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Featured: ImpactAlpha Original
Fifty Years’ bets on ‘deep tech’ – for high impact and high returns – are starting to pay off. The San Francisco venture firm has always been something of an odd fit among both tech venture capital and impact investment funds. Fifty Years has raised two funds totaling $55 million and made investments in more than 50 companies. But Fifty Years’ focus on companies that can put a dent in the Sustainable Development Goals has been seen as too soft in Silicon Valley. Its insistence that such firms could be massively profitable made it a misfit for some impact investors. “Deep tech” may be the category that fits best, given Fifty Years’ bent toward companies pursuing high-risk breakthroughs in science or engineering. Seth Bannon, who founded the firm in 2016 with his partner Ela Madej, shared limited performance data with ImpactAlpha that suggests Fifty Years’ $5 million first fund ranks in the top decile of venture funds of similar vintage. After years of making the theoretical case, Bannon says, “We’re finally able to show some data that at least one fund backing really high risk, really high reward startups that, if successful, will be massively profitable and make a massive positive impact, is working.”
If the impact investing case for high-risk investments in science- and engineering was theoretical, 2020 brought it home. Fifty Years’ portfolio gains are, as yet, unrealized, but some of the valuation gains are indisputable. Lab-grown meat producer Memphis Meats, for example, which Fifty Years’ backed in 2016, raised $161 million in January, in a round led by SoftBank Group, Norwest and Singapore’s Temasek. In 2017, the fund invested in Houston-based Solugen, which uses plant derivatives rather than petroleum inputs to produce safer and cleaner chemicals for agriculture, energy, water and personal care. Last year, the company raised $32 million, led by Founders Fund. Bannon says he wants to “put a stake into the heart” of the notion “that big tech approaches to impact” are not a great approach. “You can find these profit models that sync so beautifully with these impact models.”
Keep reading, “Fifty Years’ bets on ‘deep tech’ – for high impact and high returns – are starting to pay off,” by Dennis Price on ImpactAlpha.
Dealflow: Follow the Money
Turner Impact Capital closes $357 million affordable workforce housing fund. As many as 40 million Americans could lose their apartments in coming months because of COVID’s economic impacts. Turner Impact, an L.A.-based real estate impact investment firm, is looking to acquire 10,000 affordable “workforce” housing units for teachers, public servants and healthcare workers who don’t qualify for subsidized housing but may be struggling to pay rent. With Turner providing about one-quarter of the capital, Turner Multifamily Impact Fund II could leverage up to $1.25 billion. The fund already has acquired seven properties, with an eighth under contract, collectively representing more than 3,000 units across Austin, Dallas, Las Vegas, Chicago, Seattle and Washington, D.C.
- Social infrastructure. Turner has raised a total of $1.4 billion across funds targeting healthcare facilities, charter schools and workforce housing. The firm says the social services it provides tenants, including health services, childcare and food banks, reduce vacancy rates and delinquent rents (see, “What we know about Turner Impact Capital’s school, housing and health funds”). Turner’s first housing fund has acquired 7,840 affordable housing units that are occupied by more than 14,000 residents.
- Bold-faced names. Founder Bobby Turner has attracted celebrity backers to earlier funds, including tennis great Andre Agassi and actress Eva Longoria. The newest fund counts NBA superstar Chris Paul and hedge fund billionaire Bill Ackman of Pershing Square Capital Management among its limited partners. In a statement, Ackman said Turner’s team “has demonstrated an ability to create a sustainable and scalable for-profit solution to address the current affordable housing crisis.”
Fresh off its IPO, QuantumScape claims EV battery breakthrough. Electric vehicle battery maker QuantumScape says tests show its solid-state lithium-metal battery can charge to 80% of capacity in 15 minutes, compared to about an hour for today’s lithium-ion batteries. The solid-state batteries are also noncombustible. “We think that we’re the first to solve solid-state,” QuantumScape’s Jagdeep Singh told Wired. The San Jose, Calif.-based company last month raised $680 million via a merger with Kensington Capital Acquisition, a SPAC, or special purpose acquisition company, including a $500 million private investment. Early investors include Jeremy Grantham, Bill Gates and Volkswagen.
- Used EVs. Seattle-based startup Recurrent, which provides reports on battery life to help buyers of used electric vehicles, raised $3.5 million. The seed round was led by Wireframe Ventures.
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FMO invests $30 million to give India’s small businesses a boost. The Dutch development bank backed Bangalore-based small business lender Vistaar Finance, which supports underserved small businesses through 200 lending branches across India. FMO has been a Vistaar investor since 2013. The 10-year-old financial services firm is also backed by Elevar Equity, which provided Vistaar’s first institutional capital, and Omidyar Network. Lok Capital exited the company in 2017 (see, “Lok Capital: Blending commercial capital and smart subsidies for transformative impact”).
Spanish development bank launches $145 million fund for emerging market farmers. Compañia Española de Financiación del Desarrollo, or COFIDES, will invest in microfinance institutions, banks and agricultural cooperatives in Asia, Africa, Latin America and the Caribbean to on-lend to smallholder farmers. The Huruma Fund, to be managed by Madrid-based Gawa Capital, aims to reach 45,000 farmers.
- Blended finance. COFIDES launched the fund with just $1 million of its own capital. It raised $20 million from Spain’s international development cooperation agency AECID and $89 million from CaixaBank’s private clients. The E.U. kicked in $10 million of first-loss capital. Another $10 million will be used for technical assistance.
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Fifth Third Bank pledges $2.8 billion to accelerating racial equity. Banks have pledged billions this year in response to the racial justice movement (see, “Bank of America issues $2 billion ‘equality progress’ bond to advance racial equity”). The latest example: Cincinnati-based Fifth Third Bank’s $2.8 billion commitment to Black communities over three years. The capital includes $2.2 billion in consumer and commercial lending, $500 million in community development investments, $60 million in financial education and inclusion, and $40 million in philanthropy.
- Locavesting. Fifth Third Bank’s strategy includes a $100 million Neighborhood Fund to improve “social and environmental determinants” in Black neighborhoods. Earlier this year, it pledged $100 million to projects in Opportunity Zones across 10 states.
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Goodwell invests $1.5 million in Mozambican tilapia farm Chicoa. The Series A funding will help the aquaculture business expand its network of smallholder fish farmers, who raise and process frozen tilapia for markets across Southern Africa. Five-year-old Chicoa got early backing from Dutch aquaculture investor Aqua-Spark.
Agents of Impact: Follow the Talent
Lauren Burnhill joins Emerald Peak Private Equity as managing partner… Jarrett Barrios of California Community Foundation and Gabriella Morris of World Food Program USA join the Nathan Cummings Foundation’s board of trustees… UpMetrics is hiring a director of impact investing… OpenInvest is looking for a content marketing specialist in San Francisco.
Thank you for reading.
– Dec. 9, 2020