Greetings, Agents of Impact!
Featured: Impact Voices
Today’s excerpts from “Creativity, Culture & Capital: Impact investing in the global creative economy” explore private and public investment strategies to meet the needs of creative entrepreneurs. The collection of essays was edited by Nesta, Fundación Compromiso and Upstart Co-Lab. Read earlier selections from cellist Yo-Yo Ma and Heva Fund’s George Gachara.
Aligned capital for creative entrepreneurs. Venture capital’s traditional one-size-fits-all approach is often at odds with the missions of creative entrepreneurs, putting them on the fast-track to growth and an exit through a sale or public offering – or failure. With a toolkit of alternative financing structures, Purpose Ventures has helped dozens of founders in the U.S., Europe and Latin America grow businesses while maintaining ownership and control. “The world needs creative leaders and solutions,” write Purpose Ventures’ Alexander Kühl and Camille Canon. “It’s our job to foster their creativity and preserve their impact through aligned investments.”
- Steward ownership. Ownership structures that represent workers, suppliers, customers, community allies and investors have been adopted by a handful of pioneering companies in the U.S., including OpenAi, Organically Grown Co. and Mozilla (see, “This is what stakeholder capitalism looks like”). Denmark alone has more than a thousand such companies, with many more across Europe. Such steward-owned businesses often have higher profit margins and lower volatility than traditional for-profit companies and appear to be more resilient to financial crises.
- Shared upside. Purpose helped finance San Francisco-based Creative Action Network, a community of artists and advocates driving political change. The self-liquidating “demand dividend” lets CAN share value with artists and nonprofits while providing investors with a risk-adjusted return. When the investment is repaid, write Kühl and Canon, “CAN will be a ‘self-owned’ company, able to reinvest its profits back into its purpose and its community of artists to further scale its impact.”
- Keep reading, “Aligned capital for creative entrepreneurs,” by Alexander Kühl and Camille Canon on ImpactAlpha.
Creative industries are driving economic opportunity in Atlanta. Georgia’s civic mobilization is part of a larger story of social and economic revival in the state. Atlanta’s economic development authority, Invest Atlanta, is providing financing and brokering partnerships to support and attract creative businesses and help them prosper as small businesses. “Atlanta has leaders that believe in creative industries and have been patient and supportive in the development of a more agile ecosystem of support for this sector,” writes Invest Atlanta’s Sheoyki Jones.
- Local toolkit. Invest Atlanta’s $1.3 million Creative Industries Loan Fund has financed 11 companies, including Deepr, a music app that spotlights the creators behind the music; Screen Lloyd, a women-led film and TV content producer; and Change A Man Media LLC, a media company focused on social issues. The Creative Industries Exchange helps entrepreneurs expand with one-week trips to international markets. The Creative Corporate Fellowship Program is a job-market portal. Georgia’s film, TV, music and other creative industries employ about 200,000 people and represent a combined $37 billion in revenue.
- Replicable model. Invest Atlanta listened to what creators needed and found ways to address those needs, Jones writes. “When we started, we had to rebuild the creative community’s trust in city government,” she says. “In order for these initiatives to be truly supportive, the creative community has to trust you.”
- Keep reading, “The creative industries: Driving economic opportunity in Atlanta,” by Sheoyki Jones on ImpactAlpha.
Dealflow: Follow the Money
Two Sigma Impact invests in workforce educator Penn Foster. Hedge fund Two Sigma launched its nine-figure impact investing initiative from its own balance sheet to prove the correlation between good jobs and business value. The firm’s first investment is in Penn Foster, which offers low-cost degrees and certificates in high-demand fields like healthcare, veterinary sciences and early childhood education. “A happy, engaged workforce is good for companies. That statement isn’t debatable,” Two Sigma Impact’s Warren Valdmanis told ImpactAlpha. Together with Boston-based private equity firm BayPine, Two Sigma took a controlling stake in Penn Foster to improve its data science capabilities and “future-proof” the company in the face of technology change and the pandemic, Valdmanis said. The deal is also the first for BayPine, an ESG-based investor focused on “digital transformation.” The two firms’ investment gives existing investor Bain Capital Double Impact an exit.
- Good jobs. Valdmanis led the 2018 investment in Penn Foster by Bain Capital‘s impact group, which he left last year. Two Sigma, a $58 billion hedge fund, spotted an opportunity to use its data-centric approach to build the case for the “S” factors in environmental, social and governance-based, or ESG, investing. The starting point: good jobs. Valdmanis said Two Sigma aims to understand “the levers that build better jobs, and how that drives long-term value for companies, so we can develop repeatable playbooks.” (See, “There’s a new impact sheriff in town: activist hedge funds“.)
- Skill gap. Penn Foster targets the underserved need for low-cost vocational training. The company started nearly 130 years ago to address a skills gap in coal mining and now offers low-cost, pay-as-you-go online skills training, certification and degree programs. “We don’t have enough electricians or plumbers or pharmacy and veterinary technicians, yet the whole education system is designed to get more people into college degree programs,” said Valdmanis. “Helping people get certified and skilled for middle income jobs is a big gap in the education landscape.”
- Read more.
U.S. buyers test sustainability strategies at Peter Pan Seafood. New buyers aim to turn around an iconic Alaska salmon processor that was a money-loser for its former Japanese owner. Alaska-based McKinley Capital Management and Los Angeles-based Renewable Resources Group, which closed the purchase on Dec. 31, are banking on vertical integration with Northwest Fish Co. to reposition Peter Pan’s salmon as a premium brand with value-added products such as filets and meal kits. Northwest’s Rodger May is also part of the new ownership group. The previous owner, Maruha Nichiro, one of the world’s largest seafood suppliers, had said soaring raw fish prices and falling production made a turnaround unlikely and took a $28 million loss on the sale. McKinley’s Rob Gillam said the new partners “want to show the world that Alaska offers world-class sustainable seafood investment opportunities that result in benefits to the state of Alaska, our fishing families and coastal communities, and investors.”
- Sustainable salmon. Alaska’s Bristol Bay is considered one of the world’s most sustainable fisheries. McKinley has been active in opposing the proposed Pebble gold and copper mine upstream from the bay. The Army Corps of Engineers in November rejected a permit for the mine.
- Blank check. Separately, Renewable Resources Group, with Jeff Skoll’s Capricorn Investment Group, this week filed to raise $250 million for a special purpose acquisition company, or SPAC, to acquire companies focused on agrifood, renewable energy, water and infrastructure. Capricorn is an investor in RRG’s latest fund; the two firms have co-invested in eight deals.
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Dealflow overflow. Some of the other investment news crossing our desks:
- Aledade snags $100 million to expand value-based healthcare. The Bethesda, Md.-based health tech company is helping primary care providers shift from the fee-for-service model to preventative care. Its Series D round was led by Meritech Capital, with participation from OMERS Growth Equity, Tiger Global Management and Menlo Park.
- Nuveen acquires clean energy infrastructure investor Glennmont Partners. The $1.1 trillion investment manager owned by TIAA will add London-based Glennmont Partners’ more than $2 billion in assets to its private infrastructure platform. Glennmont’s Joost Bergsma said the acquisition will help the firm “support the global decarbonization agenda and help lead the clean energy transition.”
- uLesson raises $7.5 million for online learning in Africa. The Nigerian edtech company offers smartphone-based lessons for lower-income learners. San Francisco-based Owl Ventures led the Series A financing to help uLesson expand to East and Southern Africa.
- OZE secures $700,000 to support small businesses in Nigeria. The Ghanaian fintech’s mobile app helps small businesses go digital and access credit online. The seed financing will help OZE enter the Nigerian market.
- Merchant Capital closes $22 million affordable housing tax credit fund. The private equity real estate fund, a subsidiary of Merchants Bank, plans to invest in seven affordable housing projects for low-income families in Indiana.
Signals: Ahead of the Curve
And that was just Day One of Biden’s climate agenda. It was the executive order heard ‘round the world. “Welcome back to the Paris Agreement!” tweeted French President Emmanuel Macron, although it will take 30 days for new U.S. President Joe Biden’s move to take effect. On the day of his inauguration, Biden kicked off his ambitious climate and racial justice agenda with a broad executive order directing federal agencies to address the impact of climate change on disadvantaged communities and to roll back harmful policies enacted under former President Donald Trump. Biden also revoked the permit for the Keystone XL pipeline, despite a last-ditch attempt by Canada’s TC Energy to salvage the project by vowing to invest in renewable energy and hire union workers. “Effective climate laws, as President Biden understands, will drive a host of benefits,” including technology innovation, lower-cost energy, economic competitiveness, and human and environmental health, said As You Sow’s Danielle Fugere.
- Arctic reprieve. Biden put a temporary moratorium on oil and gas leases in the Arctic National Wildlife Refuge while the Interior Department reviews this month’s hastily arranged auction, which drew no bids from major oil companies and raised a paltry $14 million (see, “What if they threw an Arctic oil auction and no one came?”). The six largest U.S. banks have said they will not finance Arctic drilling. Last week, Axis Capital Holdings became the first North American insurer to end coverage for oil and gas projects in the refuge.
- Carbon pricing. On the eve of Biden’s inauguration, the U.S. Chamber of Commerce signaled its support for a “market-based approach” to reducing greenhouse gas emissions. Markets for carbon credits, which companies can buy to offset their emissions, are heating up as companies anticipate stricter regulations. BP last year hiked its internal carbon price assumptions to $100 per ton by the end of the decade, up from $40 per ton.
- Get on board.
Agents of Impact: Follow the Talent
The Kresge Foundation taps Tosha Tabron, ex-Invest Detroit, as a social investment officer and promotes Joe Evans to portfolio director and a social investment officer… Arctaris Impact Investors is hiring an associate in Chestnut Hill, MA… The Boston Ujima Project has internships available for investment research and fund management in Boston.
Thank you for reading.
– Jan. 21, 2021