The Brief | December 10, 2019

The Brief: Inclusive capital, closing paycheck gaps, electric-vehicle retrofits, Portland startups, aggregating smallholder harvests in Kenya

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Greetings, Agents of Impact!

Signals: Ahead of the Curve

Inclusive capital means more flexible terms and more diverse founders. The venture capital model has fostered a culture of growth at any cost – and of founder homogeneity. Pitchbook reports venture capital investment in female-founded startups reached an all-time high in 2019… 2.8% of invested capital. Enough investors are offering alternatives to the venture capital model that a trade group is forming. At Art Basel last weekend, Nathalie Molina Niño of O³ announced Builder Capitalist, a trade association for investors using revenue-based finance, holding companies and other structures “in service to the success and health” of companies. Joining O³ on the roster are BlueIO and Franklin Heritage, a holding company focused on tech and manufacturing. Molina Niño spoke about the association at the Inclusive Capital Summit, hosted at the Miami art festival by Village Capital and UBS. The two firms are developing a directory of investors using such alternative and inclusive structures, built on Village Capital’s Abaca platform. San Diego-based Founders First, which last month closed $100 million in debt financing from Community Investment Management, is among the raft of funds offering revenue-based financing for companies with recurring revenues (see, “As unicorns stumble, investors warm to revenue-based financing for ‘zebras’ and ‘Clydesdales’”).

  • Underestimated founders. Investors in attendance included Backstage CapitalImpact America Fund, Lightship Capital and Next Wave ImpactHarlem Capital’s $40 million fund closing last week, and another $42.5 million for Plexo Capital, signal a growing awareness that women and minority founders are undervalued. 
  • Capital innovation. Kauffman Foundation will invest next month in three fund managers selected for its Capital Access Lab, a $3 million pool of capital for funds deploying revenue-based investing, performance-based equity, and employee stock ownership and other new models for founder ownership and investor liquidity. Omidyar Network, Kauffman and Libra Foundation have backed Zebras Unite, the network of startup founders that “balance profit and purpose, champion democracy, and put a premium on sharing power and resources.”
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Sponsored by Tideline: Integrity through Verification

A baseline for best practice in impact investing. To assess the impact management system of LeapFrog InvestmentsTideline reviewed the firm’s investment policies, tools, memoranda, data inputs and impact performance reporting. Tideline concluded that LeapFrog had an advanced level of alignment with the International Finance Corp.’s Operating Principles for Impact Management. Tideline also rated KKR Global Impact last spring, a full year before the IFC’s assessment deadline. “We asked Tideline to conduct an informal review of our impact management system to see how we stack up against the IFC principles,” said KKR’s Ken Mehlman. “We recognize that best practices in impact management are a moving target as we all learn collectively.” The IFC principles require independent verification and annual disclosure. Tideline’s purpose-built methodology assesses firms’ impact management systems for compliance, quality and depth, and emphasizes the value of learning.

Dealflow: Follow the Money

Hastee secures £208 million to bridge U.K. workers’ wage gap. British workers struggle with minimal savings and mounting debt, much like Americans and many others. Adding to the pressure: monthly rather than bi-weekly paychecks. “They’re basically offering interest-free credit to their employers,” for 30 days at a time, Hastee’s James Herbert tells ImpactAlpha. The U.K.-based fintech startup is among a handful of companies helping workers tap unpaid wages as they earn them. The company partners with small and large employers to front cash to their workers and recoup it through the employers’ payroll. Umbra Capital and IDC Ventures are backing the company’s growth with £8 million ($10.5 million) in equity and £200 million ($263 million) in debt. 

  • How it works. Employees can withdraw up to £100 in wages for free. After that, they pay a flat 2.5% per transaction. “It just increases the frequency of pay,” explains Herbert. “There’s no interest or chance you’ll miss repayment.” Most of Hastee’s app users are in the “low-paid and variable” workforce, who use Hastee to cover emergency bills and travel costs. Herbert says such access boosts productivity. “Employees are actually doing more work than they were before, especially in the gig workforce,” he says. “They’re earning more as well.” 
  • Dealflow. Also in the U.K., Wagestream raised £40 million for a similar concept. Salary Finance, which is making a push into the U.S, raised $33 million this year to help workers avoid payday lenders. Savings-focused fintech company Even also offers earned-wages payments. 
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Lightening Systems secures $41 million to help commercial vehicles go electric. The Colorado-based company makes electric powertrains that can be retrofitted to heavy, non-electric vehicles. Oil giant BP’s venture arm backed the company alongside Cupola Infrastructure Income Fund.

1859 Ventures launches $5 million fund for Portland’s startups. The new investment firm wants to usher more early-stage capital into a startup ecosystem often overshadowed by the San Francisco Bay Area and Seattle.

Trading platform for small farmers Farmshine scores $250,000. The Kenyan company helps farmers aggregate harvests and sell them to large buyers. The company claims farmers can secure more transparent and beneficial trading terms than they could independently. Impact investor Gray Matters Capitalinvested through its gender-focused coLABS initiative.

Agents of Impact: Follow the Talent

Community Preservation Corporation, a New York community development financial institution, earned a AA- rating from S&P Global and is planning a public debt offering of “sustainability bonds” next month… Diana Kapp, author of Girls Who Run the World, is the first guest on Line of Sight, a new podcast from Santa Clara University’s Miller Center for Social Entrepreneurship, hosted by Thane Kreiner and Don Heider… Quona Capitalseeks a platform and cross-border investment associate in Washington D.C… Net Impact is hiring a senior marketing manager, a senior finance associate, and a people operations associate in the Bay Area… Design Impact is looking for a researcher in Cincinnati.

Thank you for reading. 

– Dec. 10, 2019