The Brief | August 27, 2018

‘What’s Next’ for impact investing, Queen Latifah backs Essence fund, tapping ‘alternative capital’

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Greetings, ImpactAlpha readers!

ImpactAlpha Series: What’s Next

Shaping the future of markets. Amit Bouri kicks off an ImpactAlpha series with the Global Impact Investing Network with a call to build a trusted identity for the impact investing movement. “As the industry grows beyond the early adopters, we need to establish a stronger identity for impact investing,” writes the GIIN CEO. “Distilling the core ethos of the movement will build cohesion amongst the diverse actors in the impact investing marketplace.” Since the GIIN launched its “Roadmap for the Future of Impact Investing” last spring, Bouri says, investors, fund managers, advisors and other ecosystem-builders have told him a trusted identity and brand is important for the integrity of the impact investing industry. Bouri offers three immediate action areas: Make your impact intentions known. Measure and manage for impact. And collaborate and co-invest with other investors.

The What’s Next series will provide a platform for practitioners and experts in impact investing to explore key elements of the Roadmap before and after the GIIN Investor Forum in Paris next month. In coming days, ImpactAlpha will host responses and commentaries from Tim Macready of the Australian superannuation fund Christian Super, Chris Jurgens and McKenzie Smith of Omidyar Network; Marilou van Golstein Brouwers of Triodos Investment Management; Marisa Drew of Credit Suisse, and others. What common threads tie the industry all together? What practices or processes distinguish impact investing from other investment approaches? Would a set of shared principles be useful to you and how would you use and promote them? Engage the discussion and share your thoughts to: [email protected].

Read “What’s Next: Building a trusted identity for the impact investing movement,” by the GIIN’s Amit Bouri on ImpactAlpha.

Dealflow: Follow the Money

Queen Latifah invests in Essence fund for women of color in the arts. The singer/songwriter’s production company, Flavor Unit Entertainment, is the first investor in Essence Ventures’ planned $20 million fund for film, television and documentary productions by women of color. The fund aims to help women “see more frequent, and more authentic versions of themselves reflected in the content they consume.” The announcement coincides with the launch of VC firm Andreessen Horowitz’s Cultural Leadership Fund, which counts Sean “Diddy” Combs, Shonda Rhimes, Will and Jada Smith, Chance the Rapper and other cultural leaders as limited partners. The fund will invest in companies in the Andreessen Horowitz portfolio that are interested in partnering with the fund’s LPs. Here’s more.

MacArthur Foundation backs Self-Help and ‘community-led solutions’ for Chicago. The Chicago-based foundation is lending North Carolina-based Self-Help Ventures Fund $15 million to support the integration and expansion of recently-acquired Seaway Bank in Chicago. MacArthur’s low-interest loan to Self-Help is the foundation’s seventh slug of funding to the credit union. Seaway has historically provided banking services in African-American communities that lacked banking services on Chicago’s South Side. Continue reading.

Ecofiltro secures equipment loan from Beneficial Returns. Guatemala-based Ecofiltro makes low-cost ceramic filters to purify drinking water. The company aims to bring clean drinking water to one million of Guatemala’s nearly seven million rural citizens by 2020. Beneficial Returns is supporting Ecofiltro company with a $225,000, seven-year loan for new production equipment. It is Beneficial Returns’ fourth investment. Read on.

Signals: Ahead of the Curve

Helping companies tap ‘alternative capital’ for sustainable growth. Last week, we flagged the new demand for the “demand dividend” as an alternative to venture capital-style investment terms. ImpactAlpha’s archive includes examples of the revenue-based repayment structure, which allows investors and entrepreneurs to share risk and create liquidity events. “We’re huge fans and advocates for these alternatives,” tweeted Candide Group’s Aner Ben-Ami. “We’ve also learned these profit/rev shares work only in a limited set of cases.” Ben-Ami’s use cases:

  • Later-stage financing. Revenue-share structures that work for later-stage companies may be harder to adapt to earlier stage companies, says Ben-Ami. For smaller companies, says Ben-Ami, “the growth trajectory required to repay investors starts to look a lot like the kind of ‘hockey stick’ projections that the venture capitalists are looking for.”
  • Other alternatives. For companies that are too big for revenue share, but too small for VC funding, equity buybacks, or redemptions, might be a better fit. With equity redemptions, investors buy shares and hold them until the company is able to repurchase them, via lower cost debt, for example. One advantage: “Investors are not taking money out of the company during the crucial early years of growth, and instead are reinvesting into the business,” Ben-Ami says.
  • Selecting the right capital. Cathy Clack and CASE at Duke’s Fuqua School of Business have compiled more than a dozen financing mechanisms, including variable repayment debt, recoverable grants, convertible notes and crowdfunded equity. Their Smart Impact Capital platform helps entrepreneurs raise the right type of capital for any stage, geography, industry and impact area.

Agents of Impact: Follow the Talent

Zoe Schlag and Techstars Impact hosted a demo day for their first cohort of impact startups Thursday in Austin (See, “Techstars Impact on hunt for impact alpha with first cohort). The Case Foundation’s Jean Case, Nonprofit Finance Fund’s Antony Bugg-Levine, Social Finance’s Tracy Palandjian and many other impact investors were named to the Power and Influence Top 50 list by Nonprofit Times… Housing and worker co-op lender Shared Capital Cooperative is hiring a loan administrator (h/t Oscar Perry Abello).

— August 27, 2018.