The Brief: How impact fund managers create value

The team at

ImpactAlpha

Greetings, Agents of Impact! In today’s Brief:

  • Driving alpha through impact
  • Cleaning up plant-based meat
  • Preventing chronic disease in India
  • Gender smart funds in Southeast Asia

Featured: Value Creation

After the investment and before the exit, how fund managers drive alpha through impact. Impact first, last, and in between. Private fund investments tend to attract the most attention – including at ImpactAlpha – when a deal is first closed, and again when an exit is achieved and returns are realized. But it is in the five to seven years between those events (in a typical 10-year fund) that dedicated asset managers can create value for companies and for their own investors by pulling one or more levers to increase positive social and environmental impact. “Where managers really work their magic is when they own the thing, when they can influence the thing,” says Tideline’s Ben Thornley, an author of New Frontiers in Value Creation,” produced in partnership with Impact Capital Managers. “That’s where impact DNA and the sources of impact value creation – expertise, data, commitment, intentionality – really come to the fore.”

  • Growth and transformation. The New Frontiers report features more than a dozen case studies of investors that have helped their portfolio companies scale their impact using one or more modes of influence, including market positioning, product development and access to capital (see, “Ranks of ‘impact alpha’ fund managers expand”). Stockholm-based private markets investor EQT Group, for example, helped a Swedish pest-control company transform its business around sustainable approaches and techniques. The pivot is helping “prove to the broader market that there is an efficacy of these nature-based solutions,” says EQT’s Katherine Kitson.
  • Financial materiality. “This report is helping support the evidence base that impact and financial performance can be collinear,” says Impact Capital Managers’ Diane Kulju. Through its Global Impact Fund, Nuveen Investment Management invested in Annapurna Finance, a microfinance provider in India serving some 2.5 million rural and female entrepreneurs. Nuveen helped Annapurna introduce loan products for rooftop solar, EV financing, energy storage and other green solutions, and develop a dedicated green financing unit. At the same time, Nuveen’s impact team tapped into physical climate risk data to enable Annapurna to assess the evolving climate vulnerability of its clients.
  • Tune in. Tideline and Impact Capital Managers will present the report and explore the levers for effective and financially-material impact value creation, with managers from Citi, EQT Group, HCAP Partners, Nuveen and Kellogg Foundation, in a webinar tomorrow, Feb. 8 (disclosure: Tideline is a sponsor of ImpactAlpha).
  • Keep reading,After the investment and before the exit, how fund managers drive alpha through impact,” by Amy Cortese and David Bank on ImpactAlpha.

Dealflow: Alt-Protein

Spain’s Heura raises €40 million for ‘clean’ plant-based meat. It’s been a tough couple years for companies trying to offset global meat consumption with alternatives made from plants. A handful of plant-based meat companies are breaking out of the fundraising and sales rut. Heura in Spain raised Series B financing from Netherlands-based vegan foods brand Upfield, Unovis Asset Management, Newtree Impact and the European Circular Bioeconomy Fund. The company makes plant-based alternatives to European preferences, such as chorizo and meatballs.

  • Healthier products. Heura is aiming to address a key consumer issue with plant-based meats: questionable nutritional value. “Poor quality nutrition associated with processed foods has been a major barrier” for adoption of such products, said Heura’s Marc Coloma. They’re also highly processed. Heura is developing products that don’t use additives, fillers and binding agents, such as its deli ham alternative made of soy and olive oil.
  • Choppy market. Last year’s plant-based meat casualties included US-based Hooray Foods and Nowadays, and Australian peer Food Nation. Shares of Beyond Meat are trading at just over $6 after a peak of $234 in 2019. European plant-based meat startups have released more positive news, including new funding for France’s Umiami and production growth for Happyvore. Shifting to a more sustainable food system is a key part of the European Green Deal. But green farm policies are politically fraught: farmers have staged protests in Spain, France, the Netherlands, Germany and other European countries.
  • Dig in.

India’s Aarogya Tech scores $1.8 million for chronic disease prevention and management. Non-communicable diseases like diabetes and cancer are responsible for more than 60% of deaths in India. Without interventions, they are projected to cost the country’s economy $3.6 trillion by 2030. Health tech startup Aarogya Tech offers digital health monitoring and management to support early disease detection or prevention. Its health service remotely monitors patients’ blood pressure, weight and blood oxygen levels and offers personalized health and disease management advice. The year-old company raised seed capital from angel investor Hasu Shah of US-based real estate company Hersha Hospitality Trust.

  • Home care. The Bangalore and US-based startup wants to change the way chronic diseases are predicted, diagnosed and managed. “21st century healthcare should be centered at home with advanced and cutting-edge technology,” say founders Prashant Trivedi and Lokendra Thaku. “Hospitals should be visited only for acute care.”
  • Share

Dealflow overflow. Investment news crossing our desks:

  • Mexico’s Techreo raised $3.4 million in bridge financing from Creation Investments Capital Management and G2 Momentum to expand financial services in Mexico, Bolivia, Peru, Colombia, Ecuador and for Latinos in the US. (Creation Investments)
  • Los Angeles-based ProducePay notched $38 million to streamline the US’s fresh foods supply chain and cut food waste. The round was led by agri-chemical giant Syngenta’s venture arm. (ProducePay)
  • Women-led Niremia Collective secured $22.5 million to invest in startups supporting mental health and wellness. (TechCrunch)
  • Watershed raised $100 million from Greenoaks, Kleiner Perkins, Sequoia Capital and others to help corporations and financial institutions reduce the environmental impact of their portfolios and supply chains. (Watershed)

Impact Voices: Gender Smart

Girls just want to have funds! In Singapore’s bustling financial hub, Rhea See leads She Loves Tech Asia Emerging Outliers Fund, an early-stage fund for women in technology. “Many still view investing in women as a niche, impact-only endeavor, and I want to shatter this stigma,” says See, who participated in the 2XI Asia-Pacific GP Sprint for women-led and gender-smart fund managers. Investing in women, she says, “is about unlocking untapped potential and driving technological advancement and profitable returns.” 2X Global runs a similar program for women-led fund managers in Africa. 

  • Growth market. Growing the number of women in investing is more than a matter of equity, say Sara Danzeo and Elena Mayer-Besting of the UN Economic and Social Commission for Asia and the Pacific. “It makes business sense, while emerging as a strategic necessity for the sustainable and holistic growth of the investment landscape,” they write in a guest post on ImpactAlpha. Highlighting the challenge: Women account for only 17% of decision-makers at venture investors headquartered in Southeast Asia.
  • Gender alpha. The roster of funds in the 2XI program include Manila-based ARQCapital, which provides private debt to small and medium-sized enterprises. From Vietnam, the Beacon Fund lends to female entrepreneurs running “moderate growth companies” in Indonesia, the Philippines and Vietnam. New Energy Nexus Ventures in Indonesia invests to de-risk early stage clean and climate tech. Fiji-based Matanataki Impact invests in “reef-positive businesses” in the Pacific.
  • Keep reading, “In the Asia-Pacific region, girls just want to have funds!” by Sara Danzeo and Elena Mayer-Besting on ImpactAlpha.

Agents of Impact: Follow the Talent

Equitable Facilities Fund names Elliott Nguyen, former director of charter growth and development at Texas Charter Schools Association, as vice president of development… Brian Wong, a second-year MBA student at Duke University, joins SJF Ventures as a venture fellow… Kahlil Williams, previously a partner at law firm Ballard Spahr, joins W.K. Kellogg Foundation as general counsel and corporate secretary.

As You Sow seeks a remote climate and energy program associate… The Columbia Center on Sustainable Investment is on the hunt for two program associates… Libra Foundation is looking for a new president… Arnold Ventures is hiring an impact investing executive vice president in New York… Also in New York, Pursuit seeks an impact investment associate… Rockefeller Foundation has an opening for a media relations summer associate… Generate Capital is recruiting a senior investment analyst in San Francisco. 

Camelback Ventures is accepting applications for its 15-week fellowship program for underserved social entrepreneurs… Harvard Innovation Labs selects 30 startups for its Climate Entrepreneurs Circle incubator program… The deadline to participate in the GIIN’s 2024 Global Impact Investor Survey is Friday, Feb. 16. 

Ten winners from the Elevate Prize Foundation will receive a combined $5 million in unrestricted grants. Winners include Abaas Mpindi of Media Challenge Initiative, which provides training and mentorship to young journalists in Africa; and Sam Bencheghib of Sungai Watch, which is tackling plastic pollution in Indonesia’s rivers. 

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

Thank you for your impact!

– Feb. 7, 2024