The Brief | June 6, 2022

The Brief: Kapor Capital’s leadership (podcast), transitions to employee ownership, supply-chain financing in India, food waste solutions in Brazil, Africa Eats

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Greetings, Agents of Impact!

Featured: Agents of Impact Podcast

New leadership at Kapor Capital doubles down on diversity and impact (podcast). Pro tip for entrepreneurs or fund managers getting ready to pitch Oakland-based Kapor Capital: Don’t leave diversity out of your slide deck. “We will have founders or fund managers come pitch us and we say, ‘Wait a second. Where’s the impact? Where’s the diversity? Where’s the focus here?’” co-founder Freada Kapor Klein says on the latest Agents of Impact podcast. “And they say, ‘Everyone told us to take it out of our decks.’” That won’t fly at this venture capital firm. Last month, Kapor Klein and her husband, veteran tech entrepreneur Mitch Kapor, advanced their own commitment to diverse leadership by stepping back from leadership of the firm. Stepping up are co-managing partners Brian Dixon and Uriridiakoghene “Ulili” Onovakpuri, both of whom came up through Kapor’s internal talent development. All four leaders joined ImpactAlpha’s David Bank to talk about building teams, driving impact and changing the culture of venture capital. 

  • Impact fund. Dixon and Onovakpuri are co-managing Kapor Capital’s newest fund, targeted at $125 million – the first time the firm has raised outside capital. The firm placed early bets on companies like BlocPower and Bitwise, which last year went on to raise big rounds. Other portfolio companies include Tomo Credit, which helps first-time borrowers build credit scores, and Numerade, which offers low-cost, on-demand tutoring. Led by doctors of color, Cayaba Care, which provides maternity care for low-income mothers and mothers of color, “is targeting a problem that is specifically faced by underrepresented groups more than other groups,” Onovakpuri says. “We like to see that two-pronged approach, where you have impact in the mission of the company and a diverse team being built.”
  • Countering the backlash. Issues of diversity and impact have become charged topics in Silicon Valley (see, “ESG opponents get political under the guise of getting politics out of investing”). “We’re very distinctive in being extremely hardcore in looking at the actual impact of the business as a business, and who benefits. While we’ve made some inroads on that, that is still not at all the way venture thinks,” says Kapor, an early tech entrepreneur and founder of Lotus Software. “Folks are feeling threatened about where they would be if they hadn’t benefited from so much privilege of so many kinds,” adds Kapor Klein. “Call it ‘woke capitalism’ or whatever, but people are voting with their feet and with their pocketbooks. We are already, through our portfolio companies, changing the economies of what were formerly underestimated cities.”
  • Keep reading and listen to, “New leadership at Kapor Capital doubles down on diversity and impact (podcast),” by David Bank on ImpactAlpha. Catch up on all of ImpactAlpha’s podcasts, including the weekly Impact Briefing.

Dealflow: Employee Ownership

Apis & Heritage helps businesses in Denver and El Paso become employee-owned. The Maryland-based investment firm last year launched a buyout fund to help small and mid-sized businesses with large Black and Brown workforces transition to employee ownership (see, Black and brown employee ownership for the post-COVID economy”). Apis & Heritage has inked its first two deals: Denver-based Apex Plumbing and El Paso, Texas-based Accent Landscaping Contractors. The companies employ a total of 150 workers, who will now own 100% of each company. 

  • Succession planning. “I could have sold my business to a competitor or private equity, but I know what can happen next – the culture changes and people get laid off,” said Cameron Stevens, who founded Accent more than 40 years ago. “I didn’t want that for my employees.” Apis & Heritage’s Legacy Fund helps retiring business owners transfer company ownership to employees at a fair market price.
  • Wealth creation. A&H says worker-owners in its portfolio can retire with $70,000 to $120,000 in savings. Private equity firm KKR said it aims to expand its employee-owner model from its manufacturing portfolio to all of the majority investments in its private equity platform in the Americas (see, “Ownership economy gets a payday as factory workers share in KKR’s exit”). Last month, KKR launched the nonprofit Ownership Works to help public and private companies transition to shared ownership.
  • Check it out

Dealflow overflow. Other investment news crossing our desks:

  • Gurgaon-based StrideOne raised $32 million in a round led by Elevar Equity to provide supply-chain financing and other financial services to India’s small businesses.
  • Food to Save, a startup fighting food waste in Brazil, raised 1.3 million reais ($272,000) from 211 investors via crowdfunding platform CapTable (see, “Deal Spotlight: Climate-smart food”).
  • South Africa’s FoondaMate raised $2 million to provide cheap, accessible tutoring assistance to students via Whatsapp and Facebook chatbots.
  • South Korean chemical company Hanwha Solutions co-led plastic upcycling startup Novoloop’s $10 million Series A extension round with Tokyo-based VC firm Mistletoe.

Impact Voices: Missing Middle

Africa Eats: Filling the gap in operational capital to grow Africa’s small businesses. Find great companies, add growth capital, and the results are bigger, stronger, more scalable companies. Goldenpot has surpassed $500,000 in revenue after an investment helped the company purchase missing equipment and fund factory upgrades. Paniel Meat Processing doubled revenue to $600,000 with an operational capital and equipment investment. And a series of loans helped Agro Supply pay vendors, deliver for customers and grow past $1 million in revenue last year. The growth didn’t come through “burning capital, as we typically see from venture capital funded companies,” writes Michael “Luni” Libes of Africa Eats, a holding company that since 2020 has backed more than two dozen food and agricultural supply chain companies in Africa. “The growth capital was mostly spent on operational capital, equipment and trucks.”

  • Operational capital. Libes’ analysis shows that the number of Africa Eats companies with more than $250,000 in revenue last year nearly doubled to 15. Nine of those grew to above $500,000; four passed $1 million in annual revenue. “The growth came from scaling up operations to meet customer demand,” writes Libes. Talk about funding the “missing middle” needs to turn into action, says Libes, who says Africa Eats is proving it’s possible to grow tiny companies to significant scale. “If you questioned whether it possible to invest in Africa, to make money investing in Africa, and to make a difference investing in Africa,” he says, the answers are “yes, yes, and yes.”
  • Keep reading, “Africa Eats: Filling the gap in operational capital to grow Africa’s small businesses,” by Luni Libes on ImpactAlpha.

Agents of Impact: Where to Meet

  • US SIF’s Forum 2022, June 6-8 near Albuquerque, N.M., will feature S.E.C. Commissioner Caroline Crenshaw and U.S. Representative Jamie Raskin.
  • PayPal’s Dan Schulman will keynote the Sorenson Impact Summit, June 13-15 in Park City, Utah.
  • Big Path Capital’s Impact Capitalism Summit convenes July 20-21 in Nantucket, Mass.
  • The GIIN Investor Forum will convene in The Hague, Netherlands, Oct. 12-13.

Thank you for your impact!

– June 6, 2022