Greetings, Agents of Impact!
10x’ing community recovery. Community development financial institutions, or CDFIs, rallied to help small businesses and nonprofits in underserved communities survive the COVID crisis by making emergency loans. Agents of Impact Call No. 17 will explore ways to 10x, or more, the recovery capital flowing through these vital distribution channels. Calvert Impact Capital’s Beth Bafford and Community Reinvestment Fund’s Patrick Davis will detail one such “community recovery vehicle.” Explore strategies for a more inclusive recovery with New Localism’s Bruce Katz, Trufund’s James Bason, CNote’s Cat Berman, MacArthur Foundation’s Debra Schwartz and other Agents of Impact on The Call, this Thursday, May 21, at 10am PT / 1pm ET / 6pm London. Register now.
- Jump in. Find the slide deck for CRF’s COVID-19 Community Recovery Vehicle and other resources on ImpactAlpha’s lively #community-capital Slack channel. Not yet on Slack? Sign up here and click on “channel browser” in the left column.
Featured: ImpactAlpha Original
Two steps forward, one back, for Bain Capital’s Double Impact fund. Some impact investment funds are reconsidering their portfolios and restructuring arrangements with companies hard hit by the COVID crisis. Others are pressing ahead with new investments in sectors that stand to grow in the emerging business environment. Bain Capital Double Impact is doing both. The private equity firm’s $390 million impact investment fund announced new investments in edtech company PresenceLearning and health services firm Broadstep Behavioral Health, seizing on opportunities that are proving pandemic resistant. Another company in the Double Impact portfolio, Sustainable Restaurant Group, has shuttered its 10 locations and furloughed or fired 90% of its employees. This month it filed for bankruptcy amid a bitter dispute with its former CEO, who filed suit against Bain Capital after he was ousted by the company’s board.
The split-screen at Bain Capital reflects the dual realities of impact investing in the time of coronavirus. Newer entrants into impact investing, including major private-equity firms like TPG and KKR as well as Bain, will be scrutinized for how they operate in the newly volatile marketplace. Many impact investors have shown flexibility and patience, cutting interest rates, extending repayment schedules and finding other ways to help companies extend their cash runways. But private equity investors are also well-versed in the opportunities infusions of additional capital present for extracting concessions and gaining leverage over portfolio companies. The appropriate sharing of upside potential and downside risk may not be known until the crisis has passed. “With the right approach and mindset, there’s an opportunity for private equity to drive powerful impact,” Bain Capital’s Iain Ware told ImpactAlpha. “How can we find the companies with really positive social and environmental benefits? How can we work alongside the management teams to maximize that impact?”
Keep reading, “Two steps forward, one back, for Bain Capital’s Double Impact Fund,” by Jessica Pothering on ImpactAlpha.
Dealflow: Follow the Money
UNICEF’s guarantees would speed PPE procurement in low-income countries. UNICEF USA is tapping investors and donors for a $3 million facility to give low-income countries a boost in the hyper-competitive global market for personal protective equipment. Grants and recoverable grants made to UNICEF USA’s Fast Fund will guarantee up-front payments so 90 low-income countries can procure PPE for frontline healthcare workers. Such guarantees, usually provided by banks on behalf of suppliers, have dried up in the COVID crisis, says the organization. Impact Fund for Children, UNICEF USA’s impact investing arm, will manage the fund. The fund has raised its first $250,000, subject to matching funding.
- Advance payments. Fast Fund will use recoverable grants provided by investors to guarantee UNICEF transactions with PPE suppliers. UNICEF will then lock in orders with advance payments to PPE suppliers. Once suppliers deliver the PPE, Fast Fund guarantees will be released. After 18 months, the Fast Fund will return the grants to investors if the guarantees have not been drawn down.
- Impact leverage. UNICEF USA estimates the $3 million fund can facilitate $54 million of UNICEF purchases over one year. Guarantees cover one-third of advance costs; funds can be recycled up to six times each year. A $100,000 recoverable grant made from a donor advised fund, says UNICEF USA, can provide PPE to 12,800 healthcare workers. Fast Fund aims to be fast: UNICEF USA says guarantee requests will be turned around within two days.
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Olamina Fund deploys $14.5 million to Black, Native and rural lenders. The $40 million fund was launched by Candide Group in November to address a chronic shortage of capital in low-income communities and the financial institutions that serve them. In six months, it has made low-interest loans to five lenders, including Oweesta, a CDFI serving Native populations, and UP Community Fund, a Black-led organization that lends to entrepreneurs of color in the southeast.
- COVID relief. To respond to the pandemic, Olamina rushed capital to CDFIs Hope Credit Union and Rural Community Assistance Corp. to expand access to loans via the federal Paycheck Protection Program (see, “With zero-interest loans and deposits, wealthy families rush capital to rural lenders and impoverished communities”).
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Inclusive Prosperity Capital raises $25 million for clean energy deployment. The credit facility, backed by NY Green Bank, leveraged a $10 million guarantee from the Kresge Foundation. Inclusive Prosperity Capital, a spin-out of the Connecticut Green Bank, has deployed $450 million for clean energy projects including in low-to-moderate income neighborhoods and under-invested carbon credit markets.
Tomato Jos raises €3.9 million to bolster the food value chain in Nigeria. Goodwell Investments led the round through its West Africa partner, Alitheia Capital, with participation from Acumen Capital Partners and VestedWorld.
Signals: Ahead of the Curve
The outlook is bleak, and financing needs clear, for small businesses in emerging markets. COVID is crushing small and growing businesses in emerging markets. Four in 10 companies supported by members of the Aspen Network of Development Entrepreneurs members risk failing in the next six months. Half of businesses in a Global Accelerator Learning Initiative survey have lost more than half their revenues. The impacts are disproportionately hitting women-led companies and businesses in the food services, arts, events, tourism, recreational and manufacturing sectors. The bleak data is rounded up by ANDE and Dalberg in “The Small and Growing Business Sector and the COVID-19 Crisis,” previewed earlier this month on ImpactAlpha. The range of needed responses is becoming clearer as well (see, “Needed: Responsive, aggregated and accessible capital for (once-) growing businesses in emerging markets”).
- Flexible funding. Grants, speed, pricing, grace periods or flexible repayments – choose your opportunity. Note: Small and growing businesses would prefer not to take on new debt, unless it’s forgivable. EquaLife Capital, responsAbility, Vital Capital, Open Road Alliance and a host of development banks are in the market with relief and recovery vehicles (see, “Your pipeline of impact deals in emerging markets is at risk. Three things you can do about it”).
- Survival bootcamp. Small and growing businesses are pivoting and adapting to changing market conditions. The African Management Institute launched the COVID-19 Business Survival Bootcamp to support cash flow forecasting, crisis leadership and mental well-being. TechnoServe’s “Reset, Adapt, Engage” framework is helping businesses navigate the crisis and build digital skills for remote engagement.
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Agents of Impact: Follow the Talent
JumpScale welcomes Alexis Bunten, Cassandra Ferrera, Jordan Luftig, Nikki Silvestri and Heather Lord as senior advisors and has an opening for a part-time operations and marketing coordinator in Oakland, New York or Pittsburgh… Kiva is hiring a strategic partnerships manager in San Francisco, Portland or New York… Ethic is looking for a finance lead in New York… APG seeks a senior portfolio manager in Amsterdam.
Social Venture Circle presents “Native Financial First Responders: From Relief to Recovery” with NDN Collective’s Nikki Love and First Nations Oweesta Corp.’s Chrystel Cornelius today at 1:30pm ET… National Coalition for Community Capital is hosting “Building Local Economies with Crowdfunding as Part of a Diverse Capital Stack” today at 3pm ET… Impact Entrepreneur’s Laurie Lane-Zucker interviews entrepreneur and author Nathalie Molina Niño about “Solving Racial and Gender Inequities in a Post-Covid Economy” on May 21.
Spectrum Impact’s Rehana Nathoo is hosting “Value in a Virtual World: Successfully Running a Small Business During #COVID19” with Align Impact’s Jenn Kenning, RPCK’s Chintan Panchal and Kiva’s Will Jacobsen on May 28… Ten impact startups will present at demo day for the Cox Enterprises Social Impact Accelerator, powered by Techstars, on May 28.
Thank you for reading.
–May 20, 2020
