The Brief | June 7, 2021

The Brief: Catalytic climate capital, social infrastructure, gig work in India, Citi’s impact fund, podcasting in South Africa, taxing revenue-based finance

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Greetings, Agents of Impact! Tune into this ImpactAlpha partner event this week:

  • Institutional tipping point. Tideline’s Jane Bieneman and Ben Thornley are hosting “Impact Investment at the Institutional Tipping Point,” the latest in the firm’s Compass Series. Join Franklin Park’s Brad Atkins, CalPERS’ Andrew Karsh, Avenue Capital’s John Larkin, Morrison & Foerster’s Susan Mac Cormac and Capricorn’s Dipender Saluja, Thursday, June. 10. RSVP today.

Featured: Climate Finance

Yes, impact-first catalytic capital is still needed for climate solutions. The surging interest in cleantech is undoubtedly good news. Despite the pandemic, global investment in the low-carbon transition crossed $500 billion last year, up from $459 billion in 2019. Venture capital investment in clean technologies grew more than 25-fold between 2013 and 2019 to reach $16.3 billion. “The problem is that a very large funding gap still exists at the earliest stage – that point when entrepreneurs are starting to transition research discoveries into new startup companies, a time when VC investments aren’t yet an appropriate source of funding,” says David Kenney of VertueLab, which has raised $3.1 million of a planned $5 million Climate Impact Fund. Like Prime Coalition in Cambridge, Mass., Portland-based VertueLab is a nonprofit that leverages catalytic philanthropy to bridge the early-stage capital gap. “Bridging the gap with impact-first capital to help get startup companies ready for a massive wave of new climate tech venture capital is one of the keys to bringing new climate solutions to scale,” Kenney writes in a guest post on ImpactAlpha. Read on

  • Risk tolerance. The biggest climate tech investors aren’t climate-first VCs like Breakthrough Energy Ventures, Lowercarbon Capital or Energy Impact Partners. The standouts among investors placing the most extensive and high-risk bets on technologies to decarbonize food, agriculture, transportation and other sectors: Singapore’s sovereign wealth fund Temasek; Horizons Ventures, the venture firm of Hong Kong billionaire Li Ka-Shing; Valor Equity Partners; Box Group; and GV, the $5 billion venture arm of Alphabet. An analysis by Susan Su of Sound Ventures found the leaders have deeper pockets, more patient capital, growth-stage experience, and the ability to make follow-on investments and connect with large markets in Asia.
  • Come and get it. The U.S. Department of Energy’s Loan Programs Office has $40 billion in lending authority to boost innovative climate tech awaiting commercialization and first-of-a-kind projects that private lenders shy away from. “We fund projects when commercial banks believe the projects are too risky, and then we work hard to help the projects reach commercial understanding,” writes Jigar Shah, who was recruited to lead the office from Generate Capital. The loan program has earmarked $17.7 billion for manufacturing low-carbon vehicles; more than $20 billion in loan guarantees for innovative energy sources, including nuclear, renewables and energy efficiency; and $2 billion for tribally-owned energy projects. Also on Shah’s radar:  geothermal, long-duration storage, green hydrogen and carbon capture. About a decade ago, the loan office provided a $465 million low-interest loan to an EV startup called Tesla – which repaid the loan in full.
  • Financial disclosure. Finance ministers from the G7 countries this weekend endorsed mandatory climate disclosures based on the framework from the Task Force on Climate-related Financial Disclosures, or TCFD. “The more countries that make disclosure mandatory under a shared international framework, the more useful that data becomes in fighting climate change, creating jobs and building a stronger and more resilient economy for everyone,” said Michael Bloomberg, who chairs the task force.

Dealflow: Social Infrastructure

Aunt Bertha raises $27 million to connect users to social services. The Austin-based company’s platform has grown to more than 470,000 programs and six million users. “Providing access to the right information at the right time is crucial to helping people avoid unnecessary suffering,” says Aunt Bertha’s Erine Gray. The funding follows a $16 million round in 2019. New York-based private equity firm Warburg Pincus led the new round. Earlier investors include Pershing Square Foundation, Techstars Ventures, Noro-Moseley Partners, Digitalis Ventures and The Social Entrepreneurs’ Fund.’s Chris Tsakalakis is joining Aunt Bertha’s board of directors.

  • B Corp. Founded in 2010, Aunt Bertha is among more than a dozen B Corps. based in Austin, including, NadaMoo and Vital Farms, which listed on the Nasdaq last year.
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Urban Company secures $255 million for gig marketplace in India. The mobile platform has hired and trained approximately 35,000 gig service providers since 2014 for beauty treatments, haircuts, carpentry, appliance repair, painting, cleaning and other services. Urban provides financing and technical support and an Employee Stock Ownership Program. The Series F round valued Urban at $2.1 billion.

  • Geographic reach. Urban has reached more than five million customers across 35 cities in India, Singapore, Australia, Saudi Arabia and the United Arab Emirates. Prosus Ventures, Dragoneer and Wellington Management led the round, with Vy Capital, Tiger Global and Steadview.
  • Check it out.

Dealflow overflow. Other investment news crossing our desks:

  • Citi Impact Fund takes stakes in banking platform Greenwood, fintech MoCaFi, telehealth company Moving Analytics, smart energy startup OhmConnect, and construction labor platform Sweeten.
  • Media Development Investment Fund backs podcasting company Volume to bolster independent media in South Africa.
  • L.A.-based VamosVentures raises $50 million fund for early-stage tech companies led by Latino and other diverse founders.
  • Woman-led ESG venture fund MPower Partners launches with commitments from Dai-ichi Life Insurance Co., Sompo Holdings and Sumitomo Mitsui Trust Group.

Impact Voices: Alternative Capital

Should revenue-based financing be taxed like equity or debt? The answer is not academic. Hundreds of investors and fund managers are using structured exits, royalty-based finance and other varieties of revenue-based finance (see, “Impact investors turn to revenue-based financing to bridge capital gaps for founders of color”). Venture investors find such structures appealing because, like a loan, they are able to recoup their capital without an exit. Founders like them because they avoid the dilution of standard equity investments. In the U.S., returns on the quasi-equity structures are generally taxed like debt, which is treated as ordinary income, rather than capital gains, which enjoy a lower tax rate. Revenue-based structures should be considered “a third category that can have a mix of equity and debt risk-return characteristics,” Toniic’s John Berger argues in a guest post. “Perhaps someday tax authorities will agree.” Read the full post.

Agents of Impact: Follow the Talent

Otho Kerr, ex- of Acumen, joins the New York Federal Reserve as director of strategic partnerships and community impact investing… Kresge Foundation is hiring a Detroit-based program officer… ImpactPHL and Impact for Breakfast are hosting “Investing in Resilience: Levering the power of the food sector,” with Mark Watson of the Fair Food Network and James Johnson-Piett of Urbane Development, tomorrow, June 8. 

The Global Impact Investing Network convenes “Next Normal Now,” this time on climate action, with Wendy Cromwell of Wellington Management, Temasek’s Rohit Sipahimalani and Daisy Streatfeild of the Institutional Investors Group on Climate Change, Wednesday, June 16… ImpactAssets’ Deb Parsons is hosting “Impact investing in the creative economy,” with Upstart Co-Lab’s Laura Callanan, Mary Stuart Masterson of Upriver Studios, Lorrie Meyercord of Conscious Endeavors, and Paskho’s Patrick Robinson, Wednesday, June 30.

Thank you for your impact.

June 7, 2021