The Brief | April 5, 2023

The Brief: VC alternatives for diverse founders, energy efficiency in Europe, inclusive fintech in Uganda, AI and disability, rewilding as a climate solution

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Greetings, Agents of Impact! 

Featured: Returns on Inclusion

VC alternatives for diverse founders gain traction after the collapse of Silicon Valley Bank. The demise of Silicon Valley Bank is opening opportunities for business financing alternatives. “That’s especially true for models that serve women and business owners of color, who have long faced systemic inequities within the business financing ecosystem,” Founders First’s Tracy Fuga writes in a guest post on ImpactAlpha. SVB, one of the most prominent technology-focused banks in the U.S., was known for its commitment to Black and Latine founders. Funds, many led by people of color, have grown to provide founders with non-dilutive capital (Founders First Capital Partners), opportunities to create worker owners (Apis & Heritage), and other ways to address racial wealth gaps through entrepreneurship (New Majority Capital). “We’re on a mission to create an inclusive economy, and we’re doing that through non-dilutive financing,” says Founders First’s Kim Folsom. “Diverse founders struggle with obtaining traditional bank financing or connecting with venture capitalists or angel investors who would be interested in funding their businesses because they’re not the next Facebook or Google.”

  • Seeding inclusion. Catalytic investors are stepping up to fund this new generation of managers. Founders First closed an $11 million round in 2021 with equity financing from the Rockefeller, Kellogg, Surdna and Kauffman foundations, Spring Point Partners, and Arc Chicago, a fund backed by MacArthur Foundation. Apis & Heritage’s first Legacy Fund included funding from the Rockefeller, Kellogg, Ford, Skoll and Robert Wood Johnson foundations, along with Capricorn Investments and Gary Community Investments. RSF Social Finance is leading New Majority’s community round.
  • Alt-VC. The rise of VC alternatives for diverse founders is the subject of Innovating for equity in an uncertain economy: state of social justice impact investing,” a Founders First webinar being held on Thursday, April 13 and co-hosted by ImpactAlpha, Mission Investors Exchange and Rockefeller Philanthropy Advisors. On the agenda are fund managers including Todd Leverette of Apis & Heritage, Allegra Stennett of New Majority Capital, and Kim Folsom from Founders First, as well as catalytic investors, Cate Costa of JPMorgan Chase, John Balbach of MacArthur Foundation, Susie Lee of Kellogg Foundation, Living Cities’ Thaddeus Fair, and moderated by ImpactAlpha’s Dennis Price.
  • Keep reading, “VC alternatives for diverse founders gain traction after the collapse of Silicon Valley Bank,” by Founders First’s Tracy Fuga. 

Dealflow: Energy Efficiency

Investors target home energy efficiency in Europe. European climate tech investing is defying the lull in venture capital dealmaking (see “Deal Spotlight”). Energy Impact Partners, Fair Capital Partners and Energiiq invested €15 million ($16.4 million) in HeatTransformers, a Dutch startup that sells, installs and services heat pumps in the Netherlands. The deal follows investments last week in U.K.-based smart water-heater maker Mixergy and Denmark’s Lun, which helps heat-pump installers find customers and complete installations.

  • Hot for heat pumps. Sales of heat pumps, a clean and energy-saving method of home heating and cooling, jumped nearly 40% in Europe last year, as gas prices spiked with the war in Ukraine. Consumers in the Netherlands last year faced the second-highest energy costs in Europe (costs have since come down). The Series A financing will help HeatTransformers expand into Germany and the U.K., where residential energy prices are still far above the average in Europe.
  • Smart thermostats. S2G Ventures, chipped in an additional €12 million ($13.1 million) for Germany-based Tado, which makes thermostats to improve home energy efficiency. The company raised €43 million in January with S2G’s participation. The deal underscores Chicago-based venture capital firm’s expanding climate strategy. S2G was once exclusively focused on sustainable food and agriculture investments but has in recent years branched into ocean and energy tech investments.
  • Check it out.

Renew Capital expands in Uganda with investments in Xente and Wazi Vision. Kampala-based Xente enables businesses to make payments online using credit and debit cards, mobile money and bank transfers. Users can also pay bills and send airtime and data through the platform. Uganda’s population of 45.9 million, roughly half of whom are under 18 years of age, is driving the adoption of digital solutions in the country. Renew’s investment “serves as a validation of our commitment to transforming Africa from underdeveloped to developed through our digital finance solution for businesses,” said Xente’s Allan Rwakatungu.

  • Vision care. Renew also invested in Kampala-based Wazi Vision, a women-led eyewear company that plans to open a new store for low-cost, customizable eyewear. Wazi’s Brenda Katwesigye Baganzi said glasses are “often prohibitively expensive and unattainable for the majority of the population.”
  • Africa expansion. Ethiopia-based Renew Capital is growing its footprint in new target markets, including Kenya, Nigeria, Rwanda, Tanzania, Zambia and Uganda. Last month, Renew Capital recently backed Kenyan mass transit tech venture BuuPass and Badili, which is improving affordable online and mobile access through its used-phone marketplace.
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Dealflow overflow. Other investment news crossing our desks:

  • South Africa-based affordable energy and internet provider Yellow secured funding from Triple Jump’s Energy Entrepreneurs Growth Fund. (Triple Jump)
  • Also in South Africa, Maltento, a company that breeds insects for sustainable protein, raised $788,000 from German development finance agency DEG. (DEG)
  • San Francisco-based Ecosapiens raised $3.5 million for its marketplace that trades carbon credit-backed NFTs linked to soil restoration projects in Kenya and North Dakota. (Axios)
  • Waste-to-energy company Covanta is acquiring Circon Holdings, a New Jersey-based sustainable waste management company. (Bloomberg)

Six Short Signals: What We’re Reading

👩🏽‍🦱🧑🏼‍🦱👨🏾‍🦲👩🏻‍ Inclusion alpha. Cambridge Associates plans to increase investments in money management firms owned by women and people of color to about $82 billion over the next two years, accounting for roughly 15% of the firm’s assets under advisement. (Bloomberg)

⚕️ Seeding health innovation. Among the more than 35 VC funds with at least one-fifth of their investments in healthcare startups (and at least 20% in seed): Acumen America, Impact Engine and J-Ventures (Betaboom).

🤖 AI and disability. From robot avatars to brain signals to bionic limbs, new tech is expanding opportunities for millions of people living with disabilities. (Bloomberg)

🌱 Climate tech dilemma. More than a fifth of all VC investment in climate tech startups last year included participation from oil and gas companies: $6.8 billion out of a total $36.5 billion. (Pitchbook)

🐺 Rewilding as a climate solution. The presence of wildebeest is shown to reduce wildfires. Sea otters restore trophic cascades in coastal kelp forests. Grey wolves can have positive effects in forests. Research shows that restoring wild animals can enhance natural carbon capture and storage. (Nature / Cain Blythe)

🌏 Resilient energy and food systems in Asia. Sustainability-linked loans, remittances, Islamic finance, blended finance and even crowdfunding can be harnessed and targeted to grow financing for sustainable energy and food systems in the Asia-Pacific region. (Asia Development Bank)

Agents of Impact: Follow the Talent

Rachel Curley, a former democracy advocate at Public Citizen, joins US SIF as director of policy and programs… Boston Common Asset Management’s Steven Heim wins the Interfaith Center on Corporate Responsibility’s 2023 Legacy Award… The Ellen MacArthur Foundation is recruiting a U.K.-based circular economy reporting and disclosure specialist.

Prime Buchholz is looking for an investment analyst in Boston… Enterprise Community Partners has an opening for an investment communications manager… Energy Impact Partners is looking for an impact and sustainability associate in Washington, D.C… ResponsAbility is recruiting an impact investing finance intern in Zurich.

In New York, Franklin Templeton seeks a sustainable investments research analyst, Sunwealth is hiring a senior project finance associate, Acre is hiring a senior research consultant for financial services and ESG, and Citi is looking for an assistant vice president and sustainable finance metrics reporting analyst. 

Thank you for your impact.

– April 5, 2023