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Cleantech venture capital rebounds with smarter, more patient investors.A contrarian story is emerging in cleantech venture capital. After a decade of flare ups and flameouts, climate-savvy investors are making long-term bets – and finding profits. Newcomers have joined cleantech veterans to start to provide the continuum of capital needed by cleantech and climate entrepreneurs. Major players: Oil and gas companies facing up to the low-carbon future have stepped up their corporate venture investments in carbon capture, electric-car charging and renewable energy. Data from Cambridge Associates suggests returns from investments in cleantech companies between 2014 and 2017 have rebounded to the highest level since 2000-2004. To be sure, many of the recent gains are still unrealized, venture funding for cleantech companies remains well off its 2008 peak, and high-risk, high-impact, early-stage innovators face a persistent capital gap.
“You now have investors who are approaching this space on its own terms,” says Matthew Nordan of the Prime Impact Fund, a new fund at Cambridge, Mass.-based Prime Coalition. Early-stage venture firms Congruent Venturesand Radicle Impact in San Francisco, growth-equity fund ClearSky in Florida, utility-backed investment funds like Energy Impact Partners and, of course, Breakthrough Energy Ventures, backed by Bill Gates and other billionaires, have all come on the scene in the last three years. Today’s cleantech fund managers are raising capital from limited partners with a more patient orientation – and a mission to fight climate change. The amount of capital is still no match for the urgency of the climate crisis. But the new investments have a recipe for success that Nordan says “is better than trying to do a skin graft of tech venture capital onto energy and environment.”
Keep reading, “Cleantech venture capital rebounds with smarter, more patient investors,” by Dennis Price on ImpactAlpha.
Dealflow: Follow the Money
Global Health Investment Fund clears a profit with voucher sale to Novo Nordisk. An innovative financing mechanism for drugs for neglected diseases is providing a return for impact investors. The Danish pharmaceutical giant disclosed that it is the buyer of a “priority review voucher” from Medicines Development for Global Health, an Australian nonprofit that won U.S. Food and Drug Administration approval for moxidectin as a treatment for onchocerciasis, or river blindness. With the approval came the voucher for an expedited FDA review of another drug. MDGH had estimated it could sell the voucher sold for $40 million, according to a report from Tideline, more than covering the $13 million required for the drug’s final development. The Global Health Investment Fund, launched by the Gates Foundation and JPMorgan Chase, committed $10 million in 2015. MDGH’s Mark Sullivan said moxidectin “would have been left on the shelf” without the priority review voucher funding mechanism.
- Splitting the profits. MDGH said “a significant portion” of the proceeds would go to fight river blindness, with the balance returned to investors in the global health fund, now known as Adjuvant Capital. Adjuvant is raising a second fund.
- Catch up: “After a dozen deals, Global Health Investment Fund has overcome a rocky start”
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Joust raises $2.6 million to boost financial services for gig workers. The Austin-based startup aims to modernize financial services for the 87 million freelancers and small businesses in the U.S. “Freelancers don’t have access to business banking in the traditional sense,” Joust’s Lamine Zarrad toldImpactAlpha. Such workers often don’t qualify for merchant accounts, “and they deal with regular nonpayment from clients,” Zarrad said. Joust offers merchant accounts for accepting payments as well as invoice insurance. As part bank, part insurer and part business management platform, Joust is riding two fintech trends: the rise of mostly-online “neo-banks” and a rash of startups serving small businesses, like the U.K.’s Fluidly, Brazil’s Weel, and U.S.-based Crowdz. Joust scored an early partnership with New York’s 450,000-member Freelancers Union. PBT Ventures, Accion Venture Lab, Financial Venture Studio, and Techstars backed Joust ahead of its official launch this fall. Here’s more.
- Starving artists. Joust offers freelance journalists and writers special discounts because of their particularly high need. Says Zarrad: “They experience non-payment at unprecedented rates.”
Signals: Ahead of the Curve
Agents of Impact Call No. 10: Calling trends and scooping ideas inImpactAlpha’s newsroom (audio). Don’t refer to conventional finance as ‘mainstream,’ ImpactAlpha’s David Bank said on The Call earlier this month. Call it ‘legacy finance’ in the same way the tech community refers to ‘legacy’ computer systems that are outdated but still in use. That was one takeaway from The Call No. 10, which took ImpactAlpha subscribers inside our editorial decision-making and explored our hunches and hobby horses with a few special Agents of Impact. “What we really try to do is break ideas,” said editorial director Dennis Price (see, ‘Reverse the polarity’ tops ImpactAlpha’s charts for the transformation of finance’).
- Catalytic capital. “We want to usher in ideas that become obvious,” said Rockefeller Foundation’s Adam Connaker, who explained the foundation’s innovative finance strategy, including a new fund management capacity (see, “Indispensable element in many impact investments: ‘catalytic capital’”). “The biggest idea is that finance can do more than we’ve been asking of it.”
- Returns on inclusion. “If we are not looking at racial equity in the impact investing space, what are we here for?” asked Kellogg Foundation’s Cynthia Muller. “We’re really leaving a lot of opportunity on the table.” The foundation’s lens “is really about systems, and how we change the systems of power [that] have oppressed communities of color and poor individuals,” she said.
- Reverse the polarity. The Earth’s north and south poles have reversed hundreds of times in the last 83 million years. “To me it represents those things where you say, ‘it could never happen,’” until it does, Bank said. “In our world, it stands for that whole set of ideas about reinventing capitalism.” John Goldstein of Goldman Sachs said signs the poles are reversing are proliferating. “As the world continues to change, this is just showing up in a fundamentally different way,” he said. Financial institutions need to recognize secular, persistent, accelerating themes that are shaping risk, opportunity and efficiency for their clients and themselves, Goldstein said. Otherwise, they risk becoming ‘legacy’ institutions – and not in a good way.
- Listen to an audio replay of Agents of Impact Call No. 10.
Agents of Impact: Follow the Talent
Brenda Boone joins the board of directors at Cornerstone Capital Group… Land O’Lakes International Development rebrands as Land O’Lakes Venture37 (farmers grow crops and raise livestock on 37% of Earth’s land)… AgDevCo is hiring an analyst in London.
– Aug. 14, 2019