The Brief | February 8, 2023

The Brief: Kelly McCarthy on private equity and IRIS+, accelerating HBCU founders, solar and wind power drones, affordable internet and telehealth in Kenya

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Greetings, Agents of Impact! 

👋 Agents of Impact Call No. 49: The Year of the ‘S.’ Social factors have often taken a backseat to environmental and governance issues when it comes to ESG investing. This year, human capital, worker ownership, economic mobility and community resiliency are at the top of the impact policy agenda. Join Fran Seegull of the U.S. Impact Investing Alliance, and special guests Cambria Allen Ratzlaff of JUST Capital, Jesse Van Tol of the National Community Reinvestment Coalition, and Jack Moriarty of Ownership America to explore policy strategies and actionable opportunities, Wednesday, Feb. 22 at 10am PT / 1pm ET / 6pm London. RSVP today.

Featured: Follow the Talent

Q&A with Kelly McCarthy: Architect of IRIS+ is ready to put impact management theory into practice. It’s not yet the holy grail of impact measurement, but IRIS+ has given investors a starting point for comparable and credible data to manage impact performance. The catalog now includes more than 700 metrics across 17 themes. It standardizes measurements for outputs such as quality jobs, agricultural yields and water or energy conserved. And it is used by nearly 20,000 firms. Kelly McCarthy, who shepherded the taxonomy into being over more than a decade at the Global Impact Investing Network, will now put it to the test as head of impact at Chicago-based Vistria, a middle-market private equity firm with a portfolio of three dozen edtech, health tech and financial services companies. “It was time for me to walk the talk and work with a firm that was mission-aligned and had really bought into this idea that more impactful companies are more valuable companies,” McCarthy tells ImpactAlpha in what is both an exit interview and a curtain-raiser. One incentive for jumping from nonprofit field-builder to private investment management: “I would actually get to prove out that thesis.”

  • Standards shakeout. The welter of impact reporting frameworks is settling into a handful of established tools (for background, see, “The great impact measurement and reporting convergence”). In 2021, the GIIN absorbed the Impact Classification System developed by the IMP+ACT Alliance – a time-limited consortium facilitated by Bridges Insight – in order to better integrate it with IRIS+. Simplifying impact reporting will accelerate the adoption of impact investing, McCarthy says. “IRIS+ demystifies a lot of the fear around engaging with impact.”
  • Outputs to outcomes. McCarthy says private equity allows her to work directly with portfolio companies to create positive change. “I’m in the mood right now in my career to really get my hands dirty,” she says. In December, Tom Adams of 60 Decibels took IRIS+ to task on ImpactAlpha for focusing on social and environmental outputs rather than outcomes. McCarthy acknowledges the limitation and points to the need for more robust benchmarking. She says, “If I said something was supposed to be best practice two years ago, and I find it’s total shit, I’m going to say it.” 

Dealflow: Returns on Inclusion

Nex Cubed scores $5 million from Costco to invest in founders from historically Black colleges. San Francisco-based accelerator Nex Cubed is looking to raise $40 million for an HBCU Founders Fund, which will back 20 early-stage startups a year led by at least one founder from an historically Black college or university. The fund will focus on fintech, digital health, proptech and edtech startups. It will use $5 million from Costco to launch a four-month accelerator program for 10 founders this spring, and a second cohort in the fall. Each company will secure a $120,000 investment and an average $250,000 in follow-on funding. “We want to make sure when they leave our program that they’re in that place to go out and raise that next significant round of capital, a million-plus round,” Nex Cubed Marlon Evans told The Plug. The firm is accepting applications for the first cohort. 

  • Deal sourcing. The first cohort will prioritize founders who have gone through the HBCU Founders Initiative, a nonprofit spinoff of Nex Cubed that partners with AT&T, Mastercard and Verizon to support entrepreneurs at more than 70 HBCUs. The initiative created a “look book” of HBCU-founded startups for investors. HBCUs produce about one-quarter of Black graduates in STEM fields.
  • Fundraising. Nex Cubed is looking to raise capital from corporations and foundations and the endowments of HBCUs. “That would be the ultimate goal because then all the money stays really in the community. So when the fund wins, it goes back to the institutions which then goes back to support the schools and students,” said Evans. The 10 largest endowments of HBCUs totaled $2 billion in 2020, compared to nearly $200 billion for the top 10 U.S. educational institutions overall.
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Zeitview raises $55 million to inspect wind and solar-energy assets. Wind and solar farms are decentralized, making it difficult and expensive to inspect and maintain them. Wind turbines, for example, require preventive maintenance checkups at least twice a year. Drone inspection is cheaper than manual inspections, costing $300 to $500 per turbine. Santa Monica, Calif.-based Zeitview (formerly DroneBase) to reflect its use of crewed aircrafts, smartphones and advanced software, in addition to drones (Zeitview means “time view” in German). The company says its solution is faster, more accurate and lower-cost than others in the market. “Our customers need immediate and accurate analysis about the health of their assets,” said Zeitview’s Dan Burton.

  • Expanding footprint. Zeitview claims to have inspected nearly one-third of installed solar assets in the U.S. and has customers in more than 70 countries. Valor Equity Partners led the Series E round. It joined existing investors Union Square Ventures, Euclidean Capital, Energy Transition, Upfront Ventures and Hearst Ventures.
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Dealflow overflow. Other investment news crossing our desks:

  • Temasek backed Ionblox (formerly Zenlabs) in its $32 million Series B round to ramp up production of high-efficiency lithium-ion battery cells. 
  • Telehealth startup Zuri Health in Kenya raised funding from Morocco’s UM6P Ventures to expand access to low-cost online and messaging-app consultations.
  • Also in Kenya, internet service provider Mawingu secured $6 million from InfraCo Africa, E3 Capital and FMO to expand affordable internet connectivity into rural parts of the country. 
  • Simple HealthKit raised $8 million from Initialized Capital, Kleiner Perkins, Kapor Capital and Quest Venture Partners to provide affordable home health diagnostic kits and 24-hour lab results.

Agents of Impact: Follow the Talent

The Center for Economic Democracy names Yichen Feng, ex- of Lumos Capital Group, as managing director of capital strategies… Enterprise Community Loan Fund has openings for a loan officer and senior loan officer in the Mid-Atlantic region… Impak Analytics seeks an ESG controversies analyst in Montreal… The International Foundation For Valuing Impacts is looking for a remote chief market development officer… Advisian has an opening for a senior low-carbon analyst in Irvine, Calif… Apollo is recruiting a principal of ESG integration for its climate and infrastructure group.

The Carlyle Group seeks a vice president of ESG and impact in London… Mercy Corps is looking for an insights and impact manager in Kenya… U.K.-based Climate Bonds Initiative is hiring a remote building standards manager… CBRE seeks a remote senior ESG consultant… Asana for Nonprofits & Education is hiring an enterprise account executive for education in San Francisco… MSCI is hosting a webinar on climate metrics, Thursday, Feb. 16.

Thank you for your impact.

– Feb. 8, 2023