The Brief | April 7, 2020

The Brief: Responsive capital for small and growing businesses, Visa Foundation’s gender lens, farmers-to-market in India, keeping impact on track

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Greetings, Agents of Impacts!

Featured: ImpactAlpha Original

Needed: Responsive, aggregated and accessible capital for (once) growing businesses in Africa, Asia and Latin America (audio). A viable company is a terrible thing to waste. A whole generation of otherwise viable small and growing ventures that deliver pro-social goods and services around the world is on the edge of failure because of the COVID crash. In emerging markets, no less than developed ones, revenues and demand have evaporated, supply chains have ground to a halt, exports have collapsed and customers are slow to pay. “In terms of business hospitalization, and putting many of these companies and their employees in economic intensive care units, we are six to nine weeks behind the human health tsunami,” said GroFin’s Brienne van der Walt, from Mauritius, on ImpactAlpha’s Agents of Impact conference call last week. “We need to get these guys through the next three to six months before we can begin rebuilding.” Even as relief and recovery funds begin to flow, “Often there’s a big gap between demonstrative need and ability to draw down on that funding,” said Evan Jones of South Africa-based Inyosi Empowerment.

Co-hosting The Call was the Collaborative for Frontier Finance, which is developing a facility to backstop local providers of debt and equity capital with liquidity – and therefore time. The Collaborative’s Drew von Glahn warned of a liquidity crisis “that if we don’t address properly will soon become a solvency problem.” Responsive, aggregated and accessible is how Laurie Spengler of Courageous Capital Advisors summarized the “design principles” for such facilities. “Responsive to the need, fast, simple, speedy. Get it going,” said Spengler, who is working with the collaborative. Accion Venture Lab’s Tahira Dosani said one-off rescue funds would be of limited value. Rather, limited partners and other asset owners could together design common facilities. “How can we create these quickly, and with a flexible structure, that actually serves the needs of these companies?” she challenged participants on The Call. Even before the crisis, “Not enough capital was flowing to the segments that really needed it,” said Uganda-based iungo capital’s Roeland Donckers. “So it’s not just asking ourselves ‘What can we do now?’ but also starting to ask ourselves the question, ‘What can we do better post-COVID?’”

Read on and listen in, to “Needed: Responsive, aggregated and accessible capital for (once-) growing businesses,” by Jessica Pothering and David Bank on ImpactAlpha.

Dealflow: Follow the Money

DeHaat secures $12 million to link India’s farmers to markets. Gurgaon-based DeHaat’s online marketplace connects India’s smallholder farmers to buyers, and to farming equipment, inputs and financing. It serves more than 200,000 farmers in the rural and poor states of Bihar and Uttar Pradesh, as well as Jharkhand and Odisha. Sequoia India led the company’s $12 million Series A round, backed by Dutch development bank FMO and existing investors Omnivore and AgFunder.

  • Critical connections. Services like DeHaat are all the more crucial when markets aren’t functioning normally, like right now, Omnivore’s Mark Kahn told ImpactAlpha. “Farmers in rural India are in a difficult position,” without knowing which buyers are active and which aren’t. “DeHaat is addressing information asymmetry that farmers couldn’t on their own.”
  • Read on.

Visa Foundation to provide $210 million for COVID relief, with a gender lens. A $10 million initiative will offer immediate emergency relief to charities delivering health services and food on the frontlines of the global crisis. Over five years, Visa Foundation will provide $60 million in grants to non-governmental organizations supporting small and micro business owners in emerging markets, specifically those run by or supporting women. The foundation will place $140 million with investors “that generate positive social and financial returns” for such businesses. “When women thrive, communities thrive,” said Visa Foundation’s Graham McMillan. “We know this matters now more than ever as the global economy seeks to recover and rebuild.”

Diligent Robotics closes $10 million round to alleviate nurses’ workload. The Austin-based startup’s hospital bot, Moxi, handles menial tasks, enabling nurses to focus on specialized parts of their jobs. DNX Ventures led the Series A round, which was backed by numerous existing investors.

Impact Voices: Pass the Mic

How investors can manage risk and keep impact on track during the COVID crisis. The coronavirus crisis caused many deals to be put on hold or canceled outright. Nearly all of those have been mainstream financial market deals. “The impact marketplace seems to be reacting somewhat differently,” Chintan Panchal of RPCK Rastegar Panchal and Confluence Partners’ David Press write in a guest post on ImpactAlpha. The authors posit that the way impact investors allocate risk in a crisis may give them a leg up. Just as impact investors consider impact on employees, customers and connected businesses of a potential investee, “we see impact investors looking to those same constituencies when considering their options in light of the global shocks created by COVID-19.”

  • Broad toolset. Traditional investors might reach for the “big guns,” say Panchal and Press. Contractual clauses such as force majeure and “material adverse change” can halt financing. Such binary measures have consequences, including loan defaults, cash crunches that cause layoffs, or even business failures. Impact investors can be more nuanced in adjusting purchase prices, revisiting representations and warranties, and strengthening covenants. Impact investors can also help their investees identify bridge loans or co-investors. Panchal and Press agree with Maya Winkelstein and Caroline Bressan of Open Road Alliance, who wrote in ImpactAlpha last week that “now is the time to get creative.”
  • Keep reading: How investors can manage risk and keep impact on track during the COVID crisis,” by Chintan Panchal and David Press on ImpactAlpha.

Agents of Impact: Follow the Talent

Edward Mason joins Generation Investment Management from the Church of England… Microsoft’s Brandon Middaugh has been named director of the company’s Climate Innovation Fund… Lindsay Smalling, ex- of Social Capital Markets, joins 60 Decibels as head of U.S. sales… The Milken Institute has rescheduled its 2020 Global Conference for October 12-15 in Beverly Hills, Calif… Climate Week NYC will proceed as scheduled from September 21-27. The Climate Group will host the event on a virtual platform.

Thank you for reading.

–Apr. 7, 2020