Greetings, Agents of Impact,
Situational awareness. The Uvalde, Texas, shooting is the year’s 212th mass shooting in the U.S. – and the 27th school shooting. “18 Children. 10 Black Shoppers. When is it enough?” tweeted Sonal Shah of The Asian American Foundation. “The United States needs a national referendum on gun policy,” urged John Kluge of The Refugee Investment Network. “We can’t get numb to this,” an emotional Warriors coach Steve Kerr said before last night’s playoff game. “I’m tired of the moments of silence. Enough!”
Featured: Risk, Adjusted
Risk off? Savvy investors go ‘impact on’ to stay on track in a volatile market. Speculators in crypto, high-growth venture capital, and meme and tech stocks are watching valuations in freefall. In contrast, investors in microfinance, affordable housing, community development and other sectors with stable businesses and real revenues are prepared to weather yet another downturn. “Uncorrelated returns” was an under-appreciated advantage of many impact sectors during the long bull market in stocks. As the S&P 500 hovers near bear-market territory, steady returns, however modest, look increasingly attractive. ImpactAlpha checked in with impact investors, including Founders First’s Kim Folsom, Ceniarth’s Greg Neichin and Capria Ventures’ Will Poole, to learn how they’re weathering the volatility.
- Lower volatility. “We underwrite for resilience and adaptability,” David Lynn of Mission Driven Finance tells ImpactAlpha. The San Diego-based lender has provided more than $34 million in flexible capital to local businesses and nonprofits based on community impact and quality of management, rather than credit score. “While these types of community investment portfolios don’t tend to have big hockey sticks, we do believe they tend to be lower volatility.”
- Underwriting essentials. Caught in the tech downdraft, so-called ESG funds have had a rough year. But small loans to small businesses with products tied to productive uses, such as food, clothing and other essential household items – rather than consumer trends and speculation – have proved reliable, says Courtland Walker of Developing World Markets, which provides debt and equity to microfinance institutions in emerging markets. The impact “is ultimately what makes this lending more stable.”
- Liquidity crunch. Impact and community investment can be a strong diversifier in a portfolio, says Beth Bafford of Calvert Impact Capital. The counterpoint, says Bafford, is that when portfolios are underperforming and dropping in value, many people “batten down the hatches and aren’t open to anything new/different/strange and flock toward more traditional ‘safe’ and more liquid securities.”
- Spotting winners. When the market is flooded with capital, it’s hard to pick winners and losers, says Daniel Block of Mercy Corps Ventures, which has backed more than 30 “inclusive” fintech, crypto and climate-resilience ventures. The market correction is aligning social responsibility with commercial success around “productive use” of loans, Block says. “It will start to become clear which models are actually built for success long-term.”
- Keep reading, “Risk off? Savvy investors go ‘impact on’ to stay on track in a volatile market,” by Dennis Price on ImpactAlpha.
- Next week’s Call: Fintech, crypto and financial inclusion in Africa. Join Olu Oyinsan of Nigeria-based Oui Capital, Nelly Chatue-Diop of Cameroon’s crypto-trading startup Ejara, Mercy Corps Ventures’ Scott Onder and other Agents to discuss the impact alpha in responsible financial inclusion on Call No. 43, Wednesday, June 1 at 8am PT / 11am ET / 6pm Nairobi. RSVP today.
Dealflow: Investing in Health
SwipeRx raises $27 million to digitalize pharmacies in Southeast Asia. Pharmacies are the initial point of contact with the health system in many underserved and low-income areas in Southeast Asia. Singapore-based SwipeRx (formerly mClinica) aims to facilitate the delivery of quality and affordable medicines to hundreds of millions of patients. SwipeRx’s Farouk Meralli said the company’s mobile app helps its network of 45,000 pharmacies “perform all of their daily tasks, from education to purchasing to inventory financing.”
- Digital disruption. Meralli said the funding “reaffirms our commitment to disrupt this deeply fragmented industry.” SwipeRx will expand in Indonesia, Vietnam, Malaysia, Thailand, Cambodia and the Philippines. The Series B round, led by early investor MDI Ventures, includes equity and debt capital from Johnson & Johnson Impact Ventures, the Gates Foundation and others. (J&J Impact Ventures sponsors ImpactAlpha’s coverage of Investing in Health.)
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a16z leads Flowcarbon’s $70 million round to improve voluntary carbon market transparency. Is carbon + crypto a hot combination or what? Look at the boldface names behind Flowcarbon, a New York-based startup that tokenizes certified carbon credits, mostly from nature-based project developers. WeWork chief Adam Neumann and his wife Rebekah are co-founders. Through its crypto fund, Andreessen Horowitz led a clutch of big-name venture investors that put up $32 million. General Catalyst, Samsung Next and Invesco also participated. The remaining funds were raised through – what else? – a token sale (for context, see, “Climate is a crypto play as action moves from TradFi to DeFi to ReFi“). Carbon credits are in demand from corporations with net-zero goals, but the voluntary market is fragmented and inefficient. Flowcarbon’s Dana Gibber told ImpactAlpha that the company’s blockchain will “facilitate a liquid, transparent, accessible market for carbon credits.”
- Nature-based. Buyers can hold onto Flowcarbon’s coins, called “Goddess Nature Tokens,” or redeem or retire them for offsets. The GNTs can also be sold or used for borrowing and lending. “We’re continually looking for ways to get upfront capital into the hands of project developers,” Gibber said. Flowcarbon is launching on Celo, the blockchain protocol developer that launched the Alliance for Prosperity to drive responsible and inclusive crypto applications (see, “African startups develop crypto tools for inclusive prosperity”). Celo Foundation is purchasing $10 million of the coins to offset its own emissions.
- Carbon accounting. Separately, Nomura invested $6 million in Allinfra for its “asset tokenization platform” for financing climate infrastructure… Perennial secured $18 million from Bloomberg, Microsoft Climate Innovation Fund, Temasek and SineWave Ventures to measure, verify and report soil carbon capture… And software startup Singularity Energy raised $4.5 million to account for the carbon emissions of electricity grids.
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SparkCharge secures $23 million for on-demand EV charging. The Black-led company has built a network of rapid electric vehicle charging stations in four U.S. cities. Customers order charging through a mobile app and get it delivered to their locations. Massachusetts-based SparkCharge is looking to expand its network to 20 U.S. cities and suburbs to deliver millions of miles of charge to EVs this year. “With the growth of the EV industry and the major gaps in charging access, we will be better able to scale our EV network regardless of the infrastructure in place,” said SparkCharge’s Josh Aviv. “The investments will allow our team to serve markets where no one else can to meet the needs of EV owners and fleets across the country.”
- Black green. Tale Venture Partners and Pendulum, investors in underrepresented founders and founders of color, led the Series A round. Revolution’s Rise of the Rest seed fund, the Mark Cuban Companies and Silicon Valley Bank invested alongside celebrities such as rapper Pusha-T.
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Dealflow overflow. Other investment news crossing our desks:
- A fund managed by Incofin sold its 20% equity stake in ACEP Burkina, a microfinance institution in Burkina Faso, to French impact investor SIDI.
- World Economic Forum’s UpLink secured a five-year, $15 million commitment from HCL Group to support founders with solutions for freshwater conservation and management.
- UrbanFootprint raised $25 million to help energy, finance and government institutions decide how to invest in infrastructure that will reduce climate impacts in vulnerable communities.
Agents of Impact: Follow the Talent
Sustainability lost a champion in Hazel Henderson, who “went virtual” this week at age 89… Nicole Martens, ex- of U.N. PRI, joins Old Mutual Investment Group as a senior stewardship professional… Seth Goldman called Coca-Cola’s move to discontinue Honest Tea “a gut punch to all the sweat, tears and incredible passion that went into building our beloved brand.”
A coalition of business leaders and organizations have formed the Business and Democracy Initiative with a mission of “protecting the integrity of our elections and rebuilding trust in democratic institutions”… BlocPower seeks a chief of project operations… Mission Driven Finance is hiring a Salesforce and technology administrator.
Thank you for your impact!
– May 25, 2022
