The Brief: Equitable homeownership, growing impact ventures in Africa, systemic investing post-affirmative action

The team at

ImpactAlpha

Greetings, Agents of Impact!

🤝 Connect with us. Conference season is in full swing. Look out for ImpactAlpha’sZuleyma Bebell today at the GSG Global Impact in Málaga and catch up with Zuleyma, David Bank and Jessica Pothering later this week at the GIIN’s Impact Forum in Copenhagen.

🎙️ Plugged In: Financing Black farmers and food entrepreneursOlivia Watkins co-founded Black Farmer Fund to reimagine US agricultural finance on terms favorable to Black farmers, caterers, restaurant and food-truck owners, composters, herbalists and other land stewards. Watkins will chat with host Sherrell Dorsey about scaling Black Farmer Fund’s model for flexible and responsive lending. Join Plugged In on LinkedIn Live, this Wednesday, Oct. 4, at 10am PT / 1pm ET / 6pm London. RSVP today.

Featured: Ownership Economy

How Dearfield Fund helps Black women buy homes to build wealth and health. Equitable homeownership is a key strategy for narrowing racial wealth gaps. Centering Black women is key to the strategy’s success. Denver-based Dearfield Fund for Black Wealth has deployed $5.7 million in down-payment assistance loans to help Black families build wealth through homeownership. Dearfield has sharpened its strategy to better serve Black women, who make up 60% of the fund’s 150 borrowers so far. “We know that there’s an economic case for investing in Black wealth creation,” says Dearfield’s Aisha Weeks. “There is also a case to invest in Black women so they have a safe physical and emotional space to rest in a world that often doesn’t allow Black women to rest and be at peace.”

  • Gender equity. Dearfield provided $40,000 to help Tisha Chapman, a single mother recovering from an abusive marriage, make a down payment on a three-bedroom townhouse in the Denver metro area. “Being able to come home and have that sense of safety and peace, and that this is mine and nobody can take it from me, that has really played a big part in my mental health,” Chapman says. Another borrower, Natalie Gentry, had moved apartments eight times over the past decade, largely because of rent increases. Gentry put a down payment on a one-bedroom house in Denver’s Whittier neighborhood, making her the first woman in her family to own property. “It feels incredibly empowering,” she says.
     
  • Race-specific. The Dearfield Fund adopted an explicitly race-specific solution because so many of the obstacles to homeownership are themselves race-based, from redlining to block busting. Such strategies are facing legal challenges, including the lawsuit filed this summer against Atlanta-based Fearless Fund, which provides capital for early-stage businesses led by Black women (see below). Under federal law, “special purpose credit programs” are permitted to expand responsible credit access to economically or socially disadvantaged consumers and businesses. “Aisha and I were losing a lot of sleep early on,” Santhosh Ramdoss of Gary Community Ventures, which incubated the Dearfield Fund, says of the legal challenges. “And then we realized that we should just stay the course and do the work.”
     
  • Keep reading, “How Dearfield Fund helps Black women buy homes to build wealth and health,” by Roodgally Senatus on ImpactAlpha. Catch up on all of ImpactAlpha’s coverage of the Ownership Economy.

Dealflow: Frontier and Growth Markets

With $58 million for African startups, Enza Capital will share profits with founders. Nairobi-based Enza Capital invests in tech-driven startups across Africa tackling challenges from climate change to mobility. The four-year old venture investor in seed-stage and growth rounds raised $58 million for its second fund. Enza’s portfolio includes Cloudline, a Cape Town-based maker of autonomous battery and solar-powered airships for cargo delivery; Lagos-based Autochek, which helps Africans get car financing and maintenance; and EarthAcre, a Nairobi firm that models ecosystems and helps landowners adopt regenerative practices. 

  • Profit-sharing. Enza launched a shared ownership program that cuts portfolio companies in on the firm’s returns. The Founder Partner program is about “building long term aligned and mutually beneficial partnerships above and beyond traditional venture capital structure,” said Enza’s Mike Mompi.
     
  • Share this.

Kua Ventures expands investments in East Africa’s social impact businesses. The Nairobi-based venture capital firm was launched in 2020 by the nonprofit endPoverty to help African startups build long-term resilience. Kua has clocked $1 million in investments in 20 enterprises. “We’ve gone through the pandemic, the election cycle, the depreciating Kenya shilling,” Kua’s Peter Fry told ImpactAlpha. “We continue to have the same focus of finding resilient companies that are positioned to grow,” and to take advantage of investment capital flowing to Africa. Half of Kua’s capital is deployed as revenue-based financing so that businesses aren’t stuck with fixed payments in the face of economic downturns.

  • Growth Capital. Many early-stage African enterprises lack expansion capital. Kua invests between $50,000 to $100,000 (KSh 5 million to 15 million) in the form of loans, convertible notes and revenue-based financing, to Kenyan ventures creating jobs and alleviating poverty. It plans to deploy $4 million in Kenya and $3 million in a neighboring country. Its portfolio includes digital training solutions provider Zydii, online grocery and delivery platform Soko Kijiji Groceries, pathology services provider The Pathology Network and other ventures in education, manufacturing, recycling, waste management and media.
     
  • More.

Dealflow overflow. Other deals crossing our desks:

  • BlueHub Capital has been awarded $65 million in New Markets Tax Credits for investments in manufacturing and community facilities in low-income areas in Boston. (Boston Business Journal)
     
  • Mumbai-based waste recycler ReCircle raised an undisclosed amount of pre-Series A funding from AcumenFlipkart Ventures, and 3i Partners(The Economic Times)
     
  • Tikehau Capital invested €120 million ($127 million) in Belgium-based biological pest control company Biobest. It is the first investment in Tikehau’s regenerative agriculture strategy. (Tikehau Capital)

Signals: Return on Inclusion

Investing for a post-affirmative action economy. Since the US Supreme Court decision in June barring affirmative action in college admissions, conservative activists have stepped up legal challenges to diversity, equity, and inclusion in the workplacethe militaryschools, and even investment firms. Over the weekend, an appeals court in Atlanta ordered venture capital firm Fearless Fund to halt grants for Black women business owners, overturning a district court judge’s refusal to block Fearless from enforcing the racial eligibility criteria. Racial inequity remains a systemic risk to the economy, Monique Aiken and William Burckart of The Investment Integration Project, Tynesia Boyea-Robinson of CapEQ, and Policy Link’s Mahlet Getachew argue in a guest post. Racial disparities have cost the economy around $16 trillion in recent decades. “Investors should view this lost growth opportunity as the economic imperative that it is and double down on investing equitably to support all participants in our economy,” the authors write.

  • Mitigating racial inequity risk. Investors can take action to mitigate racial inequity risk and increase economic resilience, the four authors say. PolicyLink’s Investor Blueprint for Racial Equity outlines steps investors can take, including investing in fund managers of color, considering racial equity throughout the investment lifecycle and being an active owner.
     
  • Policies and practices. Investing equitably is not about preferences for certain groups, say the guest authors, but ensuring processes and policies are fair and inclusive. “It’s not just the right thing to do, but it also strengthens long-term value creation.” Veris Wealth Partners, for example, developed a due diligence framework to identify fund managers that are intentional about racial equity throughout their policies and practices.
     
  • Keep reading, “Investing for a post-affirmative action economy,” by Monique Aiken, Tynesia Boyea-Robinson, William Burckart and Mahlet Getachew.

Agents of Impact: Follow the Talent

Don’t miss these upcoming ImpactAlpha partner events:

Ed Heaven of Montanaro Asset Management, Sonali Siriwardena of Simmons and Simmons and Dimple Mistry at Singapore’s sovereign wealth fund GIC join the UK Sustainable Investment and Finance Association… International Finance Corp.seeks an investment officer for the Middle East, Central Asia, Turkey, Afghanistan and Pakistan… Mission Investors Exchangeis hiring a director/senior director of program content… Mercy Corps Ventures Climate Lablaunches its Climate Tech Facility to provide grants of up to $100,000 to support innovative climate tech solutions.

👉 View (or post) impact investing jobs on ImpactAlpha’s new Career Hub.

Thank you for your impact!

– Oct. 2, 2023