The Brief | January 9, 2024

The Brief: Rebound for impact fundraising?

ImpactAlpha
Credit: Ampersand
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ImpactAlpha

Greetings, Agents of Impact! A few more new year’s tips to maximize the value of your subscription:

In today’s Brief:

  • Rebound for impact fundraising? 
  • Green boda bodas in Kenya
  • Private equity tries quality jobs

Featured: Impact Fundraising

Scrappy fund managers keep capital flowing to impact ventures (The Liist, Jan. 2024). A burst of impact fund closings at the end of 2023 may be a positive sign for fundraising at the end of a difficult year. It remains to be seen whether the rebound will reach managers beyond the mega climate and impact funds of legacy private equity giants and infrastructure firms. This month’s Liist of impact funds that are currently raising capital features smaller and scrappier fund managers hustling to bring capital to underfinanced opportunities in emerging markets.

While some managers pursue innovative structures, others are repurposing standard vehicles for social and environmental impact. Think VC funds for climate tech, or private equity to boost livelihoods for women and youth in Africa. That’s an innovation in itself: Impact vehicles in Africa took in just 2% of impact capital last year, and in Asia, just 10%, according to Pitchbook; three of every four people on the planet live in the two regions. What we’re watching for: institutional interest in emerging market, female and first-time fund managers.

  • Catalytic capital. Maryland-based Total Impact Capital is known for innovative impact funding mechanisms. It’s raising an Impact Notes facility, designed last year with a grant from the Catalytic Capital Consortium, to provide affordable debt to organizations supporting clean energy adoption, local livelihoods and health access in emerging markets. It’s other facility, Azure Source Capital, lends to water service providers in Central America so they can upgrade infrastructure and improve clean water access for customers.
  • VC for Africa. EchoVC is raising its first fund to seed Africa’s homegrown climate tech entrepreneurs and support their investment readiness for the larger climate funds showing interest in the region. Senegal-based Brightmore Capital, a first-time, woman-led firm, is using a traditional private equity fund model to meet the flexible financing needs of small businesses in francophone West Africa. Satgana, in Luxembourg, is raising €10 million to invest in climate tech ventures based in Africa and Europe.
  • First funds. Also on this month’s list: Dangerous Ventures, a first-time manager based in Santa Fe, is bucking the VC preference for software to back hardware and product-based climate ventures. Impact accelerator Spring Impact Capital is raising its first fund for seed-stage social enterprises in Canada. A portion of its fund will support its accelerator program to continue building the country’s impact startup pipeline.
  • Keep reading, “Scrappy fund managers keep capital flowing to impact ventures,” by Jessica Pothering on ImpactAlpha.
  • ✅ Subscriber benefit. Search the Liist of more than 100 impact funds that have raised capital in the past year on ImpactAlpha’s growing database. Know an impact fund manager currently raising capital? Complete this short form.

European and Canadian climate tech fund managers buck the VC downturn. Climate tech deals may have taken a steep 30% drop last year, but the climate funds keep on coming. The latest additions: Eurazeo launched a €1 billion ($1.1 billion) climate impact fund to invest in decarbonization, the circular economy, biodiversity, energy efficiency and other climate solutions. The French global investor in July last year closed a €400 million venture fund to invest in smart cities, and is in fundraising mode for a pair of green transition and sustainable maritime funds. As of mid-2023, research firm Sightline Climate tallied $121 billion in private climate tech fund assets under management, including $33 billion of investable dry powder.

  • True north. In Canada, Montreal-based Diagram is nearing its C$60 million (US$45 million) target for its first fund, which is focused on early-stage companies developing digital solutions for the sustainable economy. The fund is primarily seeking investments in Quebec. It has secured commitments from the state government’s Investissement Quebec, and Sagar, a Montreal-based asset management firm. Also in Canada, Active Impact Investments is seeking $120 million for its third early-stage climate tech fund.
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Dealflow: E-Mobility

Rwanda’s electric motorcycle maker Ampersand raises $19.5 million for fleet expansion. Kigali-based Ampersand seeks to build and finance a fleet of five million electric taxi motorcycles and battery swapping stations across East Africa by 2030. The goal: make electric motorcycles cheaper to buy and operate than gas-powered motorbikes. “Our technology continues to advance, alongside the now rapid march of government e-mobility policies across Africa and removal of fuel subsidies,” said Ampersand’s Josh Whale. “Our addressable market continues to grow.”

  • Two-wheeling. The infusion of capital will help Ampersand reach its goal of putting more than 10,000 electric motorcycles on the road this year. Ecosystem Integrity Fund led the round, with participation from Acumen, Alphamundi VC, TotalEnergies, Beyond Capital Ventures and other investors. The financing includes $7.5 million in debt from Cygnum Capital’s Africa Go Green Fund. Ampersand says its commercial model helps drivers spend less to operate and take home more at the end of each day.

Dealflow overflow. Investment news crossing our desks:

  • The Energy Department’s Loan Programs Office greenlighted a $189 million conditional loan to LongPath Technologies to build a methane emissions monitoring network. (DOE)
  • The Patrick J. McGovern Foundation awarded $66.4 million in grants to 148 organizations demonstrating AI’s potential for positive impact, including the World Resources Institute and Transform Health. (McGovern Foundation)
  • Seattle’s Recurrent raised $16 million in Series A financing, backed by ArcTern, Goodyear and Wireframe Ventures, for tracking the health and performance of used electric vehicle batteries. (Geekwire)
  • Health In Her HUE, a Black woman-led health tech venture working to reduce health disparities for women of color, clinched $3 million in seed funding from Johnson & Johnson Impact Ventures, Genius Guild, HBCU Founders Fund, Seae Ventures and other investors. (Health In Her HUE)
  • Chicago-based WellBe Senior Medical scored an investment from CVS Health Ventures to provide at-home care so seniors can age in place. (WellBe)

Signals: Impact in Private Equity

Blackstone, KKR and Bain seek to create value with quality jobs. Tired: Cost cutting and financial engineering. Wired: Investments in workers as assets. The private equity industry owns firms that employ at least 12 million people. Now, some of the largest firms, including KKR, Blackstone, Bain and Two Sigma, are embracing strategies to advance the skills and benefits of workers to win deals, unlock value and outperform in a crowded marketplace. The private equity industry, better known for layoffs and restructuring, can be a key lever in creating quality jobs, says Megha Bansal Rizoli of Jobs For the Future (see, ‘A’ for Effort: Private equity giants Bain, Apollo, TPG and KKR grade their own impact initiatives”). “The old ways of working aren’t the only ways of working anymore,” she tells ImpactAlpha. With the number of PE firms doubling over the past five years to 19,000, competition and regulatory pressure are pushing firms to see talent not as a cost to be cut, Bansal Rizoli says, but “as a core asset of a business that can be a growth strategy [and] a strategy for innovation and scale for those companies.”

  • Levers to pull. Nonprofit JFF aims to have 75 million people employed in “quality jobs” over the next decade. Its new report finds PE firms clustering around three levers to drive job quality: designing quality jobs, including compensation, advancement and culture (HCAP and Two Sigma Impact); building inclusive pathways for workers (Blackstone and Bain); and advancing employee-ownership models (KKR and Apis & Heritage). It’s about “alignment of incentives,” says Bansal Rizoli. “Doing well for workers will grow your businesses, will get you higher valuations, will get you higher returns.”
  • Impact alpha. KKR is establishing employee-ownership programs at each company it buys through its $19 billion Americas Fund XIII; nine exits from the fund so far have returned between 3x and 10x the amount of KKR’s invested capital (see, “Ownership economy gets a payday as factory workers share in KKR’s exit”). Blackstone’s ‘Careers Pathways’ program has worked with nearly 50 portfolio companies to source overlooked talent. The program is embedded in portfolio operations, “which signals to the business its importance,” says Bansal Rizoli. More than two-thirds of the companies in Bain Capital’s portfolio measure “employee engagement” by geography and demographics, following a Bain push to support internal HR teams.
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Agents of Impact: Follow the Talent

The Global Impact Investing Network promotes Sapna Shah, formerly the GIIN’s chief program and operating officer, to the new post of president. Amit Bouri continues as chief executive officer… Kataly Foundation is hiring a managing director of programs in the San Francisco Bay Area… Queen University’s Institute for Sustainable Finance is recruiting a managing director. 

Boosting Opportunities is on the hunt for an impact investing associate in Mexico… Project Equity seeks a remote manager of policy and impact… NDN Collective has openings for a director of institutional philanthropy, a program officer and other positions in Rapid City, SD… Volunteers of America’s Futures Fund Community Health Incubator is accepting applications from entrepreneurs… 

👉 View (or post) impact investing jobs on ImpactAlpha’s new Career Hub.

Thank you for your impact!

– Jan. 9, 2024