The Brief | May 3, 2022

The Brief: Jonathan Rose on affordable green housing, agriculture-as-a-service in Brazil, home energy monitoring, neobank in India, flexible business financing

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Greetings, Agents of Impact!

Answer The Call: The rise of alternatives to venture capital. Flexible debt and equitable growth capital can build businesses and keep the value they create in local communities (see Voices, below). Join Kim Folsom of Founders First Capital, Wefunder’s Jonny Price and other Agents of Impact to explore how new terms and tools are changing who and what gets funded, Tuesday, May 10 at 10am PT / 1pm ET / 6pm London. RSVP today.

Featured: Agents of Impact Podcast

Jonathan Rose on building green, affordable communities of opportunity. Rent restrictions were expiring on many of the units in the Pasatiempo apartments on the edge of Silicon Valley near downtown Fremont, Calif., one of the most affordability-challenged regions of the country. Around the country, private equity investors have been swooping in on such properties, aiming to flip affordable units to market-rate rents as so-called Section 8 subsidies run out. Instead, Jonathan Rose Companies, a New York-based impact fund manager, acquired Pasatiempo for $30 million in March and put rent restrictions on all of the project’s units for an additional 20 years. “In exchange, we extended the Section 8 contract for 20 years, so we have this wonderful guaranteed income,” Jonathan Rose, the company’s founder and president, says on ImpactAlpha’s Agents of Impact podcast. “That building was 94 units multiplied by 20 years – that’s about 1,800 unit-years preserved.”

The Pasatiempo investment came out of the Rose Cos.’ fifth housing preservation fund, which closed last October at $525 million. “Increasingly, we’re seeing the investor world turn towards affordable housing,” Rose says. “Your positive impact is inherent in the very nature of the product.” Through its “community of opportunity” program, Rose Cos. provides space and pays for a social service coordinator to work with local agencies to bring in after-school programs, health screenings, computer labs, community gardens and other amenities as an investment in community cohesion and economic stability. One of the Rose Cos. most ambitious projects is Sendero Verde in New York City’s East Harlem, which will include more than 700 units designated as one of seven tiers of “affordable,” ranging from formerly homeless to 120% of the area median income. Harlem Children’s Zone will operate a 60,000-square foot charter school, and Settlement House will provide senior and youth programs. A plaza between the buildings will include gardens and public meeting spaces. Promises Rose, “It will absolutely be a community of opportunity.”

Dealflow: Agrifood Investing

Lightsmith Group backs Solinftec’s precision agriculture-as-a-service in Brazil. The New York-based private equity firm raised $186 million to invest in companies with data and technology for climate resilience. Solinftec offers farmers in the U.S. and Latin America software and hardware to manage operations more sustainably. “Solinftec helps build climate resilience because it factors in real-time weather data and forecasts to help farming operations become more responsive to changing weather and climate conditions,” Lightsmith’s Sanjay Wagle told ImpactAlpha. Other events, such as rising inflation and Russia’s invasion of Ukraine, have driven up the prices of fertilizers and other inputs and are only adding to the pressure on farmers to increase operational efficiency.

  • Resilient farming. Solinftec says clients use its platform and services to manage more than 27 million acres of sugarcane, soy, corn, cotton, coffee, timber and other crops. Lightsmith led Solinftec’s $60 million round, bringing its total raised to date to nearly $147 million.
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Sense raises $105 million to help homeowners reduce energy costs. The Cambridge, Mass.-based company helps homeowners reduce their carbon footprint with devices that monitor energy usage in real-time. The Series C round was led by Blue Earth Capital, with participation from TELUS Ventures, MCJ Collective, Energy Impact Partners and Schneider Electric. “We’ve always known that the fastest path to mass-market adoption is to get our core technology built into the infrastructure of homes,” said Sense’s Mike Phillips. The company is looking to work with global home appliance brands and will target homeowners in Europe and the Asia Pacific region. Plug in.

Open secures $50 million for small business services in India. The Bangalore-based startup, which provides digital banking, payments, invoicing and automated bookkeeping services to more than two million small and mid-sized businesses, is looking to disburse $1 billion in loans in the next 12 months. The Series D round, backed by IIFL, Tiger Global and Singapore’s Temasek, brings Open’s total raised to $187 million and its valuation to $1 billion. Open raised $100 million in October in a round led by Google, Visa, Temasek and Japan’s SoftBank. Check it out.

Dealflow overflow. Other investment news crossing our desks:

  • Pyka raised $37 million to build zero-carbon and electric autonomous aircraft, which the company says can perform complex commercial agricultural operations.
  • ModusBox scored $7.5 million in Series A funding led by Patamar Capital to build fintech infrastructure to help community financial institutions better reach customers.
  • Carbon Collective, an online advisory firm for investing in climate change, raised $2.2 million in a seed financing round.
  • Dutch solar developer SolarDuck snagged €4 million ($4.2 million) to build offshore solar farms that float on water.

Impact Voices: Alternative Capital 

Flexible and equitable financial tools for a more inclusive economy. In Montana, a couple wanted to buy a community farm, but projected revenues wouldn’t meet banks’ cash flow requirements. Bozeman-based HomeStake Venture Partners provided a revenue-based loan: when revenues allow, farmers make principal payments on the loan; when revenues fall, the loan allows for a grace period and then interest-only payments. Flexible debt and equitable growth capital can “help build all kinds of businesses and keep a substantial part of the value created by those companies within the community,” HomeStake’s Bill Stoddart writes in a guest post. Homestake also provides revenue-based equity – companies can repurchase their shares with their free cash flow. “If we can be more diligent in designing our economic relationships, we may just be able to create thriving communities and vibrant ecosystems that endure far beyond the next generation.” 

  • Alternative capital. Native community development financial institutions, Black-owned minority depository institutions, and private debt funds like Olamina, Native Women Lead and Real People’s Fund are redefining the “five C’s” of credit to focus more on community and character rather than credit scores and collateral. Equity funds including WOCstars, the 22 Fund, and Beyond Capital Ventures are providing non-extractive growth capital to build equity and distribute power for underrepresented entrepreneurs and communities. Next week’s Agents of Impact Call will explore alternatives to startup capital (RSVP).
  • Keep reading, “Flexible and equitable financial tools for a more inclusive economy,” by HomeStake’s Bill Stoddart on ImpactAlpha.

Agents of Impact: Follow the Talent

Christian Okoye, ex- of Sidewalk Infrastructure Partners, joins Generate as an investor in emerging technologies… Brooke Tomasetti joins Carbon Collective as director of financial education and community… Bridgespan partner Chris Addy, who advised TPG’s Rise Fund, relocates to Singapore to oversee the firm’s Asia-Pacific work… Gender and racial equity investment advisor Muthoni Wachira joins MarketForce as chief of staff.  

KPMG seeks an associate director and editor for environmental, social and governance in the U.S… ISS ESG is looking for a global head of alternative research and ESG thought leadership in New York… CapShift is hiring an impact investment associate in the Boston area… BerlinRosen is on the hunt for a social impact financial communications account director in Los Angeles.

Thank you for your impact!

– May 2, 2022