Greetings, Agents of Impact!
Dealflow: Follow the Money
Affordable services for low-income customers distinguishes Accion Venture Lab in crowded fintech market. Accion was early to “fintech” when it launched its $10 million Venture Lab investing initiative in 2012. Since then, digital and mobile financial services have exploded, attracting $37 billion in venture capital last year. But the need for early-stage capital has only increased among emerging-market fintech companies creating affordable and transparent products for low-income customers. Now, Accion Venture Lab has closed a second fund of $33 million, including $23 million from a roster of investors that included Dutch development bank FMO, Ford Foundation, MetLife Foundation, Visa and Prudential Financial. Accion is investing another $10 million of its own capital.
“Seed stage continues to be where we see the biggest capital gap, even in impact investing,” Accion Venture Lab’s Tahira Dosani told ImpactAlpha. Some entrepreneurs survive until they can raise institutional capital by bootstrapping with revenues or relying on friends and family, Dosani said. “But some innovative models die on the vine because they can’t get that first institutional money in the door.” Accion Venture Lab has invested in 36 companies and has exited Mexico’s Clip as well as Aye Finance and Varthana in India.
- Impact first. Many startups offer seemingly similar solutions in the increasingly crowded fintech market. Accion Venture Lab’s focus on impact-first companies helps the organization cut through the noise. “We screen first for impact, and if we don’t see that, we don’t even get into the business diligence,” she said. “That avoids us thinking about tradeoffs.” Competition for customers is growing in emerging markets, but is still less intense than in the U.S. and Europe, Dosani observed.
- Getting to work. The new fund made its first investment in August, backing U.S.-based Joust, which offers financial services tailored to gig economy workers. Dosani expects to make a total of 25 to 30 new investments, and to commit most of the capital to emerging markets startups.
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UBS clients chip in $225 million for KKR’s Global Impact Fund. Details are emerging about how KKR crossed the $1 billion mark for its Global Impact Fund, which will invest in commercial solutions that contribute to the UN Sustainable Development Goals. Last year, the New York State Common Retirement Fund confirmed it had committed $300 million. Now comes UBS, which announced its wealth-management clients have placed $225 million to the fund. UBS earlier raised $325 million for TPG Growth’s $2 billion Rise Fund. “Tackling global sustainability challenges is an increasingly important investment opportunity for us and for our clients,” UBS’ Mark Haefele said in a statement. The Swiss bank in 2017 committed to raise $5 billion over five years for SDG-related impact investments. KKR’s Global Impact Fund has invested in Singapore’s Barghest Building Performance, which helps owners of commercial and industrial buildings save energy, and Indian waste management company Ramky Enviro Engineers. “There is significant opportunity to invest in businesses that create value by delivering commercial solutions to critical challenges,” KKR’s Robert Antablin said. Read on.
Emerson Collective-backed OpenGov raises $51 million. The Redwood City-based civic tech company provides cloud-based software to 2,000 public institutions to help manage budgeting, communications and reporting. In its Series D round, Weatherford Capital, 8VC and Andreessen Horowitz backedOpenGov’s mission to “power more effective and accountable government.”
PEG Africa secures $5 million in debt to expand solar access in West Africa. The E.U.-backed Electrification Financing Initiative, or ElecriFI, provided the funding. PEG is aiming to add 82,000 new home solar systems in Ghana, the Ivory Coast and Senegal by the end of the year.
Esusu clinches $1.6 million to integrate rent payments with credit reporting. The New York-based startup partners with housing developers to ensure renters’ payments gets reported to the credit bureaus, helping consumers build their credit profiles. Acumen led the funding round.
Impact Voices: Pass the Mic
Opportunity Zone skeptics and advocates can unite around mandatory impact reporting. For the cohort of impact investors coalescing around Opportunity Zones, Aaron Seybert’s quote stood out in the 4,000-word New York Times article detailing projects that offer little benefits for low-income communities but provide tax windfalls for well-connected investors. “Capital is going to flow to the lowest-risk, highest-return environment,” Seybert, a social investment officer at Kresge Foundation, told the Times. “Perhaps 95% of this is doing no good for people we care about.” Proponents of the Opportunity Zone opportunity felt the article was unfair (see, “The Opportunity Zones glass may not yet be half full, but it’s too early to call it empty”). Detractors felt vindicated in their belief the tax break is a massive give-away to the already rich. “My quote in the piece fell more in line with the second group,” Seybert writes in a guest post on ImpactAlpha.
Skeptics and advocates alike should support more rigorous, indeed mandatory, disclosure of mandatory reporting of Opportunity Zone activities and their impact, he argues. The problem is that “we don’t know, and won’t know, who the outlier is and who is the status quo. Anecdotal evidence about good actors or bad actors will not suffice.” The Kresge Foundation was an early promoter of Opportunity Zone reporting and transparency, funding the creation of an Opportunity Zones Reporting Framework, a voluntary reporting system for fund managers seeking positive economic and social outcomes. The foundation has backed Opportunity Funds from Arctaris and Community Capital Management, two fund managers that aim to benefit low-income communities (see, “Kresge seeds two Opportunity Zone funds, with impact strings attached”) and helped create an Opportunity Fund incubator for other funds with similar goals. “It has become clear that voluntary action is not enough,” Seybert writes. “It’s time we collectively demand mandatory reporting at the local, state, and federal level as our singular focus.”
- Data and accountability. Philanthropies have a responsibility to go beyond simply supporting the good actors, Seybert says. “We should fund advocacy organizations, investigative journalism, and think tanks to increase the reputation risk for policy makers and practitioners and insist this debate continues in the public eye.” History “does not justify defaulting to the assumption that this will work out fine.”
- Keep reading, “Opportunity Zone skeptics and advocates can unite around mandatory impact reporting,” by Kresge Foundation’s Aaron Seybert on ImpactAlpha. Share your reactions to the New York Times’“How a Trump Tax Break to Help Poor Communities Became a Windfall for the Rich,” to editor@ImpactAlpha.com and we’ll round them up on Friday.
Agents of Impact: Follow the Talent
James Gifford, previously with UBS, joins Credit Suisse as its first head of impact advisory. Guillaume Bonnel, ex- of Lombard Odier, joins the Swiss bank as head of sustainable and impact products… Phillips Todd Farrington, previously with Tuluni International, joins Innpact as head of portfolio management… Riverwater Partners acquires Falcons Rock Investment Counsel… Oikocredit is hiring an equity analyst in Nairobi.
Thank you for reading.
– Sept. 4, 2019