The Liist | February 7, 2023

The Liist (Feb. 2023): Creative and catalytic strategies from impact fund managers in Latin America, India and the U.S.

Jessica Pothering and Roodgally Senatus

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ImpactAlpha Editor

Jessica Pothering

ImpactAlpha Editor

Roodgally Senatus

ImpactAlpha, February 7 – Impact fund managers from India to Ecuador to the U.S. recognize that there’s no one-size-fits-all approach to plugging persistent capital gaps for inclusive, sustainable economies.

Creative and catalytic capital is the theme of this month’s Liist, in partnership with Realize Impact. 

In Latin America, two funds are leaning into alternative-finance to support high-impact businesses. Acceso Impact Fund, a women-led and gender-focused fund domiciled in Panama, is raising an evergreen fund to fill small businesses’ need for debt and revenue-based financing. Ecuador-based IMPAQTO Capital is also using revenue-based finance to invest in high-impact enterprises in the Andean region.

Climate tech ventures fared better than other startups fundraising in last year’s tech downturn, but capital is still scarce for early-stage ventures. In India, Climate Seeds Fund is looking to help promising startups with seed capital as they transition out of accelerator programs. FullCycle Climate Partners in the U.S. invests equity for companies whose technology is pre-commercialization, and also adds in project financing to get facilities and early production rolling (last year, FullCycle’s Stephan Nicoleau provided ImpactAlpha’s podcast listeners with timely updates from Davos and from the global climate summits in Sharm El-Sheikh, Egypt).

Living Cities is raising its third Catalyst Fund. This fund’s focus will be seeding emerging female fund managers and fund managers of color. Its thesis: diversity begets diversity. The businesses those fund managers back will support wealth creation and opportunities for America’s “new majority.” 

Also on this month’s Liist: Invest Appalachia, which is leveraging catalytic capital from philanthropic institutions to boost investment in Central Appalachia (see, “Catalytic capital for community impact”). Aera VC is a sustainable deep tech venture fund. 

  • Aera VC (Singapore-based VC fund for sustainability-focused deep tech)
  • Acceso Impact Fund (women-led debt and revenue-based finance fund for Latin American impact businesses with a gender-lens)
  • Climate Seeds Fund (accelerator-based venture fund for India’s early-stage climate tech startups)
  • FullCycle Climate Partners (U.S.-based venture fund supporting climate tech commercialization)
  • IMPAQTO Capital (revenue-based finance fund for social enterprises in the Andean region of Latin America)
  • Invest Appalachia (nonprofit impact fund leveraging catalytic capital for impact in Central Appalachia)
  • Living Cities’ Catalyst Fund (nonprofit impact fund investing in women and diverse-led fund managers) 

Disclaimer: The LiiST and this post are based on available information, sourced by ImpactAlpha and our partner on The Liist, Realize Impact. 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 shall constitute an offer to sell or the solicitation of an offer to buy securities. 

Aera VC is an early-stage venture capital firm focused on deep tech for sustainability. Its Climate and Frontier Fund, based in Singapore, is looking to raise $75 million to make equity investments in alternative proteins, carbon capture tech, industrial decarbonization tech, as well as climate data and analytics startups. 

The fund will invest globally, including in emerging markets “where capital is severely required,” the firm says. Aera has already raised $34 million, primarily from family offices.

  • Sustainable investing. Aera was an early backer Houston-based zero-carbon chemicals producer Solugen, which scored $200 million in October from Lowercarbon Capital, Temasek and Fifty Years at a $2 billion valuation. Aera’s climate fund will make pre-seed, seed and Series A-stage investments ranging from $500,000 to $2.5 million. The fund’s portfolio includes 20 investments, including 11 rollovers from two pilot funds. 
  • Contact Nick Winstone for more information. 

Women-led Acceso Impact Fund is a gender-focused debt fund that invests in companies throughout Central America, the Caribbean and the South of Mexico. The fund is a partnership  between Guatemalan investment manager Grupo IDC and Alterna, an organization supporting impact entrepreneurship in Latin America. Acceso is an evergreen impact fund domiciled in Panama. It will provide loans and revenue-based finance of $100,000 to $1 million.

Investments include Cassa, a women-led sustainable construction company in Guatemala, and Luum, which connects impact brands from Central America to global markets. It has so far secured $4.5 million, including $3 million from IDB Lab.

Climate Seeds Fund evolved out of the Climate Collective Foundation, one of the largest climate tech accelerators in South Asia. The fund’s goal is to help early-stage startups in India’s booming climate tech ecosystem overcome seed and pre-Series A financing gaps. 

“We have seen the ecosystem in India grow from less than 100 climate tech startups in 2016 to over 2000 in 2022,” Climate Seeds Fund’s Nalin Agarwal told ImpactAlpha. “However, there is still limited climate-first capital for early-stage startups in India, and few fund managers that have the domain expertise needed to make long-term complex investments in climate technology startups at the early stage.”

The firm is looking to raise just shy of $14 million for its first fund. It has so far secured $600,000.

  • Investment strategy. Its approach is similar to Y Combinator and other accelerator-investor programs – it cuts fixed-amount convertible notes of $35,000 and $140,000 in seed and pre-Series A startups that participate in the Climate Collective’s program. The program has supported more than 860 ventures. About 20% of those fit Climate Seeds’ investment criteria, Agarwal says.

    “We believe that a large number of small bets on startups supported by rigorous acceleration programs will lead to strong returns for LPs in this pivotal decade for climate tech in South Asia.”
  • Get in touch via email

L.A.-based FullCycle Climate Partners is an equity VC firm focused on climate infrastructure companies whose technologies have potential for gigaton-scale decarbonization. Its fund invests in circular economy, agtech, clean energy, energy efficiency, and industry and manufacturing ventures that are in the early stages of commercialization. FullCycle led, for example, the Seattle-based textile recycling venture Evrnu’s $15 million Series B round in 2021. The firm’s Delaware-based fund has a target of $150 million and has so far raised $64 million.

  • Project finance. In addition to equity investments, FullCycle’s investment model involves a right of first refusal to finance portfolio companies’ deployment projects. FullCycle led a $6.5 million Series A round for Portland, Ore.-based InPipe, which makes a smart valve that converts excess water-pipe pressure into carbon-free energy. As part of the deal, FullCycle will exclusively finance the company’s projects around the world. 
  • Get in touch via email.

IMPAQTO Capital is using revenue-based and other non-dilutive, flexible capital to support early-stage impact businesses in Ecuador and elsewhere in Latin America’s Andean region. “Venture capital is not a good fit for many impact companies, and early-stage companies are not generally able to access bank financing, or if they are, the terms are not flexible enough,” the firm explains. 

IMPAQTO is raising $2 million for its inaugural fund to cut checks of $50,000 to $200,000 in health, education, agro-industry and environmental solution businesses. The Canada-domiciled fund has so far raised half of its target, mostly from Latin America-based investors. 

  • Gender-lens investing. The woman co-led fund uses a gender lens in its investment strategy, screening for women-led businesses, products or services targeted to women, and companies supporting women’s inclusion and wellbeing in its value chains. “At the portfolio level, the fund tracks direct employment generated, number of lives impacted, and the percentage of female beneficiaries,” the firm explains. 
  • Contact Justin Schwartz for more information. 

Invest Appalachia aims to drive economic inclusion, health equity and climate resilience in the low-income Central Appalachia region of the U.S., which has suffered from decades of extraction and disinvestment. The majority-white region is also home to a significant Indigenous population, as well as Black, Latino and Asian descendants of coal mine workers. 

The nonprofit impact fund has raised nearly half of its $40 million target, securing investments from UnitedHealth Group, the Robert Wood Johnson Foundation and Sugarbush Valley Impact Investments. It has also raised $2.7 million in philanthropic capital from RWJ Foundation, Bloomberg Philanthropies and the Catalytic Capital Consortium to minimize investment risk and catalyze investments from other private funders. 

Living Cities has been testing how to drive more capital to address the racial wealth gap and shift power within capital systems for more than a decade through its series of Catalyst Funds. The New York and Washington, D.C.-based nonprofit is raising its third Catalyst Fund with a target of $100 million. 

The thesis for this fund: that putting more capital in the hands of women and fund managers of color will lead to more investments in diverse entrepreneurs. Those entrepreneurs, in turn, will address the needs of the U.S.’s new majority of people of color and support wealth creation in communities of color. (Listen to Living Cities’ Demetric Duckett discuss the fund on ImpactAlpha’s Impact Briefing podcast.)

  • Returns on inclusion. Living Cities’ third Catalyst Fund is anchored by $10 million from the Kauffman Foundation. The fund will provide access to seed capital and technical assistance to women and emerging fund managers of color to help them raise first-time funds faster.
  • Learn more. Demetric Duckett, Living Cities: New decision-makers for the new majority,” on ImpactAlpha.