Greetings, Agents of Impact!
Featured: Impact Voices
Driving strategic corporate investments: sustainability innovation. With its $2 billion Climate Pledge Fund to facilitate the transition to a low-carbon economy, Amazon became the latest corporation to leverage its balance-sheet to find key sustainability innovations. As companies seek to cut their carbon footprint, reduce their water usage, and diversify their supply chains, they are using corporate venture capital funds to make impact investments. Microsoft, Citi, Merck, Splunk, and Unilever in the past year announced new impact-oriented investment approaches. “Corporates are distinctive for their potential to adopt, scale, and ultimately, accelerate impact,” writes Moses Choi of Orange Silicon Valley in a guest post on ImpactAlpha. Corporate investments in research and development, internal incubation, and even mergers and acquisitions, he says, “can future-proof competitiveness, activate purpose, and unlock new avenues for innovation.” With more than $22 trillion of cash on their balance sheets and increasing scrutiny of their environment, social and governance, or ESG, performance, corporations are looking for startups and other partners with breakthrough technology and services.
Corporate venture capital funds are putting impact at the center of their strategic plans. “Social and environmental impact is core to who we are as a company,” says Claudine Emeot of the $50 million Salesforce Impact Fund. The fund helps entrepreneurs leverage Salesforce’s ecosystem. Total Carbon Neutrality Ventures, global energy company Total’s $400 million corporate venture capital unit, “is focused on finding, funding and fostering high-potential start-ups which will contribute to creating a low carbon future.” To help signal its impact commitment to entrepreneurs and co-investors, Danone Manifesto Ventures, the $150 million corporate venture arm of global consumer company Danone, became the first corporate venture fund to become B-Corp certified. Citi’s $150 million Citi Impact Fund, announced earlier this year, uses the bank’s capital to invest in businesses led or owned by women and minority entrepreneurs to “shine a light on the investment opportunities among this pool of often overlooked, high potential entrepreneurs.” At least a dozen corporate venture funds now invest with a “gender lens” or broader diversity investment strategy, according to Project Sage. In their core operations and global supply chains, Choi says, “Corporates have an immense opportunity to accelerate sustainability across all their sources and uses of capital.”
Keep reading, “Corporates turn to strategic investments to drive sustainable innovation,” by Moses Choi on ImpactAlpha.
Dealflow: Follow the Money
Vedantu closes $100 million in India’s red hot edtech market. The coronavirus wreaking havoc on India’s healthcare system and economy, is jet fuel for the country’s edtech ventures. Case in point: online tutoring platform Vedantu clinched $100 million in Series D funding just three months after closing its $79 million Series C round. K-12 personalized learning company Byju has raised $500 million through multiple rounds this year; online education platform Unacademy closed a $110 million Series E round in February. “Indian ed-techs are having a breakout moment, led by three stars,” observes Asha Impact’s Kartik Desai, co-author of a new report on impact investing in India (see, “Impact investors catalyze $10 billion for India’s social venture market over 10 years”). Vedantu stands out from edtech peers Unacademy and Byju for its impact mission, which aims to make after-school tutoring widely available and affordable through lessons online.
- After-school. Omidyar Network India first backed the company in 2018 and re-upped in the latest round. Omidyar’s Siddharth Nautiyal cited the company’s long-standing commitment to improving student learning outcomes at extremely affordable prices.”
- Beyond fintech. Education is among the emerging sectors in which impact investors are looking for the kind of acceleration, scale and exits they found in financial services in the past decade, says Desai. Impact-focused edtech has scooped up just under $1 billion of the $10.8 billion in impact venture capital invested in India. Driven by COVID, “Vedantu’s large raise is an example of more such deals to come,” he adds.
- Low-income market. Unacademy and Byju have been competitively snapping up smaller edtech ventures. Local language STEM education startup Doubtnut is the latest example. Desai says that the huge Indian market helps keep edtech focused on access and affordability. “Services for low-income customers become embedded in the business models of startups focused on the mass market. This helps achieve impact investors avoid mission drift even as their investees reach national scale.”
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SustainVC backs online education provider Yellowdig. The Philadelphia-based edtech venture incorporates social media-like features into its discussion board platform, making it more intuitive for today’s online students. Yellowdig has seen educator interest multiply amid coronavirus school lockdowns, The Philadelphia Inquirer reports. SustainVC invested an undisclosed amount via its second fund, which focuses on women- and minority-owned startups.
Non-profit lender Fair for You scoops up £7.5 million. The Coventry, U.K.-based lender provides low-cost credit to help U.K. consumers buy essential household items through its retail partners. Seven investors backed the female-led enterprise: Fair4All Finance, Joseph Rowntree Foundation, Esmee Fairbairn, Tudor Trust, Barrow Cadbury Trust, Robertson Trust and Ignite. Fintech startups like Aura and Sunbit in the U.S. take a similar approach to consumer credit.
Signals: Ahead of the Curve
Expanding the pool of entrepreneurs and ownership structures with access to capital. Revenue-sharing, ‘collaborative endorsements,’ and diverse referral networks are among the strategies being explored by the first funds chosen by the Kauffman Foundation’s Capital Access Lab. “Investment is more than ownership; it is about equity and impact,” said Melissa Bradley of Washington DC-based 1863 Ventures, who said the support will advance “New Majority entrepreneurship, job creation and community impact in historically overlooked and underserved communities.” Five funds will receive between $250,000 and $1 million each for a total of $3 million (the lab says it has catalyzed an additional $5 million in investments). The Capital Lab looked at more than 100 funds in 32 states, more than half of them led by women and 41% by people of color. The initiative was launched by the Kauffman and Rockefeller foundations in 2019 to support emerging funds using innovative models to break down funding barriers faced by entrepreneurs of color, women, and rural entrepreneurs.
- New structures. Capacity Capital, in Chattanooga, uses revenue-based funding to help small businesses grow. Atlanta-based Collab Capital, a new fund focused on helping Black founders grow sustainably, uses a model it calls a ‘shared profit agreement with a collaborative endorsement,’ or SPACE, that combines profit-sharing with product endorsements by its athlete and celebrity investors (see, “Collab Capital launches fund for Black founders”). Indie.vc, a champion of revenue-based growth, will expand its “Scouts” referral program aimed at creating a more inclusive startup ecosystem (see, “Bryce Roberts and Tim O’Reilly: VCs that help startups raise revenues, not rounds”). The firm’s new ‘Cub Scouts’ will invest in companies that are pre-revenue or not ready for an Indie.vc investment. Anzu helps commercialize industrial technology that is outside the scope of traditional VC.
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Agents of Impact: Follow the Talent
Candide Group is hiring a managing director in Oakland… Northeastern University’s D’Amore-McKim School of Business is recruiting an adjunct lecturer to teach social entrepreneurship in Boston… Norfund is looking for an associate in Cape Town.
Thank you for reading.
–July 20, 2020