The Brief | May 9, 2022

The Brief: Alt-capital for startups, affordable diagnostics in India, Black-led financial institutions, better carbon markets, electric mobility in Africa

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Greetings, Agents of Impact!

Featured: Inclusive Economy

In a volatile market, alternatives to venture capital keep capital flowing to diverse founders. There’s more than one capital market for startups and small businesses. Venture capital and bank loans finance less than 20% of new businesses. For the rest, a parallel market of equity, debt and hybrid capital is rising to grow businesses, create jobs and generate wealth. Investment structures like revenue-based financing, and innovations like equity redemptions, character-based lending and crowdfunding, are shifting risks, dispensing with obstacles and redesigning terms to open up the market for startup capital. The shift in approach is “already in progress,” writes Kim Folsom of Founders First Capital, which has deployed more than $2 million in revenue-based financing. “With this model, founders retain equity and investors can count on a reliable return – exactly the type of stability that both parties seek during volatile economic times.” 

By enabling companies to repay investors, up to a cap, from a percentage of their top-line sales, revenue-based financing lets founders avoid dilution and retain control. Folsom will join tomorrow’s Agents of Impact Call to explore innovative structures that are changing what and who gets funded. Nearly two-thirds of Founders First’s funding has gone to female founders, and the same portion to founders of color. Like revenue-based financing, equity crowdfunding is diversifying who gets funded. Companies with a Black or Brown founder received roughly one third of the half-billion dollars raised through crowdfunding platforms such as Wefunder and Republic, compared to just 2.6% of venture capital overall. With “community rounds,” says Wefunder’s Jonny Price, startups can “let customers invest in them as a way to build stronger relationships with the community and build engagement.”

  • Keep reading, “In volatile market, alternatives to venture capital keep financing flowing to diverse founders,” by Dennis Price on ImpactAlpha.
  • Tomorrow’s Call: Startup financing for the rest of us. Join Kim Folsom of Founders First and Wefunder’s Jonny Price, along with Astrid Scholz of Zebras United and Armillaria, Ron Boehm of BOMA Investments, Andrea Armeni of Transform Finance, and Kevin Jones of Neighborhood Economics, to explore alternatives to venture capital for startups and small businesses, tomorrow, May 10 at 10am PT / 1pm ET / 6pm London. Last chance to RSVP

Dealflow: Investing in Health

LeapFrog leads Redcliffe’s $61 million raise for health diagnostics in India. Noida-based Redcliffe provides diagnostics for non-communicable diseases, such as heart disease, cancer and diabetes, online and via 22 labs across India. With early diagnosis, patients can tap more affordable treatment options, and lower their risk for hospitalization. “Preventative medicine is the future of health in India, helping to empower the average Indian with the information they need to take charge of their health and wellbeing,” said Redcliffe’s Dheeraj Jain.

  • Health access. LeapFrog Investments led the round, with participation from Healthsquad, Schroders, Chiratae Ventures and others. Jain said the investment will help the company meet its goal to reach more than 500 million Indians in five years. The company is looking to expand in India’s tier two, three and four cities and “remote areas that are often difficult to reach with existing infrastructure,” said Chiratae’s Ranjith Menon.
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Pachama scores $55 million to verify forest-based carbon credits. San Francisco-based Pachama uses satellite imaging and artificial intelligence to monitor carbon stored in forests. The company says it has worked with Netflix, Salesforce, Airbnb, Shopify, Microsoft and Amazon on forest-based carbon offset projects. “Pachama’s platform will be key to documenting carbon removal and accelerating carbon neutrality and negativity,” said Carmichael Roberts of Breakthrough Energy Ventures, an investor in the Series B round. Angel investors include Serena Williams, talk-show host Ellen DeGeneres and her spouse Portia DeRossi.

  • Carbon markets. “With this investment, we will go beyond evaluating existing forest projects, building new, high-quality forest conservation projects from the ground up, using technology at every step along the way,” wrote Pachama’s Diego Saez Gil. Investors include Future Positive, Lowercarbon Capital, MCJ Collective, Amazon’s Climate Pledge Fund and others.
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Northwestern Mutual invests $5 million in two Black-led lenders in Milwaukee. The financial services giant is investing in Legacy Redevelopment Corp. and Northwest Side Community Development Corp. to provide loans to Black-owned businesses in Milwaukee, where Northwestern Mutual is based. “Black business owners, for a variety of reasons, have had limited access to traditional financial markets, and this latest investment will deepen our mission to make a bold and long-term impact that drives access and equity,” said Northwestern’s Ray Manista. Northwestern made the investment through the $100 million impact fund it created last June to back Black fund managers. The Northwestern Mutual Black Founder Accelerator works with gener8tor to support Black founders in fintech, insurance tech, digital health and data analytics in the U.S. Share this post.

Dealflow overflow. Other investment news crossing our desks:

  • Oakland-based CNote secured $25 million from Apple to invest in community development financial institutions in underserved communities.
  • Amperon Holdings scored $7 million in Series A funding, led by HSBC’s climate tech venture fund, to provide grid forecasts for clean energy companies.
  • ABN AMRO, through its €425 million ($448 million) Sustainable Impact Fund, acquired a stake in Netherlands-based impact crowdfunding site Lendahand.
  • Tomorrow Farms raised $8.5 million, led by Lowercarbon Capital, to partner with food science companies to build consumer-friendly and animal-free brands and products.

Signals: E-Mobility Shift

High fuel prices spur Africa’s transition to electric mobility. Long lines at Nairobi’s gas pumps last month put the spotlight on rising prices and fuel shortages caused by war in Ukraine and delayed government subsidy payments. Electric motorcycle manufacturers Ecobodaa and Ampersand, electric bus maker Opibus, and electric battery maker Shift are among the startups seizing the opportunity—and the imperative—to accelerate electric mobility in Africa (see, “Shift to electric rickshaws and motorcycles is drawing investors to emerging markets’ e-mobility opportunity”). The continent’s e-mobility startups raised about $105 million last year, out of about $5 billion in total venture capital, according to the consultancy Dalberg and Dutch development bank FMO.

  • Market leaders. Kenya has emerged as Africa’s early leader in e-mobility, primarily for two and three-wheel vehicles. Electric bus companies Opibus and BasiGo are targeting the mass transit sector. Uber last year launched electric motorcycle taxis. Its financing partner Moove is helping drivers across the continent switch to electric vehicles. In Ghana, where motorcycle taxis are banned, the biggest opportunity is in electric cars. SolarTaxi is helping the country’s taxi drivers rent and buy electric vehicles. Egypt is looking to build 3,000 EV charging stations with private-sector backing.
  • Market models. China and India could provide a market roadmap for African countries looking to drive EV adoption. China has the biggest e-mobility system in the world, with EVs accounting for 15% of the vehicle market. In India, e-mobility deals include electric vehicle maker Ola’s $200 million raise, and TPG Rise Climate’s partnership with Abu Dhabi’s ADQ to invest $1 billion in Tata Motor’s new EV unit. India’s government pledged in 2019 to invest $1.6 billion in e-mobility by this year.
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Agents of Impact: Where to Meet

Ben Thornley and Tideline are hosting “Investor contribution: Experiences in optimizing for impact performance,” with Steve Ellis of TPG Rise, Matthew Barry of Learn Capital, Hope Mago of HCAP Partners, Jennifer Pryce of Calvert Impact Capital, Emma Sissman of SJF Ventures, and Tang Zongzhong of Baring Private Equity Asia, Wednesday, May 11.

ImpactPHL is convening “Total Impact: Investing for new economies,” in Philadelphia, May 16-17. Speakers include FullCycle’s Stephan Nicoleau, B Lab’s Jay Coen Gilbert, Women of the World Endowment’s Patience Marime-Ball, Apis & Heritage’s Todd Leverette, and ImpactAlpha’s Monique Aiken and Amy Cortese. ImpactAlpha subscribers get $300 off with code IMPACTALPHA.

Clara Miller is keynoting “Money and mission: Creating 21st century capital markets for better social outcomes,” at the Federal Reserve Bank of New York on May 17.

Thank you for your impact!

– May 9, 2022