2030 Finance | November 9, 2017

Universal impact investors, recycling cell phones, Nigeria’s startup sector

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Greetings, ImpactAlpha readers!

#Featured: Impact Voices

Why that $200 hamburger may not maximize shareholder value after all. That two-dollar fast-food burger could cost up to $200 when you add in its carbon footprint, use of water use, degradation of the soil and the additional health care required by its production and distribution. By allowing the true cost of products to be transferred to others, the structure of our capital markets encourages investors and corporations to make choices that degrade the quality of life for all of us and future generations.

Jay Coen Gilbert, co-founder of B Lab, sat down with Rick Alexander, B Lab’s head of legal policy, to talk about how such negative externalities have become material risks. That’s especially true for so-called “universal owners,” investors whose broad diversified portfolios means they effectively “own the market.” To prosper, suggests Alexander, huge pension and sovereign wealth funds ought not be focused on beating the market, but on improving it.

Join a conversation about universal owners and benefit corporations between B Lab co-founder Jay Coen Gilbert and Rick Alexander Rick Alexander, B Lab’s head of legal policy, on ImpactAlpha.

Why that $200 hamburger may not maximize shareholder value after all

#Dealflow: Follow the Money

Mexican startup Rescata raises $2 million to sell recycled cell phones. The Mexican startup is tackling two problems (link in Spanish): access to affordable mobile phones and electronic waste. Mexico has lower mobile penetration than Latin American peers Argentina, Chile and Uruguay, largely because of the high cost of smartphones and a lack of financing options. At the same time, about 55 million tons of electronics are discarded globally every year; only a fraction are recycled or disposed of safely. Rescata, which provides phone-repair services, also refurbishes and sells old phones at half the original sticker price, with a six-month warranty and financing options. Phones are sold online or at about 25 kiosks around Mexico. Since last year, the company says it has served 50,000 customers and grown to more than 70 employees. The financing (link in Spanish) from Capital Invent and E Capital will be used to open more kiosks.

Shell-backed All On invests in energy access in Nigeria. Nearly half of Nigeria’s 186 million people lack access to electricity, amid the country’s booming oil and gas sector. All On, a Lagos-based non-profit, partners with investors and development finance institutions to provide capital and technical services to entrepreneurs working to expand energy access in Nigeria. The first round of investments includes an undisclosed equity investment in pay-as-you-go home and community solar company Lumos Global, which raised $90 million in debt and equity investment last year. All On is also reportedly close to finalizing a debt and equity investment in microgrid operator Green Village Enterprises. A grant from All On to tech incubator Co-Creation Hub is funding an energy access challenge for Nigerian startups. With Adam Smith International’s Solar Nigeria program, it is working to de-risk future home solar investments. Nigeria is the biggest focus of biggest focus of Shell’s social investment program; the company is also actively expanding its oil and gas business in the country.

Farmobile raises $18 million to improve agriculture data transparency. The Kansas company makes data collection units for farm equipment to help farmers gather crop and field data. Farmobile’s “Farm Data Marketplace” includes legal agreements and privacy protections to let farmers sell that data securely. The Marketplace includes data from 4,200 field records from 11 countries. The big prize is crop insurance reporting, which is required under the U.S. Federal Crop Insurance Program, a public-private partnership that insures 86% of all U.S. farmland. Better data collection would allow for some of the reporting to be automated, saving time and money for insurance agents and farmers, says Jeffrey Fenster at AmTrust, one of 16 federally approved crop insurance providers and an investor in Farmobile’s $18 million Series B equity round. Dutch agriculture tech venture capital firm Anterra Capital and private investors from Kansas also participated.

See all of ImpactAlpha’s recent #dealflow. Send deal tips and news to [email protected].

#Signals: Ahead of the Curve

Tech investments target Nigeria’s unmet consumer needs. Nigeria’s entrepreneurs are having better luck raising capital, and 40% of the funding is coming from outside Nigeria. In a record year for African venture capitalinvestment, Nigerian startups raised $73,000 on average this year, up from $57,000 in 2015, the Financial Times reports. Underpinning the upswell: consumer needs, for one. Nigeria is Africa’s most populous country, with 186 million people. But 50% of Nigeria’s adult population has no access to formal financial services; nearly 50% lack access to electricity; and while 81% of Nigerians have a cell phone, only 53% have internet access. Venture capital and foreign investors are paying attention to startups addressing those service gaps:

  • All On, backed by Shell, is working to galvanize foreign investment in Nigeria’s energy-focused startups (see above).
  • Tizeti, a company building solar-powered wifi towers in Lagos, raised $2.1 million this year; its backers include the founders of Silicon Valley’s Y Combinator.
  • Releaf, which connects agricultural buyers and sellers, was selected for Y Combinator, which comes with a $120,000 equity investment.
  • U.S.-based Accion Venture Lab invested in Lidya, a fintech startup that helps Nigeria’s small businesses build credit and access finance.

Also driving the investment surge: The Nigerian government is providing incentives for renewable energy development. Three new undersea internet cables will land in West Africa this year and next, with a combined data transfer capacity of more than 100 terabits-per-second. And the cost of smartphones has fallen by nearly half in three years. ’Bosun Tijani, CEO of Nigerian startup incubator Co-Creation Hub, says “serious money” is hitting Nigeria’s startup sector. “There is now a critical mass of people who believe they can build a sustainable and successful business,” Tijani told the Financial Times. An early-stage funding gap persists for startups looking for debt and equity investments in the $100,000 to $1 million range.