Greetings, Agents of Impact!
Podcast Series: Beyond Trade-offs
Elevar Equity: Growing demand, growing companies and growing opportunities for impact at scale. Here’s one way to tell the difference between an impact business model and the still more common alternative: Does their business model target low-income consumers? The impact businesses will be built to maximize affordability. High-quality, affordable products and services that meet the real needs of emerging middle-class consumers around the world can more than make up on volume what’s lost in margins. Greater scale delivers profits and impact together as more consumers with access to quality health care, effective education, healthy food and inclusive financial services means growing revenues. “That’s the ‘Beyond Trade-offs’ dimension,” Elevar Equity’s Sandeep Farias told ImpactAlpha’s David Bank in Episode Six of our series of podcasts produced in collaboration with Omidyar Network.
Such “collinearity” of impact and profits, the brass ring for many impact investors, is often glimpsed but hard to grasp. Elevar has raised more than $285 million in four funds and made investments in more than 35 companies in India and Latin America in financial services, agriculture, education, healthcare, and housing. In the podcast, Farias offers a tour of the “Elevar Method” for achieving impact and financial returns. It starts with companies catering to low-income customers. Then follows backing entrepreneurs with business models premised on distribution economics and affordability that can scale to reach underserved customers in low-income communities. “We want the DNA of the company to be focused on the end customer in the low-income community,” Farias says. “If you do the right thing by the customer, then the entrepreneur will do well. If you do the right thing by the entrepreneur, then the fund will do well. If you do the right thing by the fund, then the LPs will do well. I think that virtuous cycle is important.”
Read on, and listen in, to “Growing demand, growing companies and growing opportunities for impact at scale (podcast),” by Jessica Pothering on ImpactAlpha.
- Join the conversation with Sandeep Farias in Agents of Impact Call No. 9. Prudential Financial’s Ommeed Sathe, Blue Haven Initiative’s Liesel Pritzker Simmons, Omidyar Network’s Robynn Steffen will share insights with ImpactAlpha’s David Bank – and you, Thursday, May 30th. RSVP today.
- Binge on Beyond Trade-offs. Catch up on the full series of podcasts (and subscribe on iTunes, Spotify, SoundCloud or Stitcher).
Dealflow: Follow the Money
Off-Grid Energy Access Fund makes local-currency loan to BBOXX. Companies expanding energy access face the common foreign-exchange problem of investors with dollars and euros but revenues in local currency. The Off-Grid Energy Access Fund, which itself closed $58 million in August, aims to circumvent the problem by lending to companies in local currency. The fund issued off-grid solar company BBOXX an $8 million loan (roughly 7.3 billion Rwandan francs) to expand sales of its solar home systems in Rwanda, where the company has 80,000 systems installed. The funding follows a $31 million investment in BBOXX from Africa Infrastructure Investment Managers to expand in Rwanda, Kenya and the Democratic Republic of Congo. The Nordic Development Fund, the Global Environment Facility, Calvert Impact Capital and Nigeria-based energy impact investor All On have backed the off-grid fund. Read on.
Abl acquires School by Design to improve allocation of school resources. Two edtech companies with similar goals of helping students and teachers get the resources they need have merged. San Francisco-based Abl provides software and support services that help schools plan and manage their schedules. Its software has been adopted by 150 schools since 2015. Waltham, Mass.-based School by Design offers software for school districts more broadly. Its software analyzes districts’ school-specific information about students and courses alongside district-wide financial, scheduling and staffing data. Abl acquired School by Design for an undisclosed sum. School by Design will continue its district-level support under the Abl name. Combined, the two companies serve 230 schools in 55 districts in 23 states, EdSurge reports. More.
Oikocredit invests in responsible coffee company Caravela, while Annona exits. Oikocredit is buying out its fellow Dutch impact investor Annona’s investment in Caravela, a responsible coffee trading company that operates across Latin America. Caravela, launched in 2000, purchases and exports coffee from 4,000 primarily smallholder farmers in eight Latin American countries. The company pays premium rates for a product known for price volatility and to farmers struggling with unpredictable growing conditions as a result of climate change. Annona, a 10-year-old impact investment firm launched by private pension funds in the Netherlands and the Royal Tropical Institute, has backed 15 portfolio companies. Oikocredit bought Annona’s undisclosed amount of shares for $4.7 million. Dive in.
Signals: Ahead of the Curve
Empowering communities to take ownership of their own Opportunity Zones. A common thread throughout the Forbes Opportunity Zones Summit in Newark this week: Ensuring those living and working in Opportunity Zones are empowered to use the tax incentive to take an ownership stake in their own neighborhoods. “It’s about time an innovative idea came out of Washington that gives local leaders a chance to try new things,” said Sen. Cory Booker, the former mayor of Newark and current candidate for president. Earlier this month Booker introduced a bill requiring Opportunity Fund managers to report on their social impact. Rachel Reilly of the Economic Innovation Group, which co-hosted the one-day event, identified a few takeaways:
- Community ownership. “Why do other people see gold in our neighborhoods and we don’t?” asked New York radio host Charlamagne Tha God. The Confluent Group’s David Gross, business partner of the late Agent of Impact Nipsey Hussle says the Our Opportunity initiative he co-founded with Hussle is a playbook for people to “buy back the block.”
- Beyond the coasts. “Drive capital to the rest of the country so people could build great companies where they live,” said billionaire investor Sean Parker, a co-founder of EIG, the think-tank that developed the Opportunity Zones policy effort. “There are just as many bold innovators in Nashville, the Navajo Tribal Nation and Newark as there are in Silicon Valley,” said Jim Sorenson, who has put $10 million into an Opportunity Fund launched by his private equity firm, Catalyst.
- Break down barriers. Launch Pad’s Anne Driscoll said success hinges on ecosystem activation, including education, training and agency (see, “A launch pad for businesses that can make Opportunity Zones thrive”). Breaking down barriers to participation is one way to “make sure Opportunity Zones do not harm the intended beneficiaries” said Stockton, Calif. Mayor Michael Tubbs.
- City-centric. Chief Opportunity Zone Officers and other city staff can “make sure the voice of the community is represented in every deal,” said Rockefeller Foundation’s Rajiv Shah, who announced $5.5 million in grant funding. The Mastercard Center for Inclusive Growth committed $1 million to the nonprofit Accelerator for America to support 50 city Opportunity Zone leaders.
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Agents of Impact: Follow the Talent
Y Combinator partner Geoff Ralston becomes the firm’s new president. Former president Sam Altman, now an advisor, will lead OpenAI… ValueAct’s Spring Fund’s Jeff Ubben joins the board of agtech startup AppHarvest… Yonina Gray is the new director of external affairs at Reinvestment Fund… Al Jazeera is launching a business vertical called AJ Impact to focus on personal finance, economic inequality and impact investing… Techstars Impact is hiring three associates for its Austin-based accelerator… GLG Social Impact is recruiting social impact fellows.
— May 23, 2019.