Archive for the ‘Impact Investing’ Category

Investing to End Food Waste

September 16th, 2016

A SOCAP Guest Post By Maura Dilley

Over 200 million dollars are lost to food waste every year. Spoiled, unwanted, imperfect food that businesses pay to grow, package, transport, refrigerate and throw-away uneaten.

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American agriculturalists are shifting paradigms from paying to manage waste to saving money eliminating waste such as developing “co-products” and circular products from material that was once fodder landfill.

If over 200 million dollars are lost to food waste, how much money might there be to gain from plugging the leak? Investors are beginning to look into new products lines, technology, supply chain transparency and data analysis to help unlock a brave new food market.  

“Investors need to think about where and how capital can unlock more capital” says Sarah Vared of MissionPoint Partners. This means making strategic, and sometime out-of-industry, moves to clear the path and gain access to big wins for returns and circular food systems.

Wasted food is wasted money. Wasting food also has a devastating impact on communities and the environment. Growers and pickers are exposed to chemical fertilizers and pesticides that also pollutes water for food that isn’t eaten. Uneaten food is transported across the country and world, emitting greenhouse gases along the way. The social and environmental returns of ending food waste are just now being calculated but seem significant.

Herein lies a challenge for investing in an optimal food system. Someone puts the money in and society gets the value back, where can business put money in and get money back? Vared says, “Incentives and credits from government can help out a lot here. There’s also a huge need for a full spectrum approach meaning philanthropic and business capital to come in together and unlock the market.”

Transparency through Technology and Data

Food waste defies common sense: how can America waste so much and still suffer from food insecurity? What do you mean apples cores won’t compost in landfills? Food waste is such a humdinger that John Oliver famously covered it in an episode of Last Week Tonight.

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Gaining visibility into where and why food is wasted helps to plan interventions and investments. But the food supply chain is gnarly and we can’t fix what we can’t see.

Platforms that provide transparency and communication between suppliers and buyers will empower as-needed harvesting. Data analytics to better understand market needs and make smarter in decisions will also reduce waste.

Technology that allows for supply chain transparency from procurement to disposal, even in the same company, will also greatly reduce waste. Think: no more unnecessary processing and packaging; no more over-ordering for fear of under-ordering.

The Closed Loop Fund is a corporate 100 million dollar social impact fund powered by companies such as Wal-Mart and dedicated to increasing recycling in products and packaging. Closed Loop thinks about where capital invested in waste reduction can unlock more capital. They’ve discovered that 2/3 of the cost in processing food for recycling (composting) is transporting food to and from processing plants.

Food investors are considering all the different pieces of the system and pain-points to progress, including out-of-industry investments like transportation. Targeting an investment in transportation may unlock economy of scale for food recycling and make a new valuable market.

Seeing, then Increasing Value

Other new markets for waste are co-products and circular products.

Andrew Falcon suggest going with the highest value when redirecting food waste. “Consider food waste from a grocery store, best value is feeding humans, then animals, then composting – which is green but low value, an anaerobic digester – another form of disposal or make a product, like bioplastic”

Falcon’s company Full Cycle Bioplastics captures methane off-gassing from food waste, feeds it to microbes who inturn produce PHA (polyhydroxyalkanoates), a compostable bioplastic made from renewable resources.  Falcon admits, “Bioplastic from waste is somewhat of a pessimistic technology. It’d be better if we had efficient systems and policy that eliminated waste at the source then we can make products from excess waste.”  

To create value from waste you need a product that is more valuable than the waste. Counting the cost of disposal, processing and transportation of food that’s wasted is a great head start on a co-products price point.

A co-product is the highest and best use of a resource that would otherwise be trashed. POM Wonderful, pomegranate juice mongers, uses leftover ingredients from juice as components for co-products like nutritional supplements and cosmetics. Products that start as co-products could rise to meet, or eclipse, the price point value of their parents. Spent grain from breweries can be baked into flour and then into a snack bar. With the proper systems in place, excess produce could become dehydrated produce and jams.

“Waste is a hot potato,” says Falcon, because currently components of waste aren’t linked together. Technology and transparency could enable nodes along the supply chain to talk, negotiate, optimize and eliminate waste.

md_headshotMaura Dilley is a systems-change strategist, writer and designer working at the intersection of ocean health and social enterprise. She is program director at Impact Alpha’s Financing Fish.

Impact Unicorns: Can We Have Our Cake and Eat It Too?

September 9th, 2016

A SOCAP Guest Post by Fran Seegull

The term “unicorn” was coined by Aileen Lee of Cowboy Ventures to describe private companies that have achieved a post-money valuation of $1 billion or more. Originally, these companies were scarce, magical and elusive. As of August 31, 2016, according the CrunchBase Unicorn Leaderboards, there are now 191 unicorns.

In my impact investing practice at ImpactAssets and in the graduate class I teach at USC’s Marshall School of Business, I have adapted the phrase. I describe an “impact unicorn” as a company that is positioned to achieve a market rate of financial return AND high levels of impact. Population growth, income inequality, climate change and other social and environmental factors are shaping our world. The private sector has a major role to play (and returns to make) in ameliorating these intractable challenges by investing in ventures that are consistent with our values. Indeed, impact unicorns achieve strong financial returns because of, not in spite of, their impact theses.

The impact investing field has often used the Monitor Institute framework of “impact first” and “financial first” to categorize the investment orientation of companies and funds. While a bit reductive, this framework has persisted since its introduction in 2009. According to it, investments that seek to maximize impact with a financial floor are called “impact first.” Those that seek to maximize financial impact with an impact floor are deemed “financial first.” Implied by this framework is a tradeoff between financial and impact returns. Recent studies from Cambridge Associates, GIIN and the Wharton School of Business indicate that impact-focused venture capital investments can achieve market rate returns. But, what about the measurement of their impact returns? Can investors have their cake (financial returns) and eat it, too (impact returns)?  

Let’s take a look at this framework and determine where Impact Unicorns may fit in a 2×2 matrix. Impact first and financial first as described above are in the upper left and lower right quadrants, respectively, implying a tradeoff. In the lower left quadrant, we have deals with suboptimal financial and impact returns—an investor wouldn’t make these types of investments. In the upper right quadrant, we have those investments that achieve risk-adjusted rates of financial returns and strong social and environmental impact. These are the so-called “Impact Unicorns.”

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Over the last five years, as Chief Investment Officer of ImpactAssets, I have had the opportunity to see the impact investing field grow substantially. Many investment funds and impact ventures over time have delivered a very strong combination of financial and impact returns. In building a private debt and equity platform for ImpactAssets, we have largely, but not exclusively, added funds that invest in impact unicorns. These include funds from firms such as Better Ventures, Core Innovation Capital, Elevar Equity, MicroVest, Sarona and SJF Ventures. To bring the impact unicorn to life, let’s explore some examples.

Elevar Equity, from their third venture capital fund, invested in Varthana, an affordable private school finance company in India. Only 260 million of the 400 million school-aged children in India are enrolled in school. Neighborhood private schools are cropping up, but they need growth capital to scale–this is the gap filled by Varthana. Today, Varthana has improved over 2,000 schools, impacting over 800,000 students, exemplifying Elevar’s approach to “human centric venture capital.” While there hasn’t been a realized exit to date, the company has received further financing rounds at increased valuations.

An impact unicorn that has already seen an exit is NexTracker. This company, a DBL Partners venture investee, makes solar tracker systems, serving clients in Asia, Europe, and North and South America. NexTracker sold to Flextronix for $330 million just 21 months after the company’s founding and DBL’s investment.  To date, the company has created 4.8GW of solar energy through its projects, offset 1,226,121 tons of CO2 emissions, powered 920,629 homes and planted 2,465,756 trees.(1)

A portfolio company of Core Innovation Capital is Oportun, which uses alternative credit scoring methodologies to reveal the debt worthiness of those unserved or underserved by the traditional banking sector. As of June 30, 2016, Oportun has deployed $2.6 billion in loans to over 770,000 people, mostly to low-to moderate-income clients. The company has received over $265M of equity funding through lead venture capital investors such as Charles River Ventures and Madrone Capital Partners.(2) Last year, the Wall Street Journal suggested that the firm could be worth close to $1B should it pursue an IPO.(3)

While these are strong impact unicorn examples, the truth is many times as investors we can’t have our cake and eat it too. There may be some investments focused on high impact geographies (emerging and frontier markets), certain investment stages (seed- and early-stage entrepreneurs in the “Pioneer Gap”) and specific constituencies (folks at the bottom of the pyramid) that require a tradeoff in financial returns. Maybe these impact enterprises need grant capital at inception or perhaps they require concessionary funding to de-risk them to a point where more commercial rate capital can be attracted. And it must be said that impact unicorn enterprises aren’t unequivocally better than, say, impact-first ventures. But they do indeed fly in the face of the financial tradeoff debate.

Please join us at SOCAP on Wednesday, September 14, at 10:45am where we will discuss: “Impact Unicorns:  Can We Have Our Cake and Eat It Too?”

Find all of the SOCAP16 sessions Fran Seegull is participating in on Pathable. She tweets on impact investing @franseegull.

fran-seegullFran Seegull is Chief Investment Officer and Managing Director at ImpactAssets—a non-profit investment firm seeking to increase the flow of capital to impact investing. She oversees firm product development and heads investment management for The Giving Fund—an impact investing donor advised fund. Seegull is Adjunct Professor at the Lloyd Greif Center for Entrepreneurial Studies and Senior Fellow at the Brittingham Social Enterprise Lab, both at USC’s Marshall School of Business. She serves on the board of the Barbara Lee Family Foundation and the Investment Committee of the Goldhirsh Foundation and served on the G7 Social Impact Investment Task Force Working Group on Asset Allocation. She tweets on impact investing at @franseegull.

 


Article Sources:

  1. “NEXTracker Company Profile.” NEXTracker. https://www.nextracker.com/company/.
  2. “Oportun: About Us.” Oportun. http://www.oportun.com/about-progreso/.
  3. Demos, Telis. “Hispanic Community Lender Oportun Planning 2015 IPO.” Markets. The Wall Street Journal, 24 Apr. 2015. Web. http://www.wsj.com/articles/hispanic-community-lender-oportun-planning-2015-ipo-1429910554.

The Intersection of Investment, Equity, and Opportunity: Ed Dugger III at SOCAP

September 8th, 2016

socap15-6943 (1)The opening plenary panel of SOCAP16 will kick off the conference with insightful considerations on the “how” and “why” of social capital markets and the critical, and equal, importance of both. One of the leaders in the field who will speak on the plenary is Ed Dugger III, a pioneering impact investment leader with many years of experience managing venture capital funds. Dugger is President of Reinventure Capital, an innovation driven financial firm committed to creating measurable social and environmental impact.

In his last appearance at SOCAP, as part of the closing plenary panel of SOCAP15, Dugger took part in an illuminating, inspiring, and frank conversation that responded to questions about the relationship between equity and opportunity. The Equity and Opportunity plenary panel, moderated by Decker Ngongang, Senior Fellow at Frontline Solutions, also included Nikki Silvestri, Co-Founder and CEO of Silvestri Strategies, and Ben Jealous, Partner at Kapor Capital. Dugger and his fellow panelists offered their thoughts on how the capital markets can play roles in ending racial injustice and creating economic equality for everyone.

Earlier this year, Reinventure Capital produced a three-part blog series reflecting upon the Equity and Opportunity conversation of SOCAP15. In these posts, Reinventure Capital Managing Director Julianne Zimmerman deeply considers and responds to the conversation that occurred between Dugger and his fellow panelists. To reflect on what came before, and offer some background to prepare you for Dugger’s appearance at SOCAP16, we offer this summary of the series.

What is fair? What does inequity cost? What is smart?

Part 1: Equity and Equity The panelists on the SOCAP15 Equity and Opportunity panel began their discussion by defining equity in their own terms. Their answers encompassed agency, privilege, access to opportunity, and tapping into genius wherever it exists. This first post in the series reflects on these definitions and suggests that to expand “equity (value, especially capital) to increase equity (justice and impartiality),” investors must take an assessment approach that gives equal weight to justice, prudence, and value creation.

Part 2: Around, Over, Under, Through  When the SOCAP Equity and Opportunity panelists were asked to name a few of the barriers hindering entrepreneurs of color and women entrepreneurs, they each offered stories of systemic issues causing inequality, including lack of opportunity, education, and access to capital at all levels. Though these are formidable obstacles, there are innovators who are finding ways over, around, under, and through. In this second reflection, Zimmerman shares five stirring examples of those who are blazing pathways and overcoming barriers.

Part 3: Reinventing Institutions = Reinventing Ourselves Moderator Decker Ngongang asked the SOCAP Equity and Opportunity panelists the question, “How do we reinvent institutions?” In her final installment of the series, Zimmerman presents some examples (drawn in part from Ed Dugger’s own history) of institutional reinvention that suggest potential answers for how investing can be reshaped to create equality and opportunity for all.

Join us at SOCAP16 to hear Ed Dugger speak on the intersection of investment, equality, and opportunity during the opening plenary panel of SOCAP16 on Wednesday, September 14th.

Legendary Impact Investor, Mitch Kapor, Talks with Better Ventures About Doing Right with Technology

September 7th, 2016

Mitch Kapor and his wife Freada — along with Kapor Capital and Kapor Center for Social Impact — are giants in the field of impact investing and philanthropy. They are a serious force in Oakland as philanthropists and investors, and they are paving the way for so many others, including Better Ventures, who recently hosted an intimate chat with Mitch at Impact Hub Oakland.  

It was an honor and pleasure to hear all about his work, how he got to where he is, his views on Oakland and diversity in tech, and where he and the Kapor empire is headed.

Mitch might just be the most entertaining and quotable speaker in impact investing, so there were many inspiring and quotable moments.

Here are some of our favorite moments, with the full video below:

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Getting Started

When you’re on the cutting edge of a new technology, you won’t likely have mentors or guides. You’ll need to quickly get comfortable making it up on the fly.

“[Lotus Development] got to be overwhelming because we got huge fast and I had no training or background, and unlike today when there are mentors and accelerators and books and workshops and infrastructure so you can get some help, you’re not alone. This was 1983. We were basically making all of this stuff up as we went along.”

https://youtu.be/3LuAe87Fj8U?t=11m53s

Investing for Impact

A positive social impact won’t happen without strategy and follow-through at the company level, but it’s best to start at the earliest investment stage.

“We have our companies create a social impact plan and a diversity plan as a funding condition. That sort of sets the baseline… but not just of how big the market is going to get but who’s going to be better off and how many people?”

https://youtu.be/3LuAe87Fj8U?t=42m30s

“Our lens on social impact is that we’re looking for companies which are closing the gap of access and opportunity for some under served population. Could be African-American or Latino but not necessarily. It depends a lot on the context. But there has to be a gap, there has to be a closure strategy and it has to be beneficial to an underserved community. That’s our lens… It turns out that there’s just way more great opportunities that meet our criteria than we can actually invest in.”

https://youtu.be/3LuAe87Fj8U?t=40m

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Values-Driven Leadership

Corporate values are only as good as the values of a company’s leaders and staff, who sometimes need a bit of formal encouragement.

“[At Lotus], we tied managers bonuses to how well their direct reports said they actually practiced our corporate values, that they embodied them, so the values worked, not just in the abstract. There’s some economics to them.”

https://youtu.be/3LuAe87Fj8U?t=13m21s

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Oakland, Diversity and the Tech Industry

Technology is only as good as its ability to reflect and address our needs as a collective people. In America today, Oakland is a reflection of who we are – and who we are becoming – and tech will be better off if it can reflect this new country we live in.

“Tech needs Oakland, and it’s not just a matter of office space. If tech is going to serve America, it needs to look more like America, which it does not, and not in Silicon Valley. Oakland is a different proposition given its history, its diversity, its very aggressive political and cultural traditions. There’s an opportunity to do tech here in a way in which social impact and diversity are more in the mix than in San Francisco.”

https://youtu.be/3LuAe87Fj8U?t=35m32s

Watch the full video below and join Better Ventures in late September, when they host their next Fireside Chat with Ben Rattray, founder and CEO of the online petition website Change.org.

About Better Ventures PreSeed

Better Ventures PreSeed convenes thought leaders, networking, and resources to advance a thriving impact startup ecosystem in Oakland and the greater East Bay. This program offers speaker events, workshops, and other support to help early-stage entrepreneurs launch and grow successful businesses that also benefit the community.

About Better Ventures

Better Ventures is an Oakland, CA-based venture firm that backs early-stage technology companies building venture-scale models that generate positive social and environmental outcomes. Their companies are leveraging the power and scale of technology to address big societal issues from work and education, to health and sustainability. They invest at the seed stage and provide resources and support to help companies get to the next level.

How to Prepare for SOCAP16: Tips for Attendees

September 6th, 2016

SOCAP is a microcosm of the global changemaking community—a gathering place for  innovators, dreamers, thinkers and doers who are using business as a force for social and environmental change. The experience at SOCAP can feel a bit overwhelming, but there are steps you can take now that will help you feel more confident, relaxed, and productive during your time at the conference.  

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Whether you are a SOCAP first-timer or a veteran attendee, this guide will provide helpful tips and resources so you can hit the ground running on the very first day of the conference.

Pathable

Activate your Pathable profile and use it to start connecting to the SOCAP community and plan your SOCAP16 schedule. This online tool is where you can find the conference schedule online, learn about your fellow attendees and speakers, set up meetings, start discussions and make connections. To learn more, read SOCAP Pro Tip: Start Networking Before the Conference.

SOCAP16 Program Book

The SOCAP16 Program Book is now available online. The program book contains maps of the campus, a full schedule, descriptions of sessions, information about our sponsors, special programs and networking events, as well as lots of other valuable information about the conference experience. Note: Pathable is the easiest way to view the full schedule with descriptions.

Tips From the Conveners

In their welcome address in the SOCAP16 program book, SOCAP Convener Kevin Jones and Executive Producer Rosa Lee Harden gave this bit of advice to conference attendees,

“If you’re a first-timer—as about 30% are every year—seek out a scholarshipped entrepreneur and get them to tell you their story. If you’re an old hand, well, you know what to do. You probably have dozens of meetings set up with people you might only see once a year, and you have things to get done. Be sure to also make time to welcome the newcomers. They may be the ones you didn’t know you needed to meet.”

Producer and Curator Lindsay Smalling offers this piece of advice, “While at SOCAP16, I encourage you to actively support a cultural shift toward inclusive networks—pause and notice who is around the table, who is in the conversation, and whether our networks represent the relevant perspectives needed to create the world we want to live in.”

If you’re a first-timer—as about 30% are every year—seek out a scholarshipped entrepreneur and get them to tell you their story. If you’re an old hand, well, you know what to do. You probably have dozens of meetings set up with people you might only see once a year, and you have things to get done. Be sure to also make time to welcome the newcomers. They may be the ones you didn’t know you needed to meet.

How to Get the Most Out of SOCAP Sessions

On the opening night of the conference, at 3pm on Tuesday, September 13th, all first time attendees (repeat attendees can also benefit!) are invited to the session on the Festival Main Stage, Getting the Most from Your SOCAP Experience. This session will offer an overview of SOCAP16 programming and venues, tools to help you navigate, best practices for connecting to valuable strangers, as well as tips on how to maximize your time and align your activity to get the most out of SOCAP.

To see last year’s panel, watch SOCAP15 – Getting the Most from Your SOCAP Experience. In that session, SOCAP organizers and alums, including Village Capital Executive Director Ross Baird, offer their advice for navigating the conference and connecting with members of the SOCAP community.

Fran Seegull’s Tips for Investors

In her interview for our SOCAP Conversations blog series, Chief Investment Officer and Managing Director at ImpactAssets Fran Seegull offered tips for how investors can be prepared to get the most out of SOCAP.

“It is so tempting to attend the SOCAP sessions that are directly relevant to your interests and professional situation—for investors to go only to the impact investing track, for example. That is fine, but what I recommend is to pick a couple of wildcard sessions, topics that you don’t know much about, sessions that maybe aren’t directly related to your job or your objective (like raising capital). Mixing it up can really be a terrific way to meet new people and spur new ideas.

“Don’t always sit with the same people at meals. SOCAP can be overwhelming, and it is human nature to flock to the folks you know, to use them unconsciously as your social life raft. But the beautiful thing about SOCAP is that the community is really open. So try sitting with different people at every meal and engage them in a dialogue.

“In part, I use SOCAP for professional ‘speed dating.’ I live in Los Angeles. There are some impact investors and fund managers who come through LA, but I don’t see nearly as many as if I worked at the Impact Hub in San Francisco. So I use SOCAP as a way of convening with folks with whom I have phone or email relationships, but have never met or rarely meet in person. I schedule and conduct 20–30 minute meetings with fund managers and others. So, I supplement the content of SOCAP with the community at SOCAP which I highly recommend.”

Tips For Entrepreneurs

SOCAP alum and entrepreneur Minhaj Chowdhury wrote a guest post in 2015, How to Get the Most out of SOCAP: 4 Tips for Entrepreneurs, which includes the advice,

“Spend some time getting to know your cohort members and other entrepreneurs … I would really encourage you not to automatically move on when you encounter someone with an entrepreneur badge. Talking to other entrepreneurs has really changed our trajectory. We’ve met a lot of our customers and our franchisees at conferences. I found a customer at SOCAP last year that allowed us to expand to Bihar. That wouldn’t have happened if I hadn’t taken the time to talk to other entrepreneurs. I’ve actually learned more from other entrepreneurs than I have from investors because of the overlapping challenges that we have.”

Create Your Own SOCAP Community Discussion

What conversation would you like to have at SOCAP? If you have an interest that is not reflected in this year’s programming, and would like lead a conversation with like-minded attendees about that subject, we will help you create your own discussion group during the event. Take your idea to the SOCAP host station in the front of Festival Pavilion. Let them know about your idea and set a time and a place to meet. The host will help you add the information about the meeting and topic on Pathable. Talk to a host to learn more about this opportunity!