The Brief | October 27, 2020

The Brief: Impact America’s disruption, India’s small merchants, fintech for community finance, market transition from the oil industry

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Greetings, Agents of Impact! 

Featured: ImpactAlpha Original

Impact America’s $55 million second fund is hunting for unicorns in the disruption of systemic racism. Kesha Cash is looking for technologies that address one of the biggest market inefficiencies of our time: systemic racism. Impact America Fund’s thesis: Solutions to structural racism represent multi-billion dollar investment opportunities. Cash, the fund’s sole general partner, raised $55 million and attracted more than 65 limited partners to her second fund, including the MacArthur, Ford, Kellogg, Surdna and California Wellness foundations. Wealth managers betting on Cash include Cambridge Associates, Veris Wealth Partners, Caprock, Trillium Impact Partners and Monticello Associates. Next-generation market leaders are disrupting racism “by deploying technology where an injustice intersects with a multibillion-dollar market opportunity,” Cash and team wrote in an email. “We’re building toward a future where every person of color in the U.S. can participate in the economy fully and on their own terms.”

The dialogue around racial justice in financial markets has put a spotlight on investment managers that can deliver. Impact America companies “locate their opportunities within the biggest systemic challenges,” say Cash and team. Impact America’s best-known portfolio company is Mayvenn, which helps boost bookings and income for hair stylists. Other early investments from the second fund include SMBX, a marketplace helping retail bond investors back local small businesses, and caregiver upskilling startup CareAcademy. In June, the fund notched its first exit when Coupa acquired ConnXus, which helps corporations diversify their supply chains. Nine of the 11 companies in the new fund’s portfolio so far are led by founders of color; eight are Black-led. Impact America doesn’t explicitly invest in diverse founders. “We search for founding teams who are familiar with those problems — and joys! — in the daily lives of low- and moderate-income communities of color.”

Keep reading, “Impact America’s $55 million second fund is hunting for unicorns in the disruption of systemic racism,” by Dennis Price on ImpactAlpha.

Dealflow: Follow the Money

Dukaan raises $6 million to help India’s small merchants launch mobile shops. Tech solutions that help small businesses make the transition to e-commerce and online sales are booming in the COVID disruption. Mumbai-based Dukaan, launched this year, says it has already helped 2.7 million merchants and business owners launch shops through social media channels like Whatsapp and Instagram. “Small businesses are turning to technology faster than ever to survive the pandemic,” said Tarun Davda of Matrix India, which co-led Dukaan’s funding round with Lightspeed India.

  • Small business tech. Indonesia’s SIRCLO raised $6 million in September to help small businesses set up and manage online sales from large e-commerce platforms. Catalyst Fund is building a digital commerce accelerator program for startups offering similar solutions in Ghana. 
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Soros Economic Development Fund joins anchor investors in Illumen Capital. The impact investing arm of Open Society Foundations committed $5 million to the impact fund-of-funds, joining Ford Foundation, W.K. Kellogg Foundation, Deutsche Bank and other investors (see “Illumen Capital’s $85 million fund is combating fund manager biases to drive impact and alpha). Illumen Capital, which has raised $87.9 million, seeks impact and returns by training fund managers to reduce implicit racial and gender bias.

StreetShares secures $10 million for small-business fintech. The Reston, Va.-based startup makes digital underwriting and lending software to help community banks, minority depository institutions and community development financial institutions accelerate loans to small businesses. Motley Fool Ventures and Ally Ventures backed the year-old company. 

Signals: Ahead of the Curve

Economics trump politics as the smart money bets big on clean electrification. Joe Biden need not be defensive about his accidentally honest statement at last week’s debate, “I would transition from the oil industry, yes.” U.S. political campaigns at best represent a lagging indicator. Financial markets and investors already have voted to accelerate the transition away from oil and gas and toward solar, wind and batteries. 

  • Hunting for greentech at scale. From private equity to the SPAC frenzy, institutional capital is going long on cleaner tech and renewable energy. So far in 2020, global investors have poured $4.7 billion into the battery storage, smart grid, and energy efficiency sectors – almost double the level of investment of this time last year. A dozen U.S. companies making electric vehicles, batteries and charging infrastructure, like ChargePoint, are projected to bring in about $6.5 billion from public market investors via special purpose acquisition companies, or SPACs. 
  • Distributed, digitized, decarbonized. The electrical infrastructure rebuild that is now getting underway recalls the telecom buildout of the mid to late-1990s, when aging grids were updated into distributed, two-way networks – and made and lost massive amounts of capital (listen in to ImpactAlpha’s podcast, “Shutdown accelerates shift to digitized, decentralized, decarbonized electricity). In a new handbook, “Rewiring America,” Saul Griffith outlines the need for, and feasibility of, “a massive war-time mobilization effort to transform the fossil fuel economy into a fully electrified one,” powered by renewable energy. Solar and wind already are cheaper to develop than fossil fuels in most regions. Solar offers “some of the lowest-cost electricity ever seen,” says the International Energy Agency.
  • Underwater. In the battleground state of Pennsylvania, Biden could point out that the state’s 74,000 clean-energy jobs are more than triple its 23,000 petroleum-related jobs, according to The Washington Post. In Texas, cleantech firms are hiring laid-off oil and gas workers. It’s not Biden’s policies driving the transition. At under $40 a barrel, oil prices are below the breakeven prices for most new wells, and barely above the operating costs for existing wells. Banks are placing restrictions on fossil fuel funding, as they’ve already done with coal. “Momentum is building against financing oil and gas projects,” says the Institute for Energy Economics’ Tim Buckley. At least 50 global financial institutions have restricted financing of oil sands and/or Arctic drilling projects, including HSBC, Banco Santander, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Citigroup, Wells Fargo and Morgan Stanley.
  • Voter mandate. The compelling economics – along with wildfires, flooding and other extreme weather events – are driving a shift in U.S. public opinion. A recent Morning Consult/Politico poll found 57% support for a shift from oil to renewables, versus 28% in opposition. In a recent Pew poll, nearly two-thirds said the government was not doing enough to address climate change; 79% said the government should prioritize alternative energy development. Biden’s climate plan “would entail one of the most radical infrastructure overhauls in U.S. history” by expanding onshore wind and utility-scale solar seven-fold, says Wood MacKenzie’s Ed Crooks. A Trump win would dash hopes of decarbonizing the power sector before 2050. 
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Agents of Impact: Follow the Talent

BlackRock is hiring a vice president of corporate sustainability in New York… Yunus Social Business is looking for a director of partnerships and investor relations in Berlin… Rockefeller Philanthropy Advisors and Toniic are talking frameworks and tools for asset owners with Cornerstone Capital’s Erika Karp, Eric Stephenson of Align Impact, Jennifer McFarlane, Karim Harji of Oxford Impact Measurement Programme and Nia Impact Capital’s Kristin Hull, tomorrow, Oct. 28… LISC Strategic Investments will discuss investing in Black financial institutions with Shannon Alwyn of Netflix, Allison Rossi of Square, Kim Saunders of the National Bankers Association, and LISC’s Maurice Jones and George Ashton, Thursday, Oct. 29.

Thank you for reading.

–Oct. 27, 2020