The Brief’s Big Nine: Data-driven, unlocking value, low-carbon banking, economic imperatives




Greetings, ImpactAlpha readers!

Many investors claim to be data-driven. Except when it comes to impact. Neither limited partners nor anybody else would let fund managers get away with saying they don’t measure the financial performance of their portfolio companies. So why do LPs give venture capitalists a pass on measuring social impact? “We have to believe they have a positive impact,” says Ev Williams, a founder of Twitter and Medium, of the portfolio companies of Obvious Ventures, his venture capital firm. Obvious has raised more than $300 million on its “world positive” investment thesis but at this week’s impact investing conference hosted by The Economist, Williams said Obvious doesn’t ask for or require ventures to measure their impact. “Trying to measure that is a complexity that is burdensome for a company,” he said.

Williams’ explanation echoes Steve Case, who has raised more than $150 million for his Rise of the Rest fund (which this week announced its first nine investments). “We do have intentionality around impact,” Case wrote on ImpactAlpha a few weeks ago, “but we don’t plan to measure or report on impact outcomes, at least not initially.” That’s beyond the scope of the fund, he said, which is busy quickly getting capital to startups in need of investment.

Measurement is important not just to check the box for feel-good investors. As investors seek social and environmental impact as a generator of value, measurement is essential to the investment thesis itself. At The Economist’s event, Techstar’s Zoe Schlag said the global network venture launched a dedicated impact fund after its impact startups outperformed the rest of the portfolio of 1,200 companies. (Did somebody say “impact alpha”?) When impact becomes a “key performance indicator,” she said, both investors and entrepreneurs will pay attention. (We heard some other things at The Economist’s event as well). – David Bank and Dennis Price

#Featured: The Brief Big Nine

1. The glass is not yet half-full on bank financing for the low-carbon transition, but it’s getting fuller. It’s not cheerleading, but accountability that’s going to drive a step-change increase in global banking activity for clean energy and climate adaptation. Already, half of global banks surveyed by Boston Common Asset Management say they are subjecting their practices to rigorous climate-risk assessment (the canonical 2-degree Celsius scenario). And half have committed to specific low-carbon financing targets through 2025 or 2030. The half-empty problem is that those commitments are not nearly enough to close the $12 trillion financing gap by 2030, and at least half of global banks are not yet seriously engaged. Boston Common did us all a solid by compiling the stats and naming names. We’re watching you, global banks.

  • From the community: “Should anyone other than banks be on the hook for this?” asks ImpactAlpha reader Bruce Campbell of Blue Dot Advocates in Denver, rhetorically. “This problem could be solved quickly if global capital really felt the urgency.”

2. New Revivalists are unlocking value hidden in plain sight. New Revivalists see inclusion and diversity as an asset, not a liability. They’re also keen on turning market failures into big opportunities. This week, our New Revivalists are all about investing, building businesses and creating ecosystems to unlock untapped and overlooked value.

  • In Virginia, Senator Mark Warner didn’t want uneven access to capital and support to keep the state’s entrepreneurs from growing their businesses and creating jobs. So he created a statewide investment network. Read more.
  • In Tennessee, entrepreneur Charlie Brock also refuses to let lack of access stymie the state’s business owners. Backed by the Governor, Brock is connecting founders to capital, coaching?—?and the state’s biggest businesses. Read more.
  • Ben Hecht and Ellen Ward see the economic potential in expanding opportunity in entrepreneurship and closing the racial wealth gap. Living Cities provides early capital and innovative finance to entrepreneurs of color. Read more.
  • Lisa Skeete Tatum and Landit are helping women build successful careers. She knows that doing so will help them – and the companies they work for – tap the $28 trillion opportunity in women’s economic equality. Read more.
  • Can investors revive the American Dream?

3. A look at Rise of the Rest fund’s first portfolio companies. The $150 million fund’s first nine investments include startups in Indianapolis, Columbus and Pikeville, Kentucky, among other places. They include AppHarvest, which is building a $60 million high-tech greenhouse. Steve Case also announced that Michael Bloomberg, LinkedIn founder Reid Hoffman and former White House chief technology officer Megan Smith joined the funds’ roster of investors. See all nine companies.

4. True Wealth Ventures in Texas closes women-focused fund. The Austin-based investment firm raised $19.1 million, which it will use to back women-led health tech ventures and sustainable consumer brands. The founders chose Austin as a base because there are “no other early-stage funds targeting this market in the central/southern part of the US.” This is a big market opportunity.

5. The economic imperative of financing entrepreneurs of color. In 2015, JPMorgan Chase made a $6.5 million commitment to Detroit’s financially underserved minority small business owners as part of a $150 million investment in the city. The bank nearly tripled the fund size in Detroit in December and has this week announced similar, though smaller, funds in San Francisco and New York’s South Bronx, in partnership with local organizations. This is also a big market opportunity.

6. Omnivore raises second fund to improve small farmer livelihoods in India. The venture fund invests in early-stage Indian agriculture and food startups with the goal of boosting the profitability and sustainability of smallholder farms. The $46 million fund will also seek to reduce uncertainty for India’s more than 100 million small farmers by building markets that more efficiently buy and sell to them. Omnivore expects to announce the first two investments from the new fund in March and complete fundraising by August. Yet another big market opportunity.

7. The US government is again in the pay-for-success business. Slipped into the continuing resolution passed by Congress and signed by President Trump last week is $100 million to be distributed to states and localities for programs that deliver higher rates of youth employment and high school graduation and lower rates of asthma, diabetes, homelessness and recidivism among juvenile offenders. “Progress,” declared Antony Bugg-Levine, CEO of the Nonprofit Finance Fund.

8. Investors, prepare thyselves! Many impact investors complain that too many enterprises are not ready for investment. Turns out many investors are not ready themselves. In a guest post on ImpactAlpha, Tideline’s Christina Leijonhufvud and Fran Seegull of the US Impact Investing Alliance, discuss “investor readiness” and note that many family offices don’t always recognize the value of education and strategy-setting services?. Four steps to investor readiness.

9. Getting impact investing matchmaking platforms right. The recent shuttering of ImpactUS is just the latest in a string of flops among online marketplaces for impact investments. In a guest post on ImpactAlpha, Sphaera’s Astrid Scholz, along with Audrey Selian and Jeff Tuller, argues the failure of such efforts did not come about because they were too early to market or lacked the money to put more effort into sales and marketing. Rather, they say, it was because any go-it-alone platform is likely to fail in gathering enough deals and investors. Don’t make the same mistakes.

Editor’s note: The Brief will be taking Presidents’ day off. We’ll be back on Tuesday, February 20. 

Onward! Please send news and comments to T[email protected].

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