Greetings, Agents of Impact!
Featured: Inclusive Economy
Flexible financing can help diverse founders maintain gains in a volatile economy. Black and diverse-owned businesses have made gains in recent years, buoyed by a strong recovery and an outpouring of support after the murder of George Floyd. Volatile geopolitics and rising inflation and interest rates threaten to roll back those advances. “We know that diverse founders will be exposed to greater risk than other business owners,“ Kim Folsom of Founders First Capital Partners writes in a guest post. Rather than pull back, she writes, “investors should bet on these business owners to succeed and help elevate the communities in which they work, live and lead.”
- Revenue-based funding. Founders First deploys revenue-based finance, a form of non-dilutive capital that allows businesses to pay back more when revenues are up and less when sales are down. The firm’s portfolio companies that received revenue-based funding saw a 65% increase in revenues in 2021. They also created 417 jobs, more than half at premium wages, and added revenue streams. “Founders retain equity and investors can count on a reliable return,” Folsom says, “exactly the type of stability that both parties seek during volatile economic times.”
- Keep reading, “Flexible financing can help diverse founders maintain gains in a volatile economy,” by Kim Folsom on ImpactAlpha.
From wage earners to asset owners: A policy agenda for employee ownership. Baby Boomer business owners are ready to sell. Often the best buyers are their employees. But few sellers can afford to extend the five to 10-year notes required to finance such transactions. Federal loan guarantees for Small Business Association-vetted funds could mobilize private capital for employee buyouts, Ownership America’s Jack Moriarty argues in a guest post. “Impact investors looking for strategies to build a more inclusive and dynamic American capitalism,” he writes, “should support public policies designed to accelerate the investment potential of employee ownership.”
- Building wealth. The more than 6,000 employee-owned companies in the U.S. are more productive, grow faster and are much less likely to lay off workers during an economic downturn. The average employee-owner has more than double the retirement assets of a conventional worker.
- Policy support. Moriarty called for adjustments to Opportunity Zone rules to encourage employee ownership strategies. Human capital management disclosure rules under revision at the Securities and Exchange Commission could require data on employee ownership (for background, see “Agents of Impact eye corporate disclosure rules on climate and human capital”). And businesses that qualify as minority or woman-owned should be able to keep that status after a sale to employees, Moriarty says.
- Keep reading, “From wage earners to asset owners: A policy agenda for employee ownership,” by Jack Moriarty. Catch up on policy developments at ImpactAlpha’s Policy Corner, sponsored by the U.S. Impact Investing Alliance.
Dealflow: Gender Alpha
Womvest and Secha Capital offer gender incentives to small businesses in South Africa. South Africa-based Womvest launched last year to connect women entrepreneurs and investors for mutual support. The network of more than 700 women has created a pilot fund with investment firm Secha Capital to provide short-term debt for businesses in Secha’s portfolio. Companies that achieve gender-related targets will get a rebate at the end of their loan – an example of the growing use of impact incentives. “This facility allows us to start channeling flows of capital to women entrepreneurs,” Womvest’s Maya Burney told ImpactAlpha. “And we’re making sure that capital is competitive from a returns perspective while encouraging positive behaviors and incentivizing impact.”
- Women supporting women. The new investment arm, Womvest Ventures, has raised several million rand (more than $100,000) from the Womvest network. The capital will support companies like Rush Nutrition, a woman-led health food company in need of inventory financing, and IG3N, a lithium battery manufacturer, which needs working capital to backstop its supply chain. The companies commit to creating new jobs or training and mentoring opportunities for women. Burney said Womvest wants to replicate the facility with other partners and bring in institutional investors “so we can provide flexible, gender-focused working capital on a broader scale.”
- Check it out.
Dolma Impact Fund raises over $50 million for sustainable investments in Nepal. Dolma Fund Management, which is looking to raise up to $75 million for its second fund, received commitments from FMO, Swedfund, the International Finance Corp. and the U.S. International Development Finance Corp. The fund will use a gender lens for investments in renewable energy, healthcare and technology companies. Dolma’s first fund, launched in 2014, raised $36.6 million.
- Growth markets. Dolma’s second fund has backed logistics platform Upaya City Cargo. Investments in a food delivery startup and a specialty hospital are near closing. Dolma plans to bring the companies “to international scale and quality,” said Dolma’s Tim Gocher.
Clean Crop Technologies raises $6 million for food safety and reduced waste. Mycotoxins, molds and pathogens are responsible for approximately 500 million tons of wasted food. The food waste represents nearly $250 billion in losses and emits about 3% of global greenhouse gases. Holyoke, Mass.-based Clean Crop uses “high voltage catalyst technology” to create ionized gases that remove molds and toxins from seeds, nuts, fruits and vegetables. Clean Crop says the process is safe and extends foods’ shelf life.
- Clean tech. Clean Crop was a MassChallenge finalist in 2019. Prime Impact Fund led the company’s $3 million seed round in 2020. The new Series A financing was led by MassMutual Catalyst Fund, ReGen Ventures and Trailhead Capital.
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Dealflow overflow. Other investment news crossing our desks:
- Bangalore-based Money View scores $75 million to increase access to credit for borrowers overlooked by traditional banks and lenders in India.
- Protenga raises $2 million to convert waste into protein for animal feed and fertilizer for farmers in Southeast Asia.
- Nigerian neobank Yep! secures $1.5 million in pre-seed financing to bank “offline” rural Nigerians, small businesses and merchants
Agents of Impact: Follow the Talent
The Reinvestment Fund promotes Cheila Fernandez to chief operating officer and Sara Vernon Sterman to chief program officer… The Center for Popular Democracy has openings for a co-director for justice transformation and a deputy director for justice partnership… American Forests is looking for a forest carbon analyst in Washington, D.C. or Baltimore… Sunwealth seeks a project development associate in Cambridge, Mass.
Acumen West Africa is hiring a senior portfolio associate in Lagos… MSCI seeks an ESG corporate governance researcher in Toronto… Autodesk Foundation is hiring a portfolio associate in San Francisco or Boston… Applications are open for Elemental Excelerator’s 11th cohort of climate tech deployment startups.
Thank you for your impact.
– Mar. 10, 2022