Greetings, Agents of Impact!
Featured: Returns on Inclusion
LGBTQ+ focused venture capital firm comes out for Pride month. Years ago, Megan Kashner had to come out twice to the CFO of the Chicago nonprofit where she worked at the time. He had thought she was joking, Kashner recalls. “And everybody looks at him deadpan, like, ‘No, she really is a lesbian.’” The still-hidden talent among LGBTQ+ founders and entrepreneurs spurred Kashner, a professor and director of social impact at Northwestern’s Kellogg School of Management, and Bill Burckart of The Investment Integration Project, to launch Colorful Capital. “We are going to look at, celebrate and consider LGBTQ+ founders across the board,” Kashner tells ImpactAlpha. “That said, the ones who have the biggest barriers to access to capital, and therefore the ones we are most able to add value to, really are these incredibly talented founders and leadership teams who are LGBTQ+ and also Black, also Latinx.” The pair timed their announcement for June, traditionally the month for LGBTQ+ pride parades and other celebrations.
- Focus on identity. A number of venture capital and impact funds include LGBTQ+ founders in their broader list of underrepresented groups targeted for investment. Only a handful of firms specifically focus on such entrepreneurs, including Chasing Rainbows, launched last year by seed-stage investor Ben Stokes. Gaingels, a network of angel investors, has deployed $500 million since 2014. StartOut’s Pride Economic Index found that LGBTQ+ founders have raised $13 billion in venture capital.
- Barriers and exclusion. Colorful Capital’s research report examines issues of access to capital through the stories of 10 LGBTQ+ founders. Two who identify as trans said they launched their own ventures for financial security and to escape oppressive work environments. Two lesbians turned to crowdfunding “out of necessity, after failing to gain traction with venture capitalists.” One trans founder reported that an investor told her to find “a straight white male to be the face of her company if she wanted to be ‘investable.’”
- Bold-faced names. Colorful Capital’s advisory committee includes Invest Vegan’s Sloane Ortel, Impact Engine’s Priya Parrish, The Social Entrepreneurs’ Fund’s Lara Metcalf, consultant Steven Godeke, Kiva Capital Management’s Katrina Ngo, and Otho Kerr of the New York Federal Reserve Bank, among others. For some, associating their names with an LGBTQ+ firm is a form of coming out, again, Burckart said. That’s true for him, as well. “Professionally, this is the first time that I’ve led with my identity,” he told ImpactAlpha.
- Corporate accountability. Take a closer look at those pride parade sponsors. Data for Progress found dozens of corporations that identify as LGBTQ+ allies that also donate “to state politicians behind some of the most bigoted and harmful policies in over a decade.”
- Keep reading, “LGBTQ+ focused venture capital firm comes out for Pride month,” by David Bank and Cesar Chavez on ImpactAlpha.
Dealflow: Black Tech, Green Solutions
Black-led Rheaply secures $20 million to help companies reduce waste and limit emissions. Chicago-based Rheaply has built a software platform used by Google, MIT, Logitech and other organizations to exchange used materials and resources to eliminate waste. The goal: help them cut costs and carbon. Steve Case of Revolution, which invested via its Rise of the Rest Seed Fund, said the company’s solution is critical “for businesses that are trying to effectively use and recycle physical resources while also combating climate change” (see, “Rise of the Rest backs Black-led startups”).
- Climate tech. Other investors in the financing round include Emerson Collective, Techstars, Salesforce Impact Fund and the John Doerr Family Trust. Rheaply will use the capital to expand its platform to energy and utility companies.
- Check it out.
Cleantech incubator stands up debt fund focused on women, Black and Brown founders. The Los Angeles Cleantech Incubator, or LACI, has a new tool to increase access to capital for cleantech founders historically excluded from investment capital. The $6 million LACI Cleantech Debt Fund will provide loans of up to $50,000 to help earlier stage startups to serve their first customers, and bridge loans of $250,000 to help later stage startups scale. The kicker: Unlike traditional bank loans, LACI will not require personal collateral or personal credit scores to underwrite the loans. The fund will provide early-stage cleantech founders “a timely, affordable alternative to expensive venture capital and slow-moving bank debt,” said LACI’s Matt Petersen.
- Equitable cleantech. Somerville, Mass.-based SparkCharge, which last month raised $23 million, and Culver City, Calif.-based Envoy received loans from a pilot of the fund. LACI has partnered with Greentown Labs in Boston and Houston, Evergreen Climate Innovations in Chicago, and New Energy Nexus in Oakland and New York to source deals. LACI’s $5 million equity fund, Impact Fund I, is nearly fully committed; the incubator is raising a second Impact Fund.
- Catalytic capital. The cleantech debt fund is backed by Sobrato Philanthropies and Homecoming Capital. Wells Fargo Foundation provided a “catalytic grant” to cover operating costs and loan-loss reserves. San Diego-based Mission Driven Finance will assist with loan origination and servicing, as well as underwriting.
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Obvious Ventures crosses $1 billion in assets for ‘world positive’ startups. A $461 million haul for two new funds pushed the “world positive” fund manager’s assets under management over $1 billion. Obvious Ventures raised $355 million for its fourth flagship fund and $106 million for its second Obvious Prime opportunity fund. Companies building transformative solutions to systemic challenges can deliver both profit and purpose, says Obvious’ James Joaquin. “We have a growing set of proof points.”
- Mixed track record. Obvious portfolio companies Amply Power, a fleet charging startup, was acquired by BP; Inspire Clean Energy was acquired by Shell; and fintech company One Finance was acquired by Hazel. Share prices of electric vehicle makers Proterra and Lilium have both fallen more than 70% since going public via special purpose acquisition companies, or SPACs. Drug-discovery company Recursion Pharma is down more 75% since its initial public offering, and biotech company Zymergen has plummeted more than 95% since its IPO last year.
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Dealflow overflow. Other investment news crossing our desks:
- Singapore-based Envision Digital raised $210 million to build clean energy and carbon management software for corporations and governments.
- Connecticut-based private equity fund manager True Green Capital raised $661 million for its fourth clean energy infrastructure fund.
- Seafood Reboot scored €3.2 million ($3.4 million) in a pre-seed round backed by Beyond Impact to make plant-based seafood from microalgae.
- Closed Loop Partners secured $200 million for a private equity buyout fund that will invest in businesses working to advance circular supply chains.
Impact Voices: Policy Corner
Keeping communities at the center of equitable infrastructure by reimagining risk, power and accountability. Largely missing from conversations around the $1.2 trillion bipartisan infrastructure deal has been the acknowledgement of how past infrastructure investments have impacted underserved communities, notably Black, Indigenous and low-wealth communities. “To avoid repeating the mistakes of the past, we need to reimagine how we think about infrastructure and how we hold governments accountable for public spending projects and place-based investment,” writes Helen Chin of Communities First Fund, which was created to give communities more of a voice in how government dollars are spent. Through a set of principles, including investing in people, proactive collaboration and centering community wisdom, Communities First aims to:
- Reimagine risk. Invest in people, leaning on the collective wisdom of these impacted communities to find solutions that work and honor community priorities;
- Reimagine power. Infrastructure investments must prioritize community ownership, self-determination and wealth creation to ensure long-term durability and success; and
- Reimagine accountability. Demand accountability at each step of the process, from procurement and due diligence to construction and management.
Communities First has worked with philanthropists to center these priorities. “We need a larger coalition to meet this historic moment,” writes Chin. “This means government, impact investors and civil society organizations must all be willing to embrace these principles.”
- Keep reading, “Keeping communities at the center of equitable infrastructure by reimagining risk, power and accountability,” by Helen Chin on ImpactAlpha.
Agents of Impact: Follow the Talent
1st Course Capital, Burnt Island Ventures and cKers Finance are among a half-dozen fund managers selected for Confluence Philanthropies’ emerging managers program… The Conservation Innovation Fund seeks an analyst… Regen Foundation is looking for a director of development in Boston…The Federal Reserve is accepting applicants to join its Community Advisory Council.
The U.S. Treasury Department is accepting applications for its first-ever chief of diversity, equity, inclusion and accessibility… Prime Coalition is hosting a webinar on capital barriers for early deployments in climate, Tuesday, June 24… Adasina Capital’s “Civil and Voting Rights” screen will flag corporate contributions to political campaigns that oppose legislation protecting civil and voting rights.
Thank you for your impact!
– June 8, 2022