TPG’s new $2B Rise Fund seeks to deliver impact at scale

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Both the size and target of TPG’s new and impacting Rise Fund are unprecedented.

The fund, $1B when first announced has since grown to $2B, and is a market-mover, with investments in countries like Myanmar to improve the poor country’s telecom infrastructure and India to two startups that plan to make it easier for micro and small business to make loans and to make financial products more available to rural farmers.

Its board members, all of whom are investors, are big names: Bono, the lead singer of U2; Jeff Skoll, the first employee of eBay, who now runs Participant Media; Laurene Powell Jobs, wife of the late Steve Jobs.

The stakes are high – two pension funds and a sovereign wealth funds are said to have committed nine-figure sums.

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A $1 billion kitty is unprecedented in the impact investing universe. Given TPG Growth’s interest in emerging markets, it would not be unexpected for a sizeable chunk of that capital to flow into India and the larger Asian region. The allocation of such substantial resources specifically for impact businesses is without doubt a huge leg-up for a sector that has been starved for funds. Given TPG’s growth investments focus, the Rise Fund could well become an important source for the much-needed follow-on growth capital that impact businesses generally find hard to access from conventional private equity investors.

However, that will depend on the kind of businesses the Rise Fund plans to back as part of its impact agenda. Investments from the fund, which will be overseen by McGlashan, are likely to be on the lines of TPG Growth’s $40 million bet on Myanmar-based telecom towers company Apollo Towers in late 2014. The deal represented the first major global private equity bet on Myanmar after the country emerged from military rule.

A further indication of the kind of deals it may pursue is its partnership with impact investor Elevar Equity for the Rise Fund. Elevar, which has put a little over $160 million to work in 24 companies across the world, including in India, targets businesses that deliver services to underserved rural and urban consumers. Its recent investments include Indifi, a platform that makes it easier for micro and small businesses to access loans, and Samunnati, a company that makes financial products available to small and marginal farmers and other micro-entrepreneurs in the agriculture sector.

In addition, the fund’s high-profile board members and TPG’s professional staff are being held accountable for the performance of the fund, which it had developed rigorously with Bridgespan, a consulting group.

Bridgespan’s metrics for Rise could become a model for other investment firms if they prove successful, especially in a global political climate that is rethinking its capitalistic system.

“Capitalism is going up on trial, and I think that it’s clear that putting profit before people is a nonsustainable business model,” Bono said. “I think giving those two equal time is the way forward, and I think that in the present climate, we need to rethink, reimagine what it is. It’s not that capitalism is immoral; it’s amoral. And it’s a better servant than master.”

Sources: Deal Street Asia by Snidha Segupta, a contributing writer based in India, Andrew Sorkin at the New York Times and David Bank at ImpactAlpha.