The Brief | April 6, 2022

The Brief: Community rounds for startups, sustainable drywall, big bet on Climeworks, auto recycling in Brazil, health tech in Egypt

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Greetings, Agents of Impact!

Featured: Returns on Inclusion

Startups raise ‘community rounds,’ turning customers and fans into investors. Raising money from “the crowd” has sometimes seemed anonymous and unstrategic, if not a bit desperate. By calling such a raise a “community round,” startups are projecting a different vibe, bringing in customers and early adopters to speed fundraising, strengthen relationships and signal momentum to professional investors. Increasingly, high-caliber companies are tapping crowdfunding platforms, not because they can’t raise elsewhere, but “to let customers invest in them as a way to build stronger relationships with the community and build engagement,” Wefunder’s Jonny Price tells ImpactAlpha. Wefunder, the leading regulation crowdfunding site by investment volume, likes community rounds so much it wants the term to replace “equity crowdfunding.” “Crowdfunding has connotations with Kickstarter,” says Price, referring to the popular site that helps projects and companies raise funds in exchange for rewards rather than equity. Price positions community rounds with “friends and family” financing or angel investments. “It’s more in keeping with the trajectory that a venture backed startup might be on.” 

  • Community rounds. In less than 24 hours last weekend, software developer platform Replit raised an oversubscribed community round of more than $5 million on Wefunder. The campaign followed Replit’s raise at a valuation of $800 million in a round led by the Silicon Valley venture heavyweight Andreessen Horowitz. The catch: only Replit users could invest. Last year, Gumroad, a digital marketplace for creatives, turned to its user base to raise $5 million from more than 7,000 investors on crowdfunding site Republic in 12 hours, shortly after the SEC boosted the amount startups can raise from $1 million to $5 million. That same week, venture capitalist Arlan Hamilton tapped her online and professional network to raise the maximum $5 million in just a few days for Backstage Capital, which backs people of color, women and LGBTQ+ founders.
  • Returns on inclusion. Community-led startup investing is changing not only who gets to invest, but who gets funded. Companies with a Black or Brown founder last year received roughly a third of the nearly $500 million in online investments, compared to just 2.6% of venture capital overall, according to KingsCrowd. Atlanta-based Fanbase, founded by Isaac Hayes III, son of the R&B legend, estimates that up to 70% of investors in its two community-like rounds on StartEngine are users of the app. Venture investors see a “solid base of investors that believe in the app,” Fanbase’s Ramiro Canovas tells ImpactAlpha. “This shows that there’s something valuable here.”
  • Keep reading, “Startups raise ‘community rounds,’ turning customers and fans into investors,” by Dennis Price on ImpactAlpha.

Dealflow: Carbon Tech

Adaptavate raises £2.2 million to slash the climate impact of building materials. If sustainable drywall sounds like a niche innovation, consider that gypsum board is among the world’s most-used building materials and a major component of buildings’ carbon footprints. U.K.-based Adaptavate’s circular, less carbon-intensive alternative uses plant-based waste and lime, known for its ability to absorb CO2. Adaptavate mixes in captured carbon to strengthen the drywall. “It’s a fundamental rethink and re-design of the current system,” said Adaptavate’s Tom Robinson. Adaptavate will build a pilot plant with the $2.8 million in funding from Low Carbon Innovation Fund, Counteract and a U.K. government grant.

  • Direct-air capture. In a major signal of the arrival of a carbon removal market, Swiss direct-air carbon capture venture Climeworks raised 600 million Swiss francs ($646 million) to scale its modular CO2 collectors (see “How climate investors are getting ready for the carbon removal boom“). Partners Group and Singapore-based GIC led the round. Climeworks built its first direct-air capture and storage plant in Iceland last year. The fresh funding will support a new plant capable of removing 40,000 tons of CO2 a year.
  • Check it out

Vox Capital backs Octa to recycle cars in Brazil. Sao Paulo-based Octa has developed a marketplace to connect vehicle fleet owners with disposal businesses to ensure that old vehicles are disassembled and recycled. The company says less than 10% of automobiles in Brazil are disposed of properly, compared to 80% in the U.S. and Europe. Its mission is to “make the automotive economy more fair, accessible and circular.” “The opportunity is huge in economic terms,” said Octa’s Arthur Rufino, “but it also brings a very nice potential to reduce vehicle theft and CO2 emissions in the chain.” Impact investor Vox Capital led Octa’s 8 million reais ($1.7 million) round. The company was selected for Google’s Black Founders’ Fund.

  • Traceability. Octa says it confirms the provenance of all vehicles, metal and parts that transact through the marketplace. The company is looking to set up a market for used parts, for which it will provide warranties. “The idea is that companies sell the vehicle to us, buy used parts from us, and at the same time generate a significant reduction in emissions in reuse, remanufacturing and recycling,” said Rufino.
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Dealflow overflow. Other investment news crossing our desks:

  • California’s software venture Liminal (formerly Feasible) clinches $8 million to help electric vehicle battery manufacturers optimize production.
  • Kenyan fintech venture Churpy raises $1 million to help local businesses automate accounts receivables and roll out working-capital financing.
  • South Africa’s Secha Capital and Tiger Brands’ venture fund back plant-based meat company Herbivore Earthfoods.
  • Egyptian health tech venture Otida secures pre-seed funding from LoftyInc Capital Management, Flat6Labs and others to support diabetes patients.

Agents of Impact: Follow the Talent

John Kluge steps down as CEO of Refugee Investment Network, and is succeeded by Tim Docking, the organization’s managing director… Ankur Capital promotes Shreyansh Singhal to vice president of investments and Zahin Hussain to vice president of partnerships. Suraj Nair will lead Ankur’s TechSprouts network and podcast series… Social Finance’s Tracy Palandjian is elected to join Harvard Corporation.

Aaron Bourke, ex- of Reed Smith, joins impact-focused law firm RPCK Rastegar Panchal as senior counsel and head of the fund formation practice… Skoll World Forum and Mercy Corps Ventures are hosting a panel on the Web3 paradigm for climate resilience, Friday, April 8… Applications are open to food entrepreneurs seeking to pitch at the Food Investor Fair at Food Funded 2022.

Thank you for your impact.

– Apr. 6, 2022