Greetings, Agents of Impact!
Featured: Institutional Shift
Charting the flow of capital through dairy waste, SPACs and the end of externalities (podcast). Institutional investors took awhile “to get comfortable with the fact that we were going to process manure and urine and create something of institutional value,” Equilibrium Capital’s Dave Chen says in the latest installment in ImpactAlpha’s podcast series, Institutional Shift. Pension funds and others were slow “to wrap their heads around the fact that shit has value.” Institutional investors now have their heads well wrapped. In February, Portland-based Equilibrium sold a dairy manure-to-renewable natural gas, or RNG, facility in Oregon to Resilient Infrastructure Group, which is part of $109 billion Swiss private equity firm Partners Group. To meet regulatory mandates, gas utilities, as well as oil and gas companies, “are buying as much dairy RNG as they can possibly get,” Chen said.
Such infrastructure solutions for climate change and climate resilience are capital-intensive, which made them a poor fit for venture capital investors more comfortable with capital-light software and apps. But they’re a good fit for special-purpose acquisition companies, or SPACs. Equilibrium is one of the largest owners of high-tech greenhouses and an investor in AppHarvest, which grows tomatoes and other produce in a 2.6-million square foot greenhouse in Morehead, Ky. AppHarvest’s shares started trading in February on the Nasdaq stock market after it went public through an acquisition by a SPAC. “There’s a magic point in the growth-phase of a sector when he who has access to a capital structure, and the capital itself, stands a better chance of surviving and winning than those that don’t have access to capital,” Chen says. Even in high-growth sustainability sectors, not every company is going to make it, of course. But just like in the dot-com and telecom booms and busts of the 1990s, the innovation, and the infrastructure, will survive. “The lesson there to be learned is that the underlying trendlines and the underlying momentums were not wrong.”
Read on and listen to, “Charting the flow of capital through dairy waste, SPACs and the end of externalities,” with Dave Chen and David Bank.
Dealflow: Follow the Money
South Africa’s Quro Medical raises $1.1 million for home healthcare. More than 80% of South Africa’s population, particularly the Black urban and rural poor, depend on the country’s underfunded and understaffed public health system. Johannesburg-based Quro Medical is working to make affordable care at home an alternative to hospital stays for public insurance holders. Its services include video consultations, vital-sign monitoring and IV treatment for patients who would otherwise seek hospital admission, and home nursing for high-risk patients. Nairobi-based seed-stage investor Enza Capital and South Africa-based Mohau Equity Partners backed the round.
- Pandemic disruption. Public healthcare systems throughout Africa have faced dire shortages of beds, staffing and supplies through the COVID-19 pandemic. The healthcare sector “desperately needs digital solutions to ease many of the problems experienced in it,” said Quro’s Zikho Pali.
- Check it out.
Founders First’s Kitty Fund makes micro-investments in “mompreneurs.” The pandemic has been challenging for many small business owners, but mothers have faced particular burdens as childcare routines have been upended. The Kitty Fund will make micro-grants to 50 small businesses run by moms. Founders First’s Kim Folsom launched the fund last year after the death of her mother, who was known as Kitty (see, “Agent of Impact, Kim Folsom“). The investments are a way to “to pay forward the same support” she got from her mom, she says, and “to celebrate business-owner moms for the power and greatness they display every day.”
- Doubling down. This year’s grants will double from $250 to $500, thanks to matching funds from Barbara Clarke of The Impact Seat. Applications are open; winners will be announced in time for Mother’s Day. Last month, Folsom raised $9 million to expand Founders First (see, “Founders First scores $9 million to deploy revenue-based finance to diverse founders”).
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IFC backs FHipo to help Mexican families secure financing for affordable housing. Green projects and e-mortgages could help tackle Mexico’s severe affordable housing shortage, create jobs and accelerate economic recovery, according to International Finance Corp. IFC is lending approximately $130 million to Fideicomiso Hipotecario, or FHipo, a real estate investment trust that allows Mexicans to invest in residential mortgage portfolios. The loan will help FHipo provide financing for affordable housing to low and middle-income Mexican families, says FHipo’s Daniel Braatz. The firm will issue a green bond and originate loans for sustainable housing. Read more.
Dealflow overflow. Other investment news crossing our desks:
- India’s Samunnati, an agtech venture that links farmers to financing and services, acquires peer startup Kamatan to drive expansion across the country.
- Wells Fargo is making equity investments in five Black-owned minority depository institutions as part of a $50 million commitment to advance economic growth in Black communities.
- San Francisco’s SHYFT Power Solutions raises $3.1 million to help deliver affordable, clean energy to households and businesses in Nigeria.
- Agrifood investor PeakBridge and EIT Food are launching a €30 million agrifood tech fund to seed European startups.
- Lever VC closes $46 million for its first fund to invest in alternative protein ventures worldwide.
Signals: Ahead of the Curve
Cascade of climate-tech funds take aim at $10 trillion energy transition opportunity. Sign of the times: A clean energy venture firm launching in the heart of Texas’ oil patch. Houston-based Energy Transition Ventures, seeking to raise $75 million, cites the dramatically falling costs of renewable energy, which have made it cheaper to build new clean energy than to operate existing fossil fuel plants. At least 500 multi-billion dollar energy companies globally, and a big chunk of global GDP, “are going to get disrupted in the energy transition,” said ETV’s Neal Dikeman, an oil industry transplant. The contours of the massive opportunity created by the energy transition are coming into view. “I look at this as one of the greatest investment opportunities over our lifetimes,” BlackRock’s Larry Fink said this week to launch Decarbonization Partners (see, “Singapore’s Temasek and BlackRock team up as Decarbonization Partners). BlackRock, which also raised a $4.8 billion global renewable energy fund, sees a $10 trillion investment opportunity in the transition to a net-zero economy.
- Clean trillion. An estimated $1.6 trillion to $3.8 trillion is needed each year in low-carbon energy and other climate-smart infrastructure to stay within the global warming goals. Such spending by public and private players peaked in 2017 at $612 billion globally – and has been flat or declining ever since. Multi-trillion dollar green COVID recovery packages in the U.S. and Europe, and ambitious emissions reduction targets ahead of the COP26 global climate summit in November, could finally break the logjam.
- Billion-dollar babies. Breakthrough Energy Ventures, Energy Impact Partners, Amazon, Microsoft and Generate Capital each have launched funds of $1 billion or more aimed at accelerating the transition to a low-carbon future. Other signs of the surge: Renewable energy and storage companies raised a record $20 billion in public markets in 2020; and electric vehicle makers raised nearly $28 billion, according to BloombergNEF. Some $732 billion in sustainable debt was issued. Energy Transition Ventures’ more modest $75 million fund will invest in early-stage startups. GS Futures, the corporate venture capital arm of Korea’s GS Group, backed the fund’s first close.
- Read on.
Agents of Impact: Follow the Talent
ThomasLloyd hires Alan Burnett, ex- of Manulife Asset Management, as a director overseeing wholesale clients in the U.K. and Ireland… Nneka Uzoh, ex- of Elemental Excelerator and founder of Greentech Noir, joins Aligned Climate Capital as senior vice president. Aligned Climate Capital is hiring an associate in L.A., New York or Washington, D.C… CrossBoundary is looking for a head of domestic advisory in New York or Washington, D.C.
New Island Capital Management is recruiting a vice president of real estate in San Francisco… SoftBank is hiring an analyst or associate for its $100 million Miami initiative… Climate Policy Initiative is looking for a manager of climate finance in New Delhi… The Libra Foundation seeks a knowledge and grants manager in San Francisco… New Ventures is hiring a venture capital analyst to support its Colombia-based program.
Thank you for your impact.
– Apr. 14, 2021