Overhauling systems designed for inequality and exclusion starts a few dollars at a time.
On this month’s Liist of actively raising impact funds, fund managers are building on proven strategies that undercut systemic racism and inequality, expose mispriced risk and redirect capital to resources that repeatedly deliver value: people and the planet.
For Flexible Capital Fund, the community development financial institution’s work started in rural Vermont, channeling revenue-based financing and other flexible investments to sustainable local businesses. It’s now expanding throughout New England with a $30 million fund that is adding equity checks to its investment mix.
Boston Impact Initiative launched in 2013 to address the racial wealth divide by investing in businesses run by people of color. Its $20 million second fund is expanding its concessional lending and capped-return equity investing strategy to diverse-led businesses in New England.
Clarion Call Capital is looking to deepen the municipal impact bond strategy that founder Eric Glass earlier developed for $725 billion asset manager AllianceBernstein. To help underserved municipalities and other public entities work around mispriced risk in the municipal bond market, part of Clarion’s strategy includes offering debt directly to public projects in health, education and infrastructure.
Also on this month’s list are two strategies supporting disadvantaged members of the workforce. New fund manager Torana Group is out with a private equity fund that transfers a portion of company ownership to businesses’ frontline workers. Winnipeg Ventures is teaming up with Seedstars on an edtech venture fund focused on education access and skills training for Latin American and US-based Latino students and workers.
On this month’s Liist:
- Boston Impact Initiative Fund II
- Clarion Call Capital
- Flexible Capital Fund
- Seedstars Winnipeg Edtech Fund
- Torana Group Essential Owners Fund
Check out ImpactAlpha’s database of more than 100 impact funds that have recently been featured on The Liist.
Disclaimer: The Liist and this post are based on available information, sourced by ImpactAlpha. Information has not been further reviewed by the managers nor verified by third parties, is not guaranteed for accuracy or completeness, and should not be relied upon as investment advice or recommendations. Nothing in The Liist, this post or on ImpactAlpha.com shall constitute an offer to sell or the solicitation of an offer to buy securities.
Boston Impact Initiative Fund II
Boston Impact Initiative launched in 2013 with a mission of closing Boston’s racial wealth divide by investing in businesses run by people of color. Its second charitable loan fund widens the organization’s focus to businesses throughout New England.
BII provides below-market debt in the range of $100,000 to $500,000 and equity checks of up to $1 million, as well as strategic grants. The organization launched its second fund in 2022 with a goal of raising $20 million; it’s just past the halfway mark. It has disbursed $4.2 million to 19 businesses.
- Type of investments: Debt and equity with capped returns
- Fund structure: Community loan fund that offers three tiers of notes: 5-year, 5% “community notes,” open to unaccredited investors in New England; 10-year, 3% “solitary notes,” open to accredited investors; 10-year, 1% “philanthropic notes” open to accredited investors
- Where fund is domiciled: Massachusetts
- Leadership: Woman and diverse-led
- Commitments/investors: $10.5 million from World Education Services, Boston Medical Center, Union Capital, and donor advised funds from Boston Foundation, Fidelity Charitable, Impact Assets and others
- Sample investments: And Still We Rise, a Black woman-owned business that provides culturally affirming psychotherapy and life-coaching services; and the East Boston Neighborhood Trust, Massachusetts’ first mixed-income neighborhood trust
- Contact information: Betty Francisco
Clarion Call Capital
Clarion Call Capital is a new impact asset manager that is looking to direct private capital to public infrastructure projects in underinvested communities, including low-income urban, rural and Indigenous communities.
“How can I partner with those communities to expedite and to speed up the change so that we reverse decades, if not centuries, of disinvestment?” Clarion founder Eric Glass told ImpactAlpha (see, “‘You can’t do impact on a passive basis’”).
Glass is the former developer and head of AllianceBernstein’s municipal impact bond strategy. With Clarion, he’s looking to raise $100 million from high net-worth individuals, US-based family and multi-family offices, and foundations and endowments to make fixed-income investments in public projects like city water-pipe upgrades, healthcare services that focus on social determinants of health, and universities serving underrepresented students. Clarion’s initial investments will be made on an individual basis through separate managed accounts.
- Type of investments: Listed municipal bonds; 10-20% of investments will be private loans for specific projects in marginalized communities.
- Investment vehicle structure: Managed accounts of at least $1 million
- Contact information: Eric Glass
Flexible Capital Fund
In rural areas, small businesses are a critical provider of goods and services and driver of jobs and economic stability.
Many “will never grow fast enough or have large enough margins or grow to national scale for venture or equity investors,” notes the team at Flexible Capital Fund, a Vermont-based community development financial institution. The firm is supporting Vermont’s green economy and transition by providing debt, revenue-based financing, convertible debt, and equity and “equity-like” capital to the state’s growth-stage companies working in food and agriculture, forestry and clean tech.
The Montpelier-based community development financial institution cuts checks of $100,000 to $400,000 and provides its portfolio companies with technical assistance. It has made 45 investments in 24 companies. Flexible Capital’s planned $15 million fund will expand its reach throughout New England.
- Type of investments: Debt, convertible notes, equity, and flexible, non-dilutive structures, including revenue-based and mezzanine financing. Flexible Capital says its the “only CDFI in New England focused on using revenue-based financing”
- Fund structure: Low-profit limited liability company
- Where fund is domiciled: Vermont
- Leadership: Woman-led
- Commitments/investors: Vermont Community Foundation, New Hampshire Charitable Foundation
- Sample investments: Encore Renewable Energy, a renewable energy developer and project owner and certified B Corp. Flexible Capital provided $800,000 in operating capital so the business could grow its team to support its pipeline, and helped catalyze another $700,000 from other backers
- Contact information: Janice St. Onge
Seedstars Winnipeg Edtech Fund
Unequal access to quality education in Latin America (as elsewhere) is leaving many of the region’s young people unprepared for good jobs in the workforce. Women are at a particular disadvantage.
Emerging impact fund manager Winnipeg Ventures launched in 2018 to invest in education tech startups that are supporting educational attainment, workforce readiness and high-demand skills training in Spanish-speaking Latin America.
Its proof-of-concept fund made 13 investments, including Beereaders, a digital reading comprehension service focused on Latino K-12 students, and Kurios, an online learning service catering to large companies and their workforces.
Winnipeg is now teaming up with Seedstars on a planned $30 million fund to lead seed-stage rounds at up to $600,000 and make follow-on investments in Series A rounds of up to $1 million. The Seedstars Winnipeg Edtech Fund has so far secured $4.5 million from three anchor investors.
- Type of investments: Seed and Series A equity
- Fund structure: Traditional LP-GP with 2.5% management fee that ratchets down
- Where fund is domiciled: Delaware, US
- Leadership: Latino/a-led; one female GP
- Commitments/investors: The Peruvian Development Financial Corporation, or COFIDE; Seedstars; Potencia Ventures
- Contact information: Jose García
Torana Group Essential Owners Fund
Torana Group’s investment thesis centers around “human and natural resources [as] strategic drivers of enterprise value.”
The woman- and diverse-led investment firm is testing that thesis with its Essential Owners Fund, a planned $50 million fund that enables frontline workers to become owners in the companies they work for.
“Essential workers are vital to business continuity and value, yet despite the critical nature of their work, many essential workers are the lowest paid and most in danger,” the firm says.
The fund will acquire minority shares of mid-sized businesses with “undervalued frontline workers” for transfer to employee stock ownership plans, or ESOPs, employee ownership trusts, and other ownership vehicles. Torana will remain invested for five to 10 years to support the transition and ensure the employee-ownership mechanisms set businesses on a path to “responsible growth.”
Its goal is to support 5,000 workers in becoming worker-owners, including 30% workers of color and 30% female workers.
- Type of investments: Debt, non-controlling equity
- Fund structure: traditional LP-GP with 2.5% management fee that ratchets down
- Where fund is domiciled: US
- Leadership: Woman- and diverse-led
- Commitments/investors: $14 million first close; backing from Gary Community Ventures; BDT & MSD merchant bank, and family offices and individual investors; open to accredited investors
- Target investments: $3 million to $7 million in companies with $10 million to $250 million in revenue and at least 100 employees
- Contact information: Malini Ram Moraghan
