The Brief | July 17, 2024

The Brief: How a dose of pragmatism can redeem tech’s optimism

ImpactAlpha
The team at

ImpactAlpha

Greetings, Agents of Impact!

In today’s Brief:

  • Seeding techno-pragmatism in Silicon Valley
  • Affordable housing in the Philippines
  • Gig workers in Mexico
  • Corporate taxes to finance a just transition

Optimist? Pessimist? How a dose of techno-pragmatism can make tech the good guys again. The selection of one-time venture capitalist JD Vance as the Republican vice presidential nominee set off a furious round of hot takes on tech’s state of play. How Silicon Valley may be breaking was answered Tuesday by the podcast endorsement of Donald Trump for president by present-day VCs Ben Horowitz and Marc Andreessen, following their brothers-in-anti-ESG-arms, Elon Musk and Bill Ackman. A permission structure has thus been established for the rising class of anti-woke contrarians, tax-averse billionaires, libertarian absolutists and self-satisfied meritocrats otherwise known as tech and finance bros (Musk’s and Andreessen’s original turn against ESG was largely around criticism of crypto’s power consumption). Andreessen and Horowitz cast their endorsement in the language of “techno-optimism,” which they laid out at length last year. The real world has exposed limitations to the premise that tech can, or will, solve all human problems, as well as exceptions to the notion that technology is inherently linked to progress and social benefit. “Widespread and durable progress won’t happen because a narrow group of people throw shiny technologies at deeply systemic problems,” Katy Knight of the Siegel Family Endowment writes in a guest post on ImpactAlpha. Instead, progress will come from “making space for shared imagination to design solutions that actually improve people’s lives.”

  • Abundance agenda. Techno-optimists can be surprisingly pessimistic. Andreessen’s manifesto casts transformative ambitions like the Sustainable Development Goals and stakeholder capitalism as part of a “mass demoralization” campaign. That puts the blame in the wrong place and also misses opportunities for the kind of distributed prosperity and virtuous cycles that tech once purported to champion. VCs looking for an abundance agenda can find it in the disruptive approaches of impact entrepreneurs and fund managers. That the public interest can drive value creation, Knight says, is shown by innovative venture funds such as ex/ante, Chloe Capital, Visible Hands, and Slauson & Co. and advisors such as Lucid Capitalism, Responsible Innovation Labs, and Worthmore. The “meritocracy” of the tech bros cuts out those closest to the source, not to mention women, minorities and outsiders with unique insights and solutions, she says. “It’s time to replace techno-optimism with a more balanced perspective: techno-pragmatism.”
  • Pragmatic ecosystem. “Creating technology has never been more approachable and understandable,” Knight says. She champions a new category of “pragmatist builders that live and breathe the problems they are trying to solve, and bend technology in ways that address them.” Organizations that pair developers with problem experts include Code the Dream Labs, which collaborates with farmworkers and clinical trial reformers. Te Hiku Media has worked with the Maori community in New Zealand on speech recognition software to help preserve the language (and their IP). Mozilla’s Data Futures Labs, #BlackTechFutures, the Center on Rural Innovation, and Fast Forward are experimenting with technology and data grounded in impact and human agency. The Siegel Family Endowment, created by David Siegel, co-founder of the hedge fund Two Sigma, had $460 million in assets in 2022. “As society’s risk capital, philanthropy can fuel visionary pilot technologies, drive the creation of alternative tech incubators and ecosystems, and provide the seed capital needed for promising models to grow,” Knight writes.
  • Keep reading, “Optimist? Pessimist? How a dose of techno-pragmatism can make tech the good guys again,” by Siegel Family Endowment’s Katy Knight on ImpactAlpha. 

Dealflow: Affordable Housing

Lhoopa scores $80 million in equity and debt to build affordable housing in the Philippines. With roughly 120 million people, the Philippines faces a severe housing shortage that’s projected to more than triple to 22 million units by 2040, as developers chase luxury buyers. Manila-based Lhoopa leverages its technology and network of housing contractors, brokers and sales agents across the Philippines to build and sell affordable units that cost between $8,500 and $34,200. Mortgages are as low as $54 a month. Lhoopa will use the Series B financing to scale green housing options beyond the cities where it has already built and sold more than 2,500 homes. 

Mexico’s OCN lands $86 million in debt and equity to expand gig-worker car rentals. Formerly known as One Car Now, the Mexico City-based startup provides middle and long-term car rentals to Mexico’s burgeoning economy of gig workers. It recently launched operations in southern Florida and plans to expand in the US and into Brazil. OCN’s rental contracts don’t require down payments, and include costs and fees for insurance, registration and maintenance. Great North Ventures led the Series A equity portion of ONC’s round. Caravela Capital and Collide Capital participated (disclosure: Collide Capital’s Aaron Samuels serves on ImpactAlpha’s board). New York’s i80 Group provided the debt financing.

  • Economic inclusion. Latin America has more than 51 million gig workers. “Providing an all-inclusive rental model for ride-share drivers is crucial for economic growth, as it empowers drivers to achieve financial stability and enhances mobility solutions in a rapidly expanding market,” said Ryan Weber of Great North Ventures.
  • Learn more.

Dealflow overflow. Investment news crossing our desks:

  • Off-grid solar provider d.light landed $176 million in securitized financing from African Frontier Capital backed by customer receivables in Kenya, Tanzania and Uganda. It’s the latest in a series of off-grid solar securitizations. (d.light)
  • Auxilo Finserve, a Mumbai-based higher education lender, raised $30 million from LeapFrog Investments to expand its student lending portfolio. (LeapFrog Investments)
  • Seven Starling, a provider of online mental health services for women, landed $10.9 million in a Series A round backed by Rhia Ventures’s RH Capital, Emerson Collective and Magnify Ventures. (Seven Starling)
  • Seattle-based LevelTen Energy, an online marketplace for clean energy projects, raised a $65 million growth-equity round from B Capital, Microsoft’s Climate Innovation Fund, Google and other investors. (LevelTen Energy)
  • French startup Syntetica raised €4.2 million ($4.6 million) in a seed round led by Sweden’s EQT Ventures to begin producing recycled nylon materials for fashion and automotive clients. (EU-Startups)

Signals: Climate Finance

How fixing the tax blind spot in ESG ratings could help finance a just transition. For more than a decade, environmental, social and governance, or ESG, ratings agencies have ranked companies on how they are addressing climate change, treating their employees and communities, and stewarding their operations. Missing: a spotlight on the actual taxes those multinational corporations pay. The billions of dollars of absent tax revenues from overseas profit shifting are getting new scrutiny as governments look to finance an equitable transition to a low-carbon economy. The payment of corporate taxes is a powerful indicator of how a company views its role in society and supports communities in which it operates and stakeholders it engages, law professors Danielle Chaim of Israel’s Bar-Ilan University and Gideon Parchomovsky of Hebrew University in Jerusalem argue in a recent paper. “The more corporations avoid paying taxes, the less capable the government is at promoting ESG goals.”

  • Tax leakage. US corporate tax payments make up only 6.5% of federal tax revenues – down from roughly one-third in the 1950s. The nation loses an estimated $80 billion in tax revenue each year from US-based multinationals that shift their profits out of the country, where the corporate rate is 21%, to low- and no-tax countries. That’s nearly equivalent, over a decade, to the estimated $1 trillion cost of the Inflation Reduction Act. Nearly 300 of America’s largest, consistently profitable corporations saw their average effective tax rate – the amount actually paid to the Treasury Department each year – plunge 16% after former President Trump’s 2017 tax-code overhaul. Profits surged 44%.
  • Call to action. Tax-avoiding corporations are not the only ones at fault, the legal scholars say. Ratings agencies do not include robust measurements of tax payments, if they include them at all. And large institutional investors and asset managers not only tolerate tax minimization, they actively encourage it. ESG funds, Chaim and Parchomovsky observe, tend to favor companies with aggressive tax strategies. Firms such as BlackRock and Vanguard have voted against shareholder proposals aimed at enhancing tax transparency at mega-profitable corporations like Amazon, Microsoft and Cisco. Ratings agencies like MCSI and Sustainalytics should make a company’s effective tax rate “a key consideration in ESG ratings,” the authors urge. Doing so would spur companies seeking strong ESG ratings to make their tax strategies more transparent and push more impact-minded investors into funds invested in companies that pay their fair, or at least fairer, shares. 

Agents of Impact: Follow the Talent

Ownership Works hires Danielle Boursiquot, previously with AP Realty Group, as an executive assistant for its client advisory services team… Donna Leuchten Nuccio returns to Reinvestment Fund as a senior director, following a stint at Broadstreet Impact Services… Mercy Corps Ventures adds Natalia Mondragón Segura, formerly with Latin America Partners, as a Latin America-focused investment associate.

The Diverse Investing Collective names Rhia Ventures’ Erika Seth Davies, Michael Cosack of ImpactWise, US SIF’s Maria Lettini and a dozen other finance executives to its advisory board… Draper Richards Kaplan Foundation is looking for an associate in Boston… GIC is hiring a sustainable investment strategy analyst in Singapore… MCE Social Capital is recruiting an investment analyst in Nairobi.

Impact Capital Partners is hiring two analysts in New York or Washington, DC… Twilio seeks a remote senior manager for its global impact fund… TED has an opening for an impact portfolio director… PolicyLink and CapEQ will host a webinar, “Civil rights audit standards – a new tool to guide the way forward,” on Thursday, July 25.

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

Thank you for your impact!

– July 17, 2024