The Brief | October 27, 2021

The Brief: Patient capital for BIPOC businesses, impact unicorns, Africa’s creative entrepreneurs, Indonesian pharmacies, data for decision-making

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Greetings, Agents of Impact! It was great to see so many charged-up Agents on yesterday’s Catalytic Climate Capital Call. We’ll have a roundup and a replay in Friday’s Brief. Next up: Call No. 34: Financing Growing Businesses (Live from Nairobi), Tuesday, Nov. 16. RSVP

Featured: Impact Voices

Investing patient capital in established BIPOC businesses to close the racial wealth gap. Sure, startups led by Black, Indigenous and people of color need growth capital. But meeting the growth and operating capital needs of established BIPOC businesses is also key to closing the racial wealth gap. “Minority-owned businesses that have survived for years with very little access to capital tend to be led by battle-tested owners,” writes George Ashton, who leads strategic investments for Local Initiatives Support Corp., or LISC. With the right financing, such businesses “could deepen their customer bases, expand their geographic presence, enter higher margin business models, diversify business lines and most importantly, hire more employees.” Ashton says BIPOC entrepreneurs need access to growth capital, not just grants and loans. Patient, equity-like investments “allow owners to take on the risks of expanding their businesses, while also positioning them to weather economic storms.”

LISC Strategic Investments estimates that small businesses need, on average, $50,000 to $250,000 to achieve self-sustaining resilience and change the trajectory for owners, employees and communities. Some start-ups can tap friends and family; such network wealth is less accessible in many BIPOC communities as a result of historical discrimination. Investors and funders should step up to provide growth capital to bridge the gap, Ashton says. Community development financial institutions and small business lenders are testing convertible debt and equity-like products that provide flexibility to investees, and investment funds that can be built around such investment types. “As we do, it is imperative that we respond to the needs of minority-owned businesses and the communities they serve,” Ashton says. In redressing the racial wealth gap, “offering patient, flexible growth capital to promising BIPOC businesses is a critical step.”

Keep reading, “Investing patient capital in established BIPOC businesses to close the racial wealth gap,” by LISC’s George Ashton on ImpactAlpha.

Dealflow: Follow the Money

Social Impact Capital raises $42 million to back potential ‘impact unicorns.’ The New York-based venture firm was an early investor in African tech up-skilling platform Andela and zero-carbon fuel company Prometheus Fuels, both now worth more than $1 billion. Portfolio company OpenInvest was acquired by J.P. Morgan. The firm looks to invest in “impact unicorns” – companies that can positively impact one billion lives. “The most promising place to look for unicorns is companies that are making the ‘real economy’ lower cost, more sustainable and equitable,” Social Impact Capital’s Sarah Cone told ImpactAlpha.

  • Fundraising. The raise is among the largest for a VC fund led by a solo female general partner. Investors include Founders Fund’s Peter Thiel and Andreessen Horowitz’s Marc Andreessen and Chris Dixon. Social Impact has invested in 30 companies, including Aether Diamonds, which makes gems from atmospheric carbon, and Charm Industrial, which sequesters carbon by pumping it deep underground.
  • Check it out.

New fund aims to support Africa’s creative entrepreneurs. A thriving creative industry can power a robust African economy. “The creativity of young African fashion designers has forced the industry to take notice,” Annan Capital Partners’ Roberta Annan wrote in the essay series Creativity, Culture and Capital.” Annan launched the Impact Fund for African Creatives and aims to raise €100 million ($116 million). The fund, based in Ghana, will provide €50,000 in grants and up to €2 million in venture capital funding to small and mid-sized creative businesses in Africa. Annan’s foundation, African Fashion Foundation, is an early contributor to the fund. Global supply chain disruptions due to COVID have put pressure on Africa’s music, film, gaming, fashion and contemporary art sectors (for context, see, “Safeguarding a creative and cultural moment: The impact of COVID-19 on Africa’s creative sectors”).

  • Alternative structures. Annan is using a European fund structure called a Reserved Alternative Investment Fund to attract European investors. Lendable is using the same structure for its $100 million emerging markets fund. Nairobi-based HEVA Fund has supported more than 40 creative businesses in East Africa with grants, investments and technical assistance. HEVA is eyeing $20 million for a long-term fund.
  • Dive in

Farmacare raises seed funding to digitize community pharmacies in Indonesia. The Jakarta-based company helps local pharmacies manage sales records, inventory and relationships with customers. The company has the potential to impact “the millions of Indonesians who need much better access to medicines and other pharmaceutical products,” said Farmacare’s Adi Sudewa. The seed round was backed by Beenext, Taurus Ventures, iSeed SEA and Indonesia Women Empowerment Fund.

Dealflow overflow. Other investment news crossing our desks:

  • ABC Fund backs Benin’s Union Nationale des Caisses Rurales d’Epargne et de Prêt to provide microloans and credit to smallholder farmers.
  • Jay Z’s impact-focused investment firm Marcy Venture Partners closes its second fund at $325 million (for background, see, “New narratives for inclusion and investment at SOCAP21”).
  • European climate tech fund World Fund launches with the aim of raising €350 million ($405 million) for a portfolio that can displace 100 megatons of CO2 emissions per year.

Series: Optimizing for Impact

Develop a data-for-decision-making mindset. The purpose of impact measurement and management is not counting, reporting or marketing. It’s better decision-making. This week’s short video from the new Coursera course, Impact Measurement and Management for the SDGs,” developed by CASE at Duke and the U.N. Development Programme, helps investors add the five impact dimensions to their measurement practices. Don’t get distracted by shiny impact reports, says Duke’s Cathy Clark. “Truly managing impact is an ongoing practice that requires asking good questions, evaluating data that is imperfect, and deciding what to do about it.” Go deeper.

Agents of Impact: Follow the Talent

ImpactAlpha partner event: Tideline presents “An inside look at one allocator’s approach to impact fund diligence,” a case study of J.P. Morgan Private Bank’s Global Impact Fund, with J.P. Morgan’s Jessica Matthews and John Ancona, Elevar’s Amie Patel, and Trill Impact’s Pia Irell, moderated by Tideline’s Ben Thornley, Wednesday, Nov. 3. Sign up

Megan Rose Dickey, ex- of Protocol, joins Backstage Capital as chief content officer… Jacqueline Goodman is promoted to associate at SJF Ventures… WWB Asset Management is hiring a social impact manager… Capital Impact Partners is looking for an investment analyst in Arlington, Va… S2G Ventures is recruiting a corporate development associate in Chicago.

World Wildlife Fund is hiring an impact investing specialist in Washington, D.C… Dalberg seeks project managers in its Mexico City and U.S. offices to lead social impact-focused strategy engagements… ProFellow has aggregated more than 50 social entrepreneurship fellowship opportunities for innovators in more than 70 countries.

Thank you for your impact.

– Oct 27, 2021