Greetings Agents of Impact!
In today’s Brief:
- The sustainability disruption of the $3 trillion fashion industry
- Small business lending in Indonesia
- Access to health products in Africa
- Inclusive impact management and other short signals
Featured: Sustainable Fashion
To disrupt the $3 trillion fashion industry, VCs back tech for sustainability and authenticity. Innovation loves inefficiency. Mismanagement of resources, workers and customers in the $3 trillion fashion industry has opened multiple lanes for creative founders with new technologies and nimble business models to create new supply chains, and disrupt old ones, for clothing, footwear, jewelry, accessories and home decor. The value-proposition: Technology and business innovation can deliver greater quality, choice and values-aligned fashion that meets changing customer demands for authenticity and sustainability. For venture investors, the opportunity to build billion-dollar companies lies in the technology and tools to enable that disruption. Rather than betting on brands, these VCs are investing in the materials, operations and software they think can define the future of all brands. “We invest in tools to help designers and merchandisers and people at brands to make better decisions on what they should be producing, how it’s produced, and how it’s sold,” says Karla Mora of Alante Capital, based in Santa Barbara, Calif. The early stage sustainable fashion venture firm was co-founded by Eileen Fisher, whose Eileen Fisher Inc. is a public benefit corporation as well as a fashion powerhouse. The outcome of its strategy may be greater sustainability, says Mora, but the driver is competition.
- Sustainability alpha. Fisher, a venture partner, anchored Alante’s first, “proof of concept” fund of just over $10 million; Alante held a first close of its second fund earlier this year. Mora said Fisher felt the need to go beyond a commitment to sustainability to build tools to move multinational brands like Gap, H&M and Nike. The question became, “How can we make this just the way products are made?” Mora tells ImpactAlpha. “How can we invest in systemic change so that there are viable alternatives to how things are done? That can work within the confines of a huge corporate brand?” Alante has backed more than 15 companies, including Denver-based Matereal, which produces a biodegradable alternative to polyurethane, a toxic, petroleum-based product used widely in the industry for adhesives and coatings. London-based Fibe is making a cotton alternative with potato-stem waste, requiring no new land and 100% less water.
- Overlooked customers. Culturally appropriate products can meet the needs of customers the industry has largely overlooked. New York-based SoGal Ventures invested Myya, which helps cancer survivors shop for bras and prosthetics after surgery. True Beauty Ventures is backing Cay Skin, a skincare line founded by supermodel and beauty activist Winnie Harlow for “every skin tone, freckle, body type and beauty mark.” Willow Growth Partners in Los Angeles backed Tom Boy X, a queer- and women-founded company that sells sustainably made underwear for all sizes and gender expressions. Upstart Co-Lab’s “inclusive creative economy” investment vehicle, which held a first close of $15 million this year, has backed SoGal, True Beauty, and Willow Growth. All are led by women and VCs of color and are raising their second funds. “The inspiration, the design, the ingredients, the formulation, the approach of the products come from culture and heritage, or they’re for a community that isn’t doesn’t feel seen otherwise,” says Upstart’s Laura Callanan. “You have a very passionate consumer base, which makes for good business.”
- Fall fashion. The new shape of fashion can be glimpsed on and off the runways as back-to-back-to-back “fashion weeks” kick off in New York on Friday, followed by London, Milan and Paris. “Sustainability is definitely on people’s minds more,” says Alante’s Leslie Harwell. She hints that an Alante portfolio company will be featured in a collection, but she’s keeping the details a secret for now. It’s hard for smaller companies to make a splash, she says. The real discussion of sustainable fashion will happen at a growing roster of (often invite-only) side events. In New York, Decolonizing Wealth Project’s party will celebrate Indigenous designers, industry leaders, superstars, and disruptors. Remake’s “Walk your Values” runway show will put a focus on garment workers and model the conscious fashion movement. Online, United Nations Fashion and Lifestyle Network will host “Fashion with integrity: The imperative of fair labor practices,” Monday, Sept. 9.
- Keep reading, “To disrupt the $3 trillion fashion industry, VCs back tech for sustainability and authenticity,” by Dennis Price on ImpactAlpha. Cordes Foundation sponsors ImpactAlpha’s coverage of Sustainable Fashion.
Dealflow: Investing in Health
French pharmaceutical giant makes strategic investment in Rwandan health e-commerce company Kasha. Kasha Global launched in 2016 to improve access to menstrual care products, contraceptives and pharmaceuticals for low-income women in Africa. Customers can order goods and medications from even feature mobile phones. A network of mostly female agents handles last-mile delivery in Rwanda, Burundi, the Democratic Republic of the Congo, Kenya and South Africa. The company is expanding to West Africa. Kasha raised an undisclosed amount of equity capital from Sanofi’s Global Health Unit to expand delivery of medications for chronic diseases like diabetes and hypertension in the markets it serves. The investment follows a $21 million in a Series B equity round last year that was led by South African private equity firm Knife Capital. Sanofi’s investment will “make it easier and more affordable for people to get the medications they need, especially lower income and rural customers,” said Kasha’s Joanna Bichsel.
- Investing in health. Sanofi’s Global Health Unit, the nonprofit arm of the Paris-based pharmaceutical company, was set up to provide access to affordably priced drugs to people in low- and middle-income countries. It sells blood thinners for heart disease, as well as diabetes and cancer drugs. The nonprofit has reached about 250,000 people and aims to serve two million by 2030. “We recognize the importance of investing in local entrepreneurial businesses that strengthen and support sustainable healthcare delivery models and improve outcomes,” Sanofi Global Health Unit’s Jon Fairest said. He cited Kasha’s “unique physical and tech infrastructure for the last mile.”
- Check it out.
HSBC provides Validus with $50 million in debt to fuel small business lending in Indonesia. Small businesses in Southeast Asia employ 85% of the region’s workforce and contribute nearly half of its GDP. They face a financing shortfall of nearly $300 billion annually. Singapore-based Validus provides digital lending for micro, small and mid-sized businesses in Indonesia, Thailand and Vietnam. Borrowers with a credit report and six months of bank statements – something many small businesses lack – can within a day get approved for an unsecured loan of up to $150,000 – something few mainstream financial institutions can match. Validus also provides invoice and purchase-order financing. It says it has originated $3.5 billion in loans since 2015. HSBC provided a debt facility of $50 million from its $1 billion ASEAN Growth Fund to boost lending in Indonesia, Valdius’s biggest market. Its Indonesian lending is also supported by microfinance lender Oikocredit and Dutch development bank FMO.
Dealflow overflow. Investment news crossing our desks:
- TPG Rise Climate acquired Miratech, a Tulsa, Okla.-based company that specializes in managing emissions from engines in hard-to-decarbonize industries. (TPG)
- Dutch venture capital investor SET Ventures raised €200 million ($263 million) to invest in European clean energy companies. (TechCrunch)
- Boston-based GALY secured $33 million in a Series B round led by Breakthrough Energy Ventures to make a lab-grown cotton alternative with a lower carbon footprint than traditional cotton. (GALY)
- Fido, which uses AI to underwrite loans to informal and small businesses in Ghana and Uganda, scored $30 million debt and equity funding from FMO, BlueOrchard and other investors. (Techpoint)
Short Signals: What We’re Reading
🤝 Inclusive impact management. As impact and sustainability reporting coalesces around key frameworks and standards, GSG Impact (formerly the Global Steering Group for Impact Investment) suggests that “large enterprises obligated to disclose information regarding their supply chains ought to provide assistance to their suppliers, enabling them to fulfill the minimum reporting.” In “Impact Transparency from the Ground Up,” the GSG argues that for large companies, an inclusive reporting design that brings along small businesses in the Global South, “is very much in their own self-interest.” (GSG Impact)
🏃♀️ Leapfrogging the clean energy gap. Nearly four billion people lack reliable and sufficient access to electricity. Closing “the green power gap” as the Rockefeller Foundation calls it, will require 8,700 terawatt-hours – twice the current annual generation of the US – of clean power across 72 countries by 2050. From “gradual grid greening” in India, to “decentralized solar storage” in Burkina Faso, the foundation lays out four pathways for seizing the “green window of opportunity.” (Rockefeller Foundation)
🌬️ Waste-to-wind. Researchers at the National Renewable Energy Laboratory in Golden, Colo., are developing a recyclable material for making wind turbines using wood, plants, agricultural waste and used cooking oil. The design is meant to address the growing problem of “wind turbine graveyards.” Without alternative materials and recycling methods, turbines could generate 43 million tons of landfill waste by 2050. (The New York Times)
🏢 Impact through infrastructure. Since 2015, the number of infrastructure impact funds has more than tripled to 357, according to the latest report from Phenix Capital. The majority of such funds target Sustainable Development Goal No. 7, “affordable and clean energy,” and are in developed markets. In total, such funds have raised more than €150 billion ($166 billion). (Phenix Capital)
⚡ Energy transition progress report. Commitments to decarbonization and the energy transition are at an all-time high. But a new report from McKinsey flags a “reality gap” in those pledges. Holding back crucial investment decisions: inconsistent economic returns, policy unpredictability, the cost-competitiveness of clean technology, and the long timeframe for scaling nascent technologies. “A significant proportion of announced projects have not yet reached the final investment decision stage at which projects are greenlit,” write the authors, meaning ‘there is a continuing risk of cancellation or leakage.” (McKinsey)
Agents of Impact: Follow the Talent
Impact Capital Managers adds Justin MacLennan, previously with Wellington Management, as a research and impact measurement and management analyst… Isabella Chan, previously with Bank of America, joins Blue Earth Capital as a private equity analyst… IMPAQTO seeks a commercial leader… Opportunity Finance Network is looking for a chief financial officer, an accounting senior associate, a grant management and compliance vice president and other roles.
Mission Investors Exchange will host a webinar with legal experts including Emily Cuneo DeSmedt and Tomer Inbar of Morgan Lewis and MIE’s Katheryn Witt for a conversation on the Fearless Fund’s legal challenges, Tuesday, Sept. 17… Impact Engine, in collaboration with Builders Vision, Chicago Community Trust and the MacArthur and McKnight foundations, is hosting its annual Midwest Impact Investing Showcase in Chicago, Tuesday, Oct. 1.
👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.
Thank you for your impact!
– Sept. 5, 2024
