The Brief | August 15, 2019

The Brief: Impact investing platform shakeout, cutting food waste, seeding inclusive fintech, blended financing for smallholders, beyond venture capital

Dennis Price
ImpactAlpha Editor

Dennis Price

Greetings, Agents of Impact!

Featured: ImpactAlpha Original

Shakeout highlights an elusive factor in impact investing platforms: the impact. Breathless headlines captured the ambitions of the new crop of impact investing platforms for retail, or smaller, investors. OpenInvest touted the “first impact investing category to end human trafficking,” while Swellpromised to help build “a portfolio of companies that make the world a better place.” Ethic last year linked its growth in assets under management to “impact in metric tons of carbon saved.” Earlier this year, OpenInvest’s Joshua Levin opened up to ImpactAlpha about the difficulty getting clients to switch to a new platform, saying, “To go out and acquire people head-to-head costs more money than you’ll make.” When Swell shut down last month, Bloombergsuggested the new retail platforms were “wrong” about the readiness of Millennials to commit to values-aligned investing.

In a guest post on ImpactAlpha, Align Impact’s Hummayun Javed suggests a more fundamental issue: Retail investors don’t buy the platforms’ promises of actual impact. “The problem might lie in linking personalization of your portfolio to measurable impact in the world,” he writes. A Rockefeller Foundation report this summer found retail investors are apt to believe impact investments can generate financial returns. It’s the “impact” they’re not so sureabout. One factor may be the limited impact of public-equities investing. “Shareholder engagement” campaigns can make a difference, but as Javed points out, such strategies “require holding stocks in companies you disagree with, rather than excluding them from your portfolio.” Some retail impact investing platforms are moving beyond public equities, to banking (AspirationGood Money) or private debt (CNote). Others are betting on robo-advising (EllevestVestive). It seems the competition among startups to channel the assets of tens of million of U.S. retail investors may be fought over the depth of their social and environmental impact. And that’s just swell.

Keep reading, “Shakeout highlights an elusive factor in impact investing platforms: the impact,” by Hummayun Javed of Align Impact.

Dealflow: Follow the Money

Bioenergy Development clinches $106 million to manage organic waste in cities. The financing from Newlight Partners, a spinoff from Soros Fund Management, will help Maryland-based Bioenergy build waste-to-fuel plants across North America.

Hazel Technologies and Cambridge Crops raise capital to combat food waste. Chicago-based Hazel raised $13 million for packaging inserts that slow food decay. Separately, Boston-based Cambridge Crops closed $4 million from The EngineClosed Loop Ventures and others for its silk-based edible food coating.

Village Capital, MetLife, PayPal ramp up global fintech accelerators. The partners are launching Finance Forward, a multi-year initiative to seed 100 startups focused on improving financial health. MetLife is committing $850,000 for seed funding.

Aceli Africa wins Convergence grant to blend finance for smallholder farmers. The Global Development Incubator and Council of Smallholder Agricultural Finance will use the funds to establish the blended finance facility for small and growing African agribusinesses.

Impact investors commit $3.4 million to Indian agtech startup GramophoneAsha Impact and Better Capital invested alongside online advertising company InfoEdge, backing Gramophone’s product marketplace and advisory services to smallholder farmers.

Signals: Ahead of the Curve

Beyond venture capital: More impact investors offer alternative financing. Less than 2% of entrepreneurs ever raise venture capital, the high-risk, equity-based funding that carries high expectations for returns. That leaves opportunities to back a lot of growing businesses for investors that can provide more appropriate types of financing. Viewing the world through the VC lens “limits the range of opportunities investors can access for returns,” writeVillage Capital’s Rob Tashima and Zebras Unite’s Astrid Scholz. Investors have developed a range of alternative term sheets. VilCap Investments(Village Capital’s investment arm), Candide GroupIndie.vcLighter Capitaland Earnest Capital all provide upfront financing in return for a share of future revenues (often capped). Mexico’s Adobe Capital closed a $30 million second fund that uses “quasi-equity convertible loans.” In his own post, Candide Group’s Aner Ben Ami argues, “We need many more funds to think this way if we’re going to enable the creation of more independent, diverse, mission-driven and sustainable companies,” and explores the pros and cons of alternative models.

  • Different strokes. Alternative capital providers are targeting different sectors and stages, and offering founders different terms. Betaworks’ Matt Hartman details many of the offerings in a useful Twitter thread(psst… the replies are just as good).
  • Common language. Village Capital and Zebras Unite are developing a prototype taxonomy of alternative capital structures and are seeking to mobilize investors and entrepreneurs to make sense of the movement.
  • On the agenda. Alternative (and inclusive) capital is part of the program at Village Capital’s Pathways to Capital event in Philadelphia next month. For a recap of last year’s dedicated Alternative Capital Summit, see, “Re-plumbing business financing with alternative capital structures.
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Agents of Impact: Follow the Talent

Sandra Sainz, ex- of Cantera Capital, joins Promotora Social Mexico as investment officer of impact investing… Luis Ubiñas, former president of the Ford Foundation, joins the board of CDFI-certified fintech company Aura… Charity Bank is looking for a compliance and financial crime officer in Tonbridge, U.K.… Investir&+ is recruiting a partner in Paris… Nike Valiant Labs seeks an entrepreneur-in-residence for emerging markets in Portland, Singapore, Mexico City or remote… World Benchmarking Alliance is hiring a research analyst… The Global Development Incubator is looking for a branding, marketing and communications lead in Washington DC, New York, or San Francisco… Register now for the Latin American Impact Investment Forum for Central America and the Caribbean, November 13-14 in Antigua, Guatemala.

– Aug. 15, 2019