The Brief | July 25, 2022

The Brief: Quasi-public impact investors, early tech in emerging markets, decarbonizing real estate, off-grid solar in Africa, Indonesian agri-tech

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Greetings, Agents of Impact!

Featured: Muni Impact

How ‘The Port’ is drawing private investors to redress Cincinnati’s racial wealth gap. The role the Port of Greater Cincinnati Development Authority wants to play: market maker. The quasi-governmental agency, known as The Port, is deploying public financing, private-sector expertise and its own real estate to jumpstart economic activity and attract responsible follow-on investment in the riverfront city’s most undercapitalized neighborhoods. The Port has issued bonds to bring small manufacturers back to the once-thriving city. In December, it orchestrated the purchase of almost 200 homes from Los Angeles-based Raineth Housing, a private investor that had let the rental homes fall into disrepair – and then into foreclosure. The plan: renovate the properties and give long-marginalized residents a path to home ownership. “The Port is clawing affordably priced homes back from the grips of predatory institutional landlords, creating opportunities for homeownership, bringing manufacturing back to the city, and prioritizing minority-owned businesses in all of our efforts,” says The Port’s Laura Brunner.

Development finance agencies, housing finance agencies, private financial institutions and impact investors convened in Cincinnati this month to mobilize capital for The Port’s industrial and neighborhood revitalization. The two-day “investor challenge” was part of the Accelerating Community Investment initiative of the Lincoln Institute of Land Policy, supported by the Heron Foundation. “We are priming private investors to view public funds as first-in capital,” says Lincoln’s R.J. McGrail. Local leaders are optimistic about leveraging federal dollars through the American Rescue Plan and Bipartisan Infrastructure Law to address systemic inequities, reports Rachel Reilly of Aces & Archers. But surging housing costs and the prospect of recession threaten to plunge struggling residents and communities deeper into poverty. In Cincinnati, investors met with Mayor Aftab Pureval and toured a potential Advanced Manufacturing District in the city’s West End and other capital-starved communities where the Port hopes to catalyze investment. “We have successful proof points that indicate we can reduce the racial wealth gap by inclusively transforming and expanding ownership of real estate,” says Brunner. “Now, we need more capital to accelerate our work and scale our impact.” 

Dealflow: Catalytic Capital

Seedstars raises $20 million for early-stage impact startups in emerging markets. The Geneva-based fund is targeting a $30 million final close for Seedstars International Ventures, which will back up to 100 scalable impact tech ventures with pre-seed to Series B financing. International Finance Corp. provided first-loss capital to catalyze investments in lower-income countries such as Bangladesh, Nigeria, Ghana, Tanzania and Senegal. The catalytic tranche will “provide downside protection should the investments in those markets not work out as planned,” Seedstars’ Charlie Graham-Brown told ImpactAlpha. Other anchor investors include Swiss asset manager Symbiotics, Visa Foundation and Rockefeller Foundation, which invested via its Zero Gap Fund, a $30 million fund it launched with MacArthur Foundation and the Catalytic Capital Consortium, or C3. Zero Gap last week reported that it has mobilized more than $580 million in private capital to meet the U.N. Sustainable Development Goals.

  • Impact tech. The venture fund will invest in early-stage startups in financial inclusion, digital commerce, the future of work, health and education. Seedstars aims to invest the fund evenly across Latin America, Asia and Africa. Seedstars’ first emerging market venture fund, which raised just under $10 million, invested in 81 companies in more than 30 countries.
  • Gender lens. Seedstars aims to qualify for the 2X Challenge, which incentivizes funds to emphasize women’s employment, entrepreneurship and leadership (for context, see “With billions as bait, development financiers seek to hook private investors on gender-lens investing). Portfolio companies will be required to have at least one female founder and will receive gender diversity training. “Consciously, we’ve built and hired a team that’s 50-50 male and female at every level,” said Graham-Brown. “We figured if we’re asking portfolio companies to look out for this, we should start with ourselves.”
  • Dive in

Fifth Wall closes $500 million climate fund to decarbonize real estate. Buildings across the world contribute nearly half of global carbon emissions. Property tech investor Fifth Wall’s first climate fund is investing in software and hardware, clean energy and energy storage, smart buildings and other decarbonization tech solutions for real estate companies. More than 100 real estate organizations have invested in Fifth Wall, including BNP Paribas Real Estate, CBRE, Cushman & Wakefield and Marriott International. New investors include BBVA, Hilton, MGM Resorts and American Homes 4 Rent.

  • Climate tech. The real estate organizations have access to Fifth Wall’s portfolio companies as potential clients. The fund has made nine investments, including low-carbon cement producer Brimstone, hydrogen-fuel producer Electric Hydrogen, home energy retrofitter Sealed, and SPAN, which is reinventing the lowly circuit panel. “Real estate organizations that prioritize R&D investment have developed a real competitive edge over their peers,” said Fifth Wall’s Greg Smithies. The fund brings Fifth Wall’s total assets under management to $3.2 billion.
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D.light raises $50 million in debt as investors warm up (again) to off-grid solar. The pioneer in low-cost solar products for off-grid households secured debt financing to extend its product line and consumer financing business in Africa. FMO, Trade and Development Bank and off-grid solar lender Mirova SunFunder invested. The lenders denominated a portion of the capital in local currencies to make d.light “more resilient to potential shocks,” said FMO’s Marina Pannekeet. The deal brings d.light’s total raised in 2022 to more than $300 million.

  • Pay-as-you-go. It has taken a decade or more for the off-grid solar market to reach critical mass. The remote, rural and low-tech nature of many off-grid households, particularly in Africa, challenged early pay-as-you-go business models. Some solar providers folded, others pivoted upmarket. D.light, Bboxx and others are offering an expanding range of products and services to existing customers (see, “Can off-grid solar keep focus on energy access for the poor as commercial capital arrives?“).
  • Bright spots. Investor interest in off-grid solar resurged last year, after a five-year period of effectively flat investments. This year, Sun King raised $260 million in equity – more than twice the total equity capital committed to pay-as-you-go solar companies in 2021. Other big deals: d.light raised $238 million in June for its second Brighter Life Kenya multi-currency debt facility; M-KOPA raised $75 million, led by Generation Investment Management; and French asset manager Mirova acquired SunFunder.
  • Check it out

Dealflow overflow. Other investment news crossing our desks:

  • Sudanese fintech venture Bloom, which offers high-yield savings accounts and digital banking services, raised $6.5 million in seed funding from Visa, Y Combinator and others after participating in Visa’s Fintech Fast Track Program.
  • Energy tech company Nabors Industries invested $7 million in Natron, a developer of sodium-ion batteries, which do not require lithium, cobalt, copper, nickel and other difficult-to-obtain minerals.
  • AgriAku clinched $35 million from Alpha JWC Ventures, Go-Ventures and others to digitalize services in Indonesia’s agricultural value chain.
  • Egypt’s Algebra Ventures secured $10 million for its second early-stage tech fund from FMO. Algebra previously raised capital from the International Finance Corp. and the European Bank for Reconstruction and Development

Agents of Impact: Follow the Talent

Matt King, co-founder of Santa Fe’s immersive art institution Meow Wolf, has died at age 37 (for background, see “Santa Fe funhouse Meow Wolf raises $17.5 million to expand its creative economy)… Agnes Dasewicz, ex- of SEAF, joins U.S. International Development Finance Corp. as chief operating officer… Chris Castro, who helped lead Green Works Orlando, joins the U.S. Department of Energy as chief of staff to the office of state and community energy programs.

Jason Sukhram, ex- of MaRS Discovery District, joins Quinn+Partners as impact services lead and engagement manager. Chelsie Hunt, previously an ESG consultant, joins the firm as senior analyst… A team of German scientists led by Tobias Erb at the Max Planck Institute for Terrestrial Microbiology is awarded a $1 million prize to fight climate change with “photosynthesis 2.0.”

Thank you for your impact!

– July 25, 2022