to companies in developing countries, has been tasked by President Trump with financing domestic production of commodities deemed critical to the effort to stem the coronavirus pandemic. The effort is intended to “re-shore” domestic production of personal protective equipment, injectable pharmaceuticals and other products, the DFC’s Adam Boehler told ImpactAlpha. “You need to identify critical areas where either the U.S. needs to own some or all” of such capacities, Boehler said in an interview. “Just like we provide in the developing world, we can provide loans and investments in order to support some of those brought to the U.S. or to our allies or both.”

  • Executive order. President Trump gave the DFC authority under the Defense Production Act “to make loans, make provision for purchases and commitments to purchase, and take additional actions to create, maintain, protect, expand, and restore the domestic industrial base capabilities, including supply chains within the United States and its territories.”
  • Mission drift? The domestic expansion of the DFC’s mandate surprised some of the agency’s supporters, who worry it could distract from the mission of promoting economic development in emerging markets. Boehler said the agency would stand up a new team with a separate investment budget and a two-year time limit.
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Agents of Impact: Follow the Talent

Ecotrust is looking for a chief impact officer in Portland, Ore… Positive Money is hiring three non-executive directors to its board… Acumen seeks an instructional design senior associate in New York… Mennonite Economic Development Associates is recruiting for three senior project managers in Waterloo, Ontario.

Online this week:

  • Tuesday, May 19. Katapult Future Fest is going virtual with Katapult Cloud to bring consciousness, technology and impact investing to the planet’s biggest challenges… Adobe Capital, AlphaMundi Group, Acumen LatAm Capital Partners and CI Ventures will share “Perspectivas de la Inversión de Impacto Durante el COVID19” on an Impaqto webinar… HIP Investor is hosting an ESGX Live webinar, “Sustainable Food Systems,” with Farmland LP’s Craig Wichner… CapShift is hosting “Covid-19 Response and Recovery: How You Can Help.”
  • Wednesday, May 20. Faith & Finance: “The Purpose of Capital and the Cost of Wealth,” with Edgar Villanueva and Jed EmersonComing next month: “Can Capitalism Be Healed?” with Eve Poole, author of Capitalism’s Toxic Assumptions, Wednesday, June 3; “A Blueprint for Local Investing,” with Ross Baird, David Robinson Sr. and David Robinson Jr., Friday, June 12.

Thank you for reading.

–May 18, 2020