The Brief | October 5, 2020

The Brief: Public policy for private equity, impact verification, India’s VC boom, Chicago’s service businesses, Latin America’s working capital crunch

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Featured: Impact Voices

With policy prompts, private equity fund managers can drive social benefits, too. Private equity investors in the U.S., suffice to say, have not always delivered measurable, net-positive results for all stakeholders. A new generation of private equity investors “have an opportunity and a responsibility to rewrite the private capital narrative,” write Impact Capital Managers’ Marieke Beeuwkes Spence and Daniel Pianko of University Ventures and board member of the impact managers network. (The network includes more than 50 venture, equity and debt funds that manage over $12 billion and have invested in more than 900 companies.) “Now more than ever it’s time to fully mainstream a framework for private investment that generates best-in-class financial returns while advancing objectives around sustainability, economic empowerment, racial justice and more,” Spence and Pianko write in a guest post on ImpactAlpha. “This isn’t wishful thinking.”

Short-term decision making has led to decisions that disregard social and environmental risks – dangers which increasingly, over time, translate into financial risks too. Studies indicate that impact investing can yield superior economic returns. The ways in which impact considerations can drive performance has been documented in research like “The Alpha in Impact.” Now, argue Spence and Pianko, “We need smart policy to establish new rules of the game, enticing more capital to move confidently off the sidelines and into impact.” Impact fund managers are advocating for elimination of fossil fuel subsidies, prohibition of predatory loans to small businesses, tax credits for electric vehicles and charging, restructuring of student debt, state funding for employer-sponsored apprenticeships, and an expansion of medical reimbursements. “Just as private equity investment can be a damaging force when applied with short-term agnosticism,” the authors say, “well-regulated investing that values outcomes in addition to profit can be a tool for positive change.”

Keep reading, “With policy prompts, private equity fund managers can drive social benefits, too,” by Impact Capital Managers’ Marieke Beeuwkes Spence and Daniel Pianko.

Series: Impact Verification

From impact measurement to impact management to impact verification. Every commercial market that has gone mainstream includes both common standards and best practices, and mechanisms for holding market participants accountable to those standards. This story is now repeating itself in the impact investing market, which is poised to scale sustainably thanks to the introduction of new standards and impact verification requirements. Tideline has launched BlueMark as an independent verification business to bring accountability, discipline and comparability to the impact investment market. In the first part of “Impact Verified,” BlueMark’s sponsored series on ImpactAlpha, CEO Christina Leijonhufvud discusses best practices in impact investing and why independent verification is essential to scaling the industry with integrity. 

Keep reading, “From impact measurement to impact management to impact verification,” by BlueMark’s Christina Leijonhufvud. 

Dealflow: Follow the Money

Indian startups and social ventures attracted $1.8 billion in venture capital last month. September was a killer month for venture capital in India, with two record-setting weeks of over $500 million in commitments each. A handful of large funding rounds boosted the total, but early-stage impact startups comprised a significant share of the smaller deals. Companies supporting India’s digital transition, particularly in health, education and financial services, have attracted investors amid the pandemic. Investors also are committing to early-stage energy, cleantech and agriculture startups. Recent deals include: 

  • Clean tech. Etrio, an electric vehicle company focusing on two- and three-wheel vehicles, which comprise a majority of India’s road vehicles, secured $3 million from high-net-worth investors in Singapore. Bangalore-based biogas tech startup GPS Renewables closed $3 million in Series A financing from Hivos-Triodos Fund and Caspian. Sanitation startup ECOSTP raised $250,000 from Habitat for Humanity to install its low-cost, chemical free sewage treatment tech in low-income communities. 
  • Agriculture. Ag-focused financial services company Samunnati secured $20 million in debt from the U.S. International Development Finance Corp. to expand lending and technical assistance to low-income farmers. Gurgaon-based AgroWave raised $500,000 to deliver produce from small villages to customers. 
  • Dig in

Founders First backs OnShore Technology. The Chicago-based “enterprise verification” firm helps biosciences firms and other companies secure software, computer systems and transactions. San Diego-based Founders First provided an undisclosed amount of funding for the company. Founders First, launched last year by Kim Folsom, aims to provide revenue-based financing and support to 500 service-based businesses founded by women, people of color and military veterans (see, Helping diverse founders grow businesses with revenue-based financing). The investment fund has committed to investing $5 million in Chicago-area businesses. Check it out

Signals: Ahead of the Curve

Latin America’s micro-, small- and medium-sized enterprises need working capital to survive and thrive. Latin America’s annual small business financing gap stood at $1 trillion even before the COVID crisis. Now, with 10% of the global population, the region has logged 25% of all COVID cases. The pandemic is exacerbating the capital gap and threatening to reverse recent advances in income and gender equality, economic growth, and employment. As businesses have been forced to stop or slow operations over the past six months, 60% of capital providers in the region think their portfolio companies will need more than $300,000 each, mostly in working capital, to weather continued disruptions and rebound from the crisis, according to a new survey of Latin America’s local capital providers by the Collaboration for Frontier Finance (a sponsor of ImpactAlpha’s Capital on the Frontier series). “The pandemic has exacerbated the need for capital for almost all businesses in the ecosystem,” said Raúl Pomares of Sonen Capital, which sponsored the survey of the new operating environment. The Collaborative polled 90 capital providers supporting Latin America’s small business ecosystem with a total of $3.5 billion in assets under management.

  • Growth potential. Before the pandemic, more than 60% of companies in the capital providers’ portfolios companies were growing revenues by 10% or more each year. Coming out of the pandemic, capital providers are seeking to increase their investments in healthcare, education and financial services, where the pandemic is accelerating digitization. The biggest losers: tourism and travel. A June survey of emerging market capital providers by CFF found that 94% of capital providers believe their portfolio companies need relief funding—specifically concessionary capital and debt.
  • Market maturity. Engagement from local investors committed to local market growth makes Latin America’s market relatively mature compared to Africa’s, for example, CFF’s Drew von Glahn told ImpactAlpha. More than 80% of Latin America’s capital providers are principally based in the region; more than one-quarter have raised their third or fourth funds, including Mexico City-based DILA Capital, which is raising a fourth fund to expand in the region. In June, Corporación Andina de Fomento issued a €700 million, five-year social impact bond to provide COVID economic relief to small and underserved businesses.
  • Ecosystem building. More than 50 organizations that had created Emprendedores Frente al COVID-19 (Entrepreneurs Facing COVID-19) are building an ongoing network to share resources and coordinate support for entrepreneurs (see, “
COVID response spawns network to support Latin American entrepreneurs).
  • Check it out.

Agents of Impact: Follow the Talent

Najada Kumbli, ex- of Calvert Impact Capital, joined Visa Foundation as head of mission investments. Calvert, meanwhile, surpassed $500 million in outstanding Community Investment Notes… Farm Animal Investment Risk and Return, or FAIRR, is hiring a policy director… Paul Ramsay Foundation is looking for an impact investing associate in Sydney… Climate Leadership Initiative seeks a head of global climate strategies… East African Social Ventures is looking for Africa-based board members… Dow Jones has an opening for an ESG investment analyst in Barcelona.

Thank you for reading.

–Oct. 5, 2020