The Brief | September 30, 2020

The Brief: AppHarvest’s SPAC acquisition, cultivated shrimp in Southeast Asia, mitigating risk with an LGBTQI lens, raising green

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Greetings, Agents of Impact! 

Agents of Impact Call No. 24: Solar financing for frontline healthcare in Africa and Asia. Renewable energy meets global health in a knotty challenge for innovative finance. Join We Care Solar and ImpactAlpha to explore emerging solutions for financing clean, affordable solar power for frontline primary health clinics. The World Bank’s Raihan Elahi, Sustainable Energy for All’s Jem Porcaro, UBS’s Phyllis Costanza and Liebreich Associates’ Michael Liebreich join We Care Solar’s Laura Stachel and ImpactAlpha‘s David Bank, Thursday, Oct. 8, at 9am PT/ 12pm ET/ 7pm Kampala. RSVP today.

Dealflow: Follow the Money

Greenhouse venture AppHarvest will reach the Nasdaq before its tomatoes reach consumers. The Morehead, Ky. B Corp, which will go public via an acquisition by Novus Capital Corp., ticks the boxes for high impact and high profile. High-tech sustainable agricultural production. Coal-country job creation. Bold-faced investors and board members like Martha Stewart, Narya Capital’s J.D. Vance, Lupa Systems’ James Murdoch, Inclusive Capital’s Jeffrey Ubben and Black Capital’s Kevin Johnson. And now, an acquisition by a special purpose acquisition company, or SPAC, that will provide $475 million in fresh capital and a $1 billion valuation. What AppHarvest doesn’t have yet is revenues or its first tomatoes, which are set to be planted within weeks in its 2.8 million-square-foot greenhouse. The first harvest is due early next year. “We wanted to take the company public as we were about to start selling our fruits and vegetables,” AppHarvest’s Jonathan Webb told ImpactAlpha, “to let consumers be owners in the company and to help rebuild agriculture in America with us.”

  • Controlled environment. The deal is a signal of the next, tech-driven stage of agricultural production. “Controlled environment agriculture is riding the S-curve of tech productivity,” Equilibrium Capital’s Dave Chen, an AppHarvest board member, told ImpactAlpha. Equilibrium owns AppHarvest’s Morehead greenhouse, as well as a stake in the company. The $100 million from the Novus SPAC, along with $375 million through a PIPE, or a “private investment in a public entity,” gives AppHarvest the ability to expand production and pursue its own acquisitions. “Structuring the company so it can access capital and consume capital is a competitive advantage,” Chen says.
  • SPAC-tacular. Novus listed on the Nasdaq exchange in May as a “smart tech” SPAC. Such “blank check” companies exist to acquire other companies—just no one knows what company exactly. Other sustainability-focused SPACs include listings from TPG; Bridges Fund Management and AEA Investors; and EV makers Canoo, Lordstown Motors, Fisker and Nikola. Ubben, who also is an investor in Nikola, told The New York Times. “There’s a legacy company balance sheet, and there’s this new model.” 
  • Flush with cash. Novus’s initial $100 million raise is being supplemented with the $375 million PIPE, which includes Novus, Inclusive and Fidelity Management & Research Co.  AppHarvest also issued a $30 million convertible note to Inclusive. AppHarvest will use the capital to build new greenhouse facilities across the U.S.’s Appalachia region. AppHarvest previously raised a total of $150 million. The announcement comes a month after AppHarvest closed a $28 million Series C venture funding round, backed by Inclusive, Equilibrium, Lupa Systems, Black Capital, Breyer Capital, S2G Ventures and Endeavor Catalyst.
  • Climate adaptation. Webb acknowledges the considerable leap to going public. “We’re on a steep growth trajectory, but we don’t have a choice,” he says. “The climate is rapidly changing. Farmers don’t have the predictability to be able to grow outdoors. In the U.S., California is where we grow our food, but it’s drought stricken. It’s on fire. The food system here is very fragile. COVID has exposed that even more so.” The SPAC financing model promises capital to fuel green, low-carbon tech ventures as production and consumption shift, he says. “In our lifetime, most power will come from renewable resources, most cars will run on electricity, and most fruits and vegetables will be grown in a controlled-environment facility.” 
  • Dig in.

Aqua-Spark backs cell-based shrimp company Shiok Meats. Singapore-based Shiok is one of the first in Southeast Asia to market cell-based shrimp and other crustaceans as a cleaner and traceable alternative in the $50 billion shrimp farming industry. Netherlands-based Aqua-Spark led the $12.6 million round, which also included SEEDS Capital, Real Tech Fund, Irongrey and Yellowdog Empowers Fund

National Energy Improvement Fund crowdfunds energy efficiency loans. The B Corp. raised the funds via two offerings on RaiseGreen, an environmentally-focused crowdfunding platform (see, “Grassroots platforms are not waiting for Washington to invest in a green new deal”).

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Impact Voices: Pass the Mic

How an LGBTQI lens can mitigate investment risk. When Chick-fil-A expanded to the U.K., its first chicken sandwich franchise closed within eight days. The reason: protests by lesbian, gay, bisexual, transgender, queer, and intersex groups – LGBTQI, for short – over CEO Dan Cathy’s public opposition to same-sex marriage. It was an example of the reputational risk facing companies poorly adapting to cultural shifts in gender norms. “Understanding how bias and normative assumptions about gender and sexual identity emerge in financial analysis are crucial to identifying, mitigating and adequately pricing risk in all investments,” write Joy Anderson and Tia Subramanian of Criterion Institute in a guest post on ImpactAlpha. In Criterion’s report, “Investing with an LGBTQI lens,” Anderson and Subramanian argue that using an LGBTQI lens can help investors find opportunities for impact and financial return in companies led by or serving LGBTQI individuals, and capture value in shifting norms and behaviors. Another example: recognizing LGBTQI oppression can illuminate unseen country risks in labor supply, consumer demand, and overall economic growth, or where discrimination undermines the ability to create an effective workplace.

Most LGBTQI investing activity to date has taken place in public markets. Firms like Trillium Asset Management, LGBT Capital, Dreilinden gGmbH and Cornerstone Capital Group have focused on influencing companies to build inclusive policies and protections for all employees. Firms including Calvert and NorthStar Asset Management are integrating LGBTQI-specific considerations into impact investment strategies. A growing number of venture investors, including Pipeline Angels and Backstage Capital, are finding overlooked opportunities by investing in LGBTQI entrepreneurs. Beyond public equities strategies and direct investments in LGBTQI-led enterprises, investors are applying an LGBTQI lens to spot regulatory, reputational and market risks facing companies unable to adapt to changing laws and culture. Say Anderson and Subramanian, “Understanding how culture is shifting around gender norms is an undervalued component of investment risk.” 

Keep reading, “How an LGBTQI lens can mitigate investment risk,” by Criterion Institute’s Joy Anderson and Tia Subramanian on ImpactAlpha.

Agents of Impact: Follow the Talent

Emily Chasan, ex- of Bloomberg News, joins Generate Capital as director of communications. Generate also has recruited Nam Tran Nguyen, previously with SunPower, who joined as chief operating officer, and Andrew Marino, ex- of Carlyle, who came on as a senior managing director and head of strategy… ICA Fund names Dianna Tremblay chief program officer and John Gough chief investment officer… Coalition for Inclusive Capitalism is recruiting a program director in New York… VC Include’s Bahiyah Yasmeen Robinson is hosting “Black Voices in Sustainable Investing,” with Rachel Robasciotti of Adasina Social Capital, FullCycle’s Stephan Nicoleau, Marilyn Waite of Hewlett Foundation and Taj Eldrige of Los Angeles CleanTech Incubator, Thursday, Oct. 1.

Thank you for reading.

–Sept. 30, 2020