Greetings Agents of Impact! I’ll be at the GIIN’s West Coast Impact Forum in San Francisco this week with ImpactAlpha’s Joe Whitwell and in Park City for the Sorenson Impact Summit with ImpactAlpha’s Aaron Kissel. Dennis Price will be in Buenos Aires for Pro Mujer’s GLI Forum Latam. Say hi! – David Bank.
In today’s Brief:
- Private credit for underinvested markets and communities
- Kenya’s e-commerce darling stumbles
- Foundations push for equitable AI
- Investing in social determinants of health
Featured: The Liist
Impact fund managers steer private credit to places equity fears to tread. Fundraising has been tough going for private equity fund managers, impact funds included. Private credit, on the other hand, is booming. On this month’s Liist of actively raising impact funds, debt-focused fund managers are expanding the reach of private credit into niche and underinvested markets and communities with the help of concessional and catalytic capital from foundations, family offices, donor-advised funds and even retail investors. Amazonia Impact Ventures, a UK-based fund manager, is providing loans to women and Indigenous communities in the Amazon for sustainable agroforestry, forest management and biodiversity preservation. Nonprofit fund manager New Story Ventures is lending to land development projects in Mexico to help low-income families become homeowners. In the US, RSF Social Finance is funding community organizations and businesses that traditional banks and lenders deem too small or too risky.
- Materials innovation. Sustainable materials companies are supporting the low-carbon transition with green concrete, new and upcycled textiles, and fungi-based meat. Nonprofit Fibershed is teaming up with Sustainable Agriculture and Food Systems Funders on a flexible grant and debt fund to support small and emerging textile businesses in the US, with dedicated funding for Black-led companies. Pangaea Ventures is raising its fifth equity fund to invest in early stage hardware, biotech and advanced materials companies in North America addressing climate and healthcare challenges.
- Keep reading, “Impact fund managers steer private credit to places equity fears to tread (The Liist, June 2024),” by Jessica Pothering and Lucy Ngige on ImpactAlpha.
- Scan more than 100 impact funds that have been raising capital in the past year on The Liist, ImpactAlpha’s searchable database. Know an impact fund manager currently raising capital? Complete this short form.
Dealflow: Funding Fallout
African e-commerce darling Copia files for administration as funding dries up. Copia, which delivers household goods and appliances to more than 500,000 hard-to-reach rural customers, has been known as Kenya’s “rural Amazon.com.” Copia has now filed for administration after a turbulent year and difficulty fundraising. Copia Global, which oversees the operations of Copia Kenya, was unable to attract capital on acceptable terms, Copia said in a statement. “Copia Global is now winding down, leaving the Copia Kenya business in a new position to raise capital directly.” Impact investors including Goodwell, LGT Group, Sorenson Impact Foundation, as well as development finance institutions like the US Development Finance Corp. and Germany’s DEG, had rallied behind the company’s mission to help rural households access goods as conveniently as wealthier consumers in advanced economies. “Even though we’ve taken a loss, if the company continues to function, then our capital will have had the impact we intended,” Goodwell’s Lilian Oyando told ImpactAlpha.
- Dominoes. Africa’s funding drought has claimed several once-high flying startups. Startups on the continent raised just $542 million in the first quarter of the year, less than one-fourth of the $2.3 billion they took in in the same quarter of 2022. Kenya’s logistics startups, including iProcure, Twiga and Sendy, have had a particularly hard time (see, “Trouble at Twiga”). Goodwell’s Nico Blaauw says capital raised during the funding boom of 2020 and 2021 wasn’t well matched to a sector that wasn’t fully proven. “You can build an e-commerce business for rural clients, but in order to build that, you need scale, and you need longitude. It’s 10 or 12 years, minimum,” he said. With Copia, “we’ve seen that the model works, but there was not enough patient capital to get them to profitability.”
- Administration. The wind-down of Copia Global means a write-down for its equity investors but not an end to its operations in Kenya. The company will continue running a scaled-down version of its ordering and delivery routes while the team continues fundraising. Copia last July attempted a “limited restructure of its operations” after multiple rounds of layoffs and a decision to pull out of its second market, Uganda. Investors, including Goodwell, Sorenson, LGT, DEG, the DFC and Enza Capital, gave the company a $20 million equity injection in December. The company did not immediately reply to ImpactAlpha’s request for comment.
- Late to the party. The pandemic ignited a startup wave in Africa seeking to build viable and inclusive mass-market businesses by helping households, small businesses and supply chains with digital upgrades that could improve access to products and services in underserved communities. Copia, whose early focus was largely offline rural customers, may not have made the digital shift early enough. Investors recruited ex-Metaswitch CEO John Lazar to the board in December to help the company digitize its network of more than 30,000 rural distribution agents and shift more to online ordering in order to “change the game on unit economics and efficiencies.”
Omidyar Network, Kapor and SF foundations commit $25 million for equitable and ethical AI. The three California-based funders responded to Gov. Gavin Newsom’s call to develop tools for the responsible use of artificial intelligence in education, workforce, innovation and infrastructure. “We have a momentous opportunity before us to shape an AI future that prioritizes positive human and societal impacts,” said Omidyar Network’s Anamitra Deb. Omidyar Network, Kapor Foundation and the San Francisco Foundation plan to work with other philanthropic organizations; academic, nonprofit, advocacy and worker groups; technologists; and the public sector to design equity-focused initiatives and help shape California’s AI landscape. Omidyar Network, the philanthropic investment arm of eBay founder Pierre Omidyar and wife Pam, has carved out a specialty in responsible technology and inclusive AI in recent years.
- AI for impact. In a separate collaboration this year, Omidyar and the Ford and Nathan Cummings foundations invested a combined $7.5 million to purchase small stakes in Anthropic, a competitor to OpenAI (see, “With stakes in Anthropic, impact investors seek a seat at the AI table”). “Our main ask is that when AI gets deployed at companies, that workers have a seat at the table,” Omidyar Network’s Mike Kubzansky said at the time. (Disclosure: Ford Foundation is an investor in ImpactAlpha. Omidyar Network and Ford have sponsored ImpactAlpha projects.) In a guest post last month, Paul Fehlinger of Project Liberty Institute and Johannes Lenhard of Venture ESG warned, “The window for constructive action is closing rapidly” for AI and other disruptive technologies. “Choices made today will irrevocably shape our collective societal and economic future.”
- Check it out.
Dealflow overflow. Investment news crossing our desks:
- Energy Capital Partners raked in $6.7 billion for its energy transition infrastructure buyout fund. The New Jersey-based firm was acquired by Bridgepoint Group in September last year. (ESG Today)
- BNP Paribas and Sumitomo Mitsui Banking Corp. and other banks extended a $468 million loan to Shriram Finance to increase access to financial services for India’s underbanked entrepreneurs. (YourStory)
- Sweden’s Cloover raised $108.5 million in debt financing, alongside a separate $5.5 million seed equity round led by Lowercarbon Capital, to finance small energy upgrade installers. (TechCrunch)
- Yola Fresh, a Moroccan startup that connects smallholder farmers with food retailers, scored $7 million in a pre-Series A round backed by FMO, Algebra and Al Mada Ventures. (APEN)
Short Signals: What We’re Reading
📰Breaking news. A federal appeals court ruled against Fearless Fund, halting the Atlanta-based venture capital fund’s grant program for Black female founders (for background see, “Legal challenge to Fearless Fund misses the mark on racial bias in venture capital”). The ruling gives a victory to conservative activists seeking to dismantle diversity programs in business and finance. (Atlanta Journal-Constitution)
♀ Gender Smart. Reproductive health for women is chronically underfunded, especially after the overturning of Roe v. Wade. In a report, the Milken Institute explored how private funding, including blended capital, can “fill gaps to scale innovation and deliver equitable, high-quality care across research and development, infrastructure, products and services.” (Milken Institute)
⚕️ Investing in social determinants of health. Health outcomes are intimately tied to social factors. Community Capital Management lays out the case for impact investing in the social determinants of health. Impact products that can help: impact bond funds, real estate investment trusts, and community development financial institutions. (CCM)
🏳️🌈 Pride month. Despite accounting for 8% of the population, ventures led by LGBTQ+ founders received just 0.5% of the more than $2 trillion in startup funding in 2023. In “Outsized Impact,” the VC firm Colorful Capital argues that supporting LGBTQ+ companies and founders, investors can reduce systemic risks, improve portfolio performance and strengthen social resilience. (Colorful Capital)
👩🌾 The state of regenerative ag. Veris Wealth Partners’ 2024 investment overview of regenerative agriculture explains how the firm differentiates agricultural practices that “restore, improve and enhance the biological vitality” of farming landscapes. Areas of promise: “supporting farmers, upstream technology, midstream companies and infrastructure, and food and product companies sourcing regenerative inputs.” (Veris Wealth Partners)
📍 Bottom up: The hallmarks of community-centered economic inclusion initiatives are hyperlocal scale, interdisciplinary scope, and decision making that integrates both community-level leadership and city and regional officials. A Brookings Institution study says it’s time to abandon top-down or “trickle-down” approaches for “community-centered models that have demonstrated true promise.” (Brookings)
Agents of Impact: Follow the Talent
Goldman Sachs is hiring an Americas-focused head of sustainability and impact for its private asset and wealth management group in New York… The Milken Institute is recruiting an innovative finance intern in Washington, DC… mHUB is on the hunt for a climate and energy innovation fellow in Chicago… Village Capital seeks a UK-based fund manager for its Refugee Venture Fund… BlueOrchard Finance is looking for a Nairobi-based private debt investment officer for Africa. Candidates must speak proficient English and French.
The Department of Energy’s Loan Programs Office is hosting an informational webinar about its Tribal Energy Financing Program for solar + storage and microgrid projects… Join Common Trust and Purpose US today at 4pm ET for the publishing of their new book, “Assets in Common,” which is based on research, case studies and approaches of shared ownership and steward-ownership models.
👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.
Thank you for your impact!
– June 4, 2024
