The Brief: Airlift’s crash landing, clean energy in Africa, fusion dreams, impact and risk in catalytic investing

Greetings, Agents of Impact!

Featured: Growth Markets

For ‘quick commerce’ startups, the pandemic giveth and taketh away. Airlift has crash-landed. The Lahore-based startup became a darling of Pakistan’s venture capital scene last year when it raised $85 million in Series B financing from a slew of foreign investors – Pakistan’s largest VC deal last year. The deal seemed to validate the big opportunities for fast-growing startups in the still-nascent and often overlooked market. Airlift’s shutdown reflects the volatile economic conditions that have accompanied the Covid pandemic. The startup started as a ride-sharing company and shifted to grocery delivery when passengers disappeared in the early days of the pandemic. The pivot paid off – in the short-term. Foreign venture capital investors, once cautious about investing in Pakistan and other frontier markets, pumped capital into the country last year (relatively speaking: startups collectively raised $350 million in 2021). Customer demand for the convenience Airlift offered wasn’t durable, however, and the company’s unit economics weren’t sustainable. Squeezed by the contraction of the VC market, Airlift was unable to raise a Series C round and ceased operations this month.

Other fast-delivery companies also benefited from consumers’ twin needs for convenience and social distancing. Companies like Turkey’s Getir, Germany’s Flink and Gorillas, and U.S.-based goPuff, each raised more than $1 billion in successive, arguably inflated, rounds. Now, many of these cash-guzzling companies have been laying people off in droves and shutting distribution centers. “In a global downturn, it’s important to look at startups that are building products and services that fill a need and add real value to people’s lives, rather than nice to haves,” says Misbah Naqvi of I2I Ventures, an early-stage venture fund based in Karachi (for background, see “In Pakistan, investing with a gender lens gives i2i Ventures an early-stage edge”). In Pakistan, fintech companies that support small businesses and workers, for example, have continued to attract capital. Metric, which provides digital accounting services for small businesses, closed a round in March; Abhi, a startup providing workers access to their earned wages ahead of the normal payday, also raised funding this year. Other raises: woman-led medIQ, which provides on-demand virtual healthcare services, and Farmdar, which is connecting farmers with data insights. “There are spaces where there are still opportunities to build even when the economy is shrinking,” Naqvi says. “There are startups here that are helping people save money, live more efficiently, and fulfilling needs that are important.”

• Keep reading, “For ‘quick commerce’ startups, the pandemic giveth and taketh away,” by Jessica Pothering. Catch up on all of ImpactAlpha’s coverage of investment and entrepreneurship in frontier and growth markets.

Dealflow: Energy Transition

CrossBoundary Energy raises $40 million to expand clean energy in Africa. Nairobi-based CrossBoundary Energy invests in and develops solar systems for commercial and industrial customers in Africa, where access to reliable energy services worsened during the pandemic. The company’s solar, wind and battery storage portfolio spans 14 African countries. KPL Norfund Investments, a joint vehicle of Norwegian pension manager KPL and the Norwegian Investment Fund for Developing Countries, provided the equity investment. CrossBoundary Energy’s Pieter Joubert said the fund “seeks to deliver an operational portfolio of over $300 million in assets within the next five years.”

• Global customer base. CrossBoundary Energy has helped finance and install 150 megawatts of solar generating capacity and 50 megawatt-hours of battery storage projects from Kenya to Sierra Leone. It has 30 clients, including Unilever, Rio Tinto, Heineken and local companies like Ghana’s Kasapreko and Kenya’s Xflora Group.
  
• Share.

TAE Technologies secures $250 million to build its fusion reactor. You think it’s hot out? Fusion energy startup TAE Technologies announced it was able to sustain plasma at temperatures of 75-million-degrees Celsius. The Foothill Ranch, Calif.-based company spun that breakthrough into a $250 million “G-2” equity round from investors including Chevron Technology Ventures, Google, Reimagined Ventures, Sumitomo Corp. and TIFF Investment Management. TAE will use the funding to construct its Copernicus research reactor in Irvine, Calif., using a “field-reversed configuration.”

• Net energy. After years of unfulfilled hopes, fusion technology finally appears poised to generate commercial, carbon-free energy – in about 10 years. The acid test: generating more energy than it takes to spark a reaction, or net-energy. Fusion startups have raised billions in recent years to build demonstration plants and prove their technology. M.I.T. spin-off Commonwealth Fusion Systems raised $1.8 billion last December.
  
• Feel the heat. 

Dealflow overflow. Other investment news crossing our desks:

• Stori, the Mexican fintech that makes credit cards for underserved populations, raised $150 million from Goodwater Capital, General Catalyst, GIC and others, bringing its valuation to $1.2 billion.
  
• UnitedHealth Group committed $25 million to the Healthy Neighborhoods Equity Fund to finance inclusive, mixed-use developments in low-income southern New England communities.
  
• Lightship scored $23 million in a Series A funding from investors including My Climate Journey and Congruent Ventures to build all-electric recreational vehicles.
  
• Silicon Badia secured $5.2 million from Smart Capital to invest in early-stage financial, health and education tech startups in the Middle East and North Africa.

Series: Seeding Impact

Assessing impact and risk when deploying catalytic capital. The “growth” portfolio of British International Investment (formerly known as CDC Group) aims to accelerate private-sector development at scale. Five years ago, the development finance institution of the U.K. government established a “catalyst” strategy to nudge nascent markets towards inclusiveness and sustainability (see, “An investor’s journey: How CDC Group is innovating with catalytic capital”). The case for the deployment of flexible catalytic capital has three parameters: a higher threshold for development impact, relatively higher risk, and appropriate deal dynamics. “While we apply a flexible risk appetite, we also expect financial performance from each investment we make, ideally delivering a demonstration effect for investors that can follow our lead once the business graduates to a more proven model,” write BII’s Yasemin Lamy and Prerna Choudhury in the latest post in ImpactAlpha’s series, “Seeding Impact,” in partnership with the Catalytic Capital Consortium. BII’s growth investment in Ayana Power and catalytic investment in Gridworks demonstrate the distinctions.

• Scaling proven technology. BII injected $100 million in equity in 2017 into Ayana Power to develop green infrastructure in India. By 2021, Ayana had 1,140 megawatts of renewable power under development and had received $170 million in follow-on investment from mainstream investors. “It is highly impactful in supporting the clean energy transition in India through the scaling up of proven technology, rather than piloting new technology for sustainability or transferring technology to a new place,” write Lamy and Choudhury.
  
• Filling gaps. GridWorks is a platform BII established in 2018 to address the market gap in transmission, distribution and distributed renewable energy infrastructure in Africa. The off-grid energy investment group has backed distributed renewable energy company Sustainable Power Solutions, and established Moyi Power, which builds and owns solar-powered utilities in northern Democratic Republic of the Congo. GridWorks, in which BII is the only shareholder, has filled a gap in transmission and distribution in a challenging market, helping the deal meet BII’s impact threshold for a catalyst transaction.
  
• Keep reading, “Assessing impact and risk when deploying catalytic capital,” by BII’s Yasemin Lamy and Prerna Choudhury on ImpactAlpha. Catch up on the full “Seeding Impact” series and all of our coverage of catalytic capital.

Agents of Impact: Follow the Talent

The Predistribution Initiative is looking for an associate to work with executive director Delilah Rothenberg… BlackRock seeks a sustainable investing research and strategy associate/vice president in New York or Washington, D.C… UBS is hiring a head of impact investing in Hong Kong… Boston Impact Initiative is on the hunt for a senior impact investing associate in Boston.

The California Endowment seeks an impact investing portfolio manager… Microsoft is hiring a global societal impact and sustainability leader for its national transformation partnerships group… The Taskforce on Inequality-related Financial Disclosures is hosting its first (virtual) global meeting on Thursday, July 21…  The National Academies is hosting an all-day workshop on equity and justice in the energy transition on Thursday, July 6. 

Voting is open (through July 22) for sessions for SOCAP22. ImpactAlpha is seeking community feedback on two projects in progress: engaging youth via a mobile impact investing video game and mapping climate finance to catalyze capital for adaptation and equity. We also are excited to record a podcast on stage with ReFed’s Alexandria Coari on investment in food-waste reduction. Thank you for your votes! Send us one-line descriptions and links to your SOCAP Open sessions and we’ll share in The Brief.

Thank you for your impact!

– July 20, 2022