The Brief: Harlem Capital’s diverse entrepreneurs, Cornerstone Capital’s impact mutual fund, revenue-based finance in Europe, working capital for workforce re-entry



Greetings, Agents of Impact!

Double Feature: ImpactAlpha Originals

Harlem Capital raises $40 million to ‘change the face of entrepreneurship’. The New York-based venture firm closed a $40 million fund to invest in U.S. companies led by women and founders of color. The venture firm is the latest to seek an edge by backing entrepreneurs often overlooked by traditional venture capital. “Our thesis is that women and minority founders are undervalued,” Harlem’s Henri Pierre-Jacques told ImpactAlpha. “There’s alpha to make.” Early this year, private equity firm TPG made a non-controlling equity investment in Harlem Capital to provide institutional back-office credibility. Other limited partners include the State of Michigan Retirement Systems, Vanderbilt University and the Consumer Technology Association. W.K. Kellogg Foundation invested $3.5 million as part of its strategy to reduce bias in the financial system. “If they are introducing underrepresented people of color to corporations, to banking, to investment, for us that’s the win,” Kellogg Foundation’s Cynthia Muller told ImpactAlpha.

Managing partners Jarrid Tingle and Pierre-Jacques founded the firm as an angel syndicate three years ago. They say they were told, “There aren’t enough Black and Latino companies raising significant capital.” A search turned up more than 100 startups with Black and Latino founders that have raised $1 million or more – $2.7 billion in total – in software, e-commerce, media and entertainment, healthcare and other industries. “We don’t believe it’s a pipeline problem,” says Pierre-Jacques. The raft of new funds moving to seize “inclusion alpha” include Impact America Fund, Backstage Capital, Babel Ventures, and Unilever and Sundial’s New Voices Fund. Silicon Valley-based Portfolia recently launched Rising America Fund, led by African-American and Latina women partners, to focus on African-American, Latino, LGBTQ markets and entrepreneurs. Copenhagen-based Unconventional Ventures raised a micro-fund to make early investments in startups led by women, immigrants, LGBTQ founders and founders of color.

Keep reading, “Harlem Capital raises $40 million to ‘change the face of entrepreneurship’,” by Dennis Price on ImpactAlpha.

Cornerstone Capital seeks to prove active managers can deliver impact in public equities (podcast). With the portfolios of most investors heavily weighted toward public equities, investment advisors have struggled to find stock market strategies that deliver impact along with competitive returns. The strategies they do find often have high fees and high investment minimums, putting them out of reach of retail investors looking to invest in companies pursuing impact themes such as inclusive fintech, sustainable water and other environmental solutions. “When we looked around to find these solutions for our clients, it didn’t exist,” Cornerstone Capital Group’s Erika Karp says in an interview for ImpactAlpha’s Returns on Investment podcast. “Global thematic impact didn’t exist, so we decided to build it ourselves.”

Cornerstone’s Access Impact Fund is a Nasdaq-listed mutual fund that for a minimum $1,000 investment offers access to sub-advisors looking for thematic investments in small-, medium- and large-cap companies across geographies. As of Monday, the fund, which trades under the ticker CCIIX, had net assets of $4.9 million (Karp says her nephew was the fund’s first investor, investing his bar mitzvah gifts). Karp, formerly the head of global sector research at UBS investment bank, is taking a stand on hotly debated investment topics that go beyond impact investing. She says active management, which has fallen out of favor because of high fees and uneven performance, is key to intentional impact. As for public-equities investing, she says, “We need the pension funds. We need the endowments. We need the sovereigns. We need trillions. This is why you need the public equity markets, and have to find the managers who really get it.”

Keep reading, and listen in to, “Cornerstone Capital seeks to prove active managers can deliver impact in public equities (podcast),” on ImpactAlpha.

Dealflow: Follow the Money

Lightspeed Venture Partners backs Vinted’s ‘circular economy’ clothing site. Lithuania-based Vinted raised €128 million ($142 million) in its Series E round. Lead investor Lightspeed Venture Partners noted that a key reason for investing is the surge in second-hand clothing sales, spurred by consumers “increasingly driven by the need for sustainability” and affordable fashion.

Uncapped clinches £10 million to offer startups revenue-based financing. The London and Warsaw-based company offers startups up to £1 million ($1.3 million) in working capital for a flat fee. Repayment terms are flexible and tied to revenue streams. Global Founders Capital, White Star Capital, Seedcamp and multiple angel investors provided Uncapped with debt and equity funding.

StudentFinance.com raises €1.2 million to bring income-based student financing to Europe. The company helps post-secondary programs in Europe that teach in-demand tech skills develop “Income Share Agreements.” The tuition model, growing in popularity in the U.S., allows students to pay for their studies after they secure steady income.

First Step Staffing secures working capital to help people re-entering the workforce. The non-profit offers temporary work assignments to the homeless, military veterans, and previously incarcerated individuals as a pathway to long-term work. Investors Atlanta Emerging Markets, The Reinvestment Fund and Access to Capital for Entrepreneurs provided a $3 million loan to support operations.

Signals: Ahead of the Curve

Labor and business leaders tell Trump: ‘Join us in staying in’ the Paris climate agreement. As the COP25 global climate conference kicks off in Madrid, more than 70 CEOs, along with the AFL-CIO, declared their support for the Paris climate agreement. “We know that driving progress on addressing climate change is what’s best for the economic health, jobs, and competitiveness of our companies and our country,” they wrote. The CEOs of IBM, Citigroup, Cargill, Schneider Electric, Shell and other signatories urged the U.S.: “Join us in staying in.”

Agents of Impact: Follow the Talent

Bank of England Governor Mark Carney accepts an assignment as U.N. special envoy for climate action and finance… David Bohigian, former acting CEO of the Overseas Private Investment Corp, departs its successor organization, the U.S. International Development Finance Corp… Planet FWD’s Julia Collins joins Cleo Capital as entrepreneur-in-residence.

Thank you for reading. 

– Dec. 3, 2019

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