Unfounded Biases Can Get in the Way of Impact Investing

By

-

April 25, 2017

Most investors, on the surface, appear to have everything under control. Many project confidence in their decisions as goals are met, calls are correctly made, or as big bets pay off in big returns.

Yet for all the positive publicity of big investment bets that returned billions, less known are those that failed, and consequently, unintentionally in some cases, don’t end up showing in charts due to biases because of gender or like the Survivor Effect (see chart).

Inherent Bias – Downside

Cognitive biases, “thinking patterns based on observations and generalizations that may lead to memory errors, faulty logic and bad decisions,” have been shown by research and data to affect investing decisions.

“People are inherently biased and our unconscious biases affect our decisions and perceptions,” according to Dr. Khatera Sahibzada, an industrial/organizational psychologist who helps VCs and start-ups identify talent by developing better assessment and selection processes.

Fears of the unknown, or greed due to unbounded excitability can compound the effects of biases, degrade the quality of investment decision-making, and fail to maximize the social utility of impact investments.

Persistent Myths

Impact investing is all about philanthropy. In fact, impact investing spans a wide range, public, private, fixed income, corporate SRI programs, institutional, retail. In the 2016 annual investor survey by the GIIN, “approximately 90% of investors surveyed had financial returns that satisfied or exceeded their expectations.”

Impact investing only relates to direct investments. As in the first myth, in fact, impact investing spans asset classes, private/public debt, private/public equity, CDFI, green bonds. “Some families like those in the Toniic, 100% Impact Network are deploying 100% of their investable assets achieving return and impact.”

There is a lack of domestic opportunities for U.S. investors interested in impact investing. In fact, in the U.S., affordable housing, climate change, homelessness, job training and affordability of higher education continue to be main social issues. “Global societal and environmental issues like hunger, inequality and climate change are regional-agnostic, and there is ample opportunity to invest in the U.S. market.”

Impact investing is difficult. In fact, “an investor can start by moving cash or cash equivalents to an ethical bank, investing in an impact fixed income vehicle (like a green bond) and picking a fossil-free mutual fund.”

It’s a Democrat vs. Republican issue. “While partisan disagreement isn’t new, … it’s embraced by both sides of the political aisle.”

Brain Mechanics At Play

Jason Zweig’s “Your Money and Your Brain” helps provide a good resource of the biology and behaviors behind biases. Two notable examples:

When markets tumble – the brain’s amygdala floods our bloodstreams with corticosterone. Fear points the needle to “Sell!”
When markets unexpectedly soar – the brain’s reflexive nucleus accumbens fires up in your frontal lobe. Greed convinces you to seize the day. “Buy!”

Prescription – A Sample

Systematic and rigorous decision-making frameworks can minimize biases and improve investment judgement. Here is a sample one documented in good detail by Clint Korver, a venture capitalist at Ulu Ventures.

“The framework I adopted to improve my investment judgment was decision analysis, a rigorous and sophisticated set of tools that have been adopted as best practice in industries analogous to venture, such as pharmaceutical research and development and upstream oil and gas exploration.

All three industries require large amounts of initial capital, face significant uncertainty, and achieve success (if ever) years after the original investment. I found the similarities compelling, and with my academic background in decision analysis (including a PhD from Stanford) and 20 years of experience applying it to a wide range of problems and industries, I was well prepared to develop a decision-analysis framework for venture investing.”

Helpful Resources

Munger’s 25 Cognitive Biases

Above the Market “10 Most Common Biases”

Bloomberg “Biases Can Cost You”

Kauffman Fellows “Applying Decision-Making Analysis to Venture Investing”

Attempts to use machine-learning algorithms to reduce bias, also bias, against minorities

The BackFire Effect explained in a comic strip

Human cognition may be reaching its limits in solving today’s social problems

***

Sources: Investment News, KSahib Consulting, Vestory, TechCrunch

More Women Are Leading SRI but Few are Engaging, TPI reports

By

Gino Baltazar, MS Finance

-

April 24, 2017

womenframework — Framework for Deepening Women’s Engagement in Impact Investing. Source: The Philanthropic Initiative

Women are leading the way in impact investing, up to 80% yet only 15% are only engaging in socially responsible and impact investing behavior, according to a March study by The Philanthropic Initiative.

The study was co-developed with Mission Investors, a network of 200 foundations engaged in impact investing and Mission Throttle, a social impact strategy firm based in the Midwest U.S.

Why The Gap?

Several factors are said to be responsible.

Women are more averse to high risk and generally need more information before making investment decisions.
Women are less confident, by up to 50% compared to men, in their investment knowledge and abilities.
Fewer women than men are responsible for household investment decisions (50% vs 13%) although there is a noticeable shift among the younger, Millenial demographic (42% vs 37%).
Few introductory “on-ramp” structures exist today that appeal to women to help gain more experience and confidence in impact investing. Women, the report cites, feel that conventional advisor relationships are ineffective, investment networks are not diverse enough, or women feel “out of place” in investment committees that are dominated by males.

Bottom Line – Why This Matters

It boils down to maximizing opportunities in terms of dollars invested and wealth managed, and the potential collective social good those dollars can achieve, as more women increasingly influence investment direction in the future.

Women are expected to increasingly influence the projected $400 billion in impact investing decisions by 2021, according to several studies cited in the report.
Up to 70% of $41 trillion in intergenerational wealth is expected to transfer to women because they outlive men.
More women among Millenials are consistently expressing greater interest in SRI.

Call to Action – Potential Strategies

A range of actions and strategies are needed to promote psychological safety among women.

Mentoring – organize one-on-one, small group and peer-to-peer type opportunities for women. Create safe, coaching and mentoring type of environments.
Increase visibility – leverage networks to inspire high net worth women to learn more, drive emotion to actually engage in impact investing.
Curate stories – share meaningful stories that women can relate to, share tools that are used, share failures and learning outcomes to help women understand how to safely navigate from being educated to actually practicing impact investing.

Sources: Mission Investors, Mission Throttle

Advocating for Earth Day 2017

By

Gino Baltazar, MS Finance

-

April 22, 2017

Earth Day 2017’s theme is Environmental and Climate Literacy, made notable in a year dominated by renewed climate change skepticism and promotion of climate science deniers in politics and leadership.

Renowned scientist Albert Einstein once famously suggested that if he was given an hour to solve a problem, he would first spend 55 minutes defining the problem, then just 5 minutes solving it.

In Einstein’s spirit, a global citizenry knowledgeable in environmental science and fluent in local and global ecological issues is first required. Toolkits are available to schools, colleges, and community groups across the world to hold their own teach-ins for Environmental and Climate Literacy or other Earth Day events.

Earth Day Since 1970

Since the first Earth Day 47 years ago, the world’s population has doubled, 2.4 times more CO2 is being emitted, causing average temperatures to rise by 0.97 degrees Celsius. Sea ice is melting by a rate of 13.3% per decade, causing sea levels to rise by 11 centimeters in the same period.

Wild land animal populations have shrunk by nearly 38%; marine animal populations have declined by nearly 36%.

Over 170 animal species have been declared extinct.

Why Earth Day Matters – Advocacy

Without Earth Day, some landmark accomplishments might never have happened, such as:

The establishment of Environmental Protection Agency in 1970
The Clean Air Act of 1970
The Clean Water Act of 1972
The Endangered Species Act of 1973
The Resource Conservation and Recovery Act of 1976
The Federal Occupational Health and Safety Act aimed at “in-plant pollution”

What’s Happened Since Then

Practice recycling, which was nearly non-existent 40 years ago
Have alternative, energy efficient forms of energy, such as CFL light bulbs
In 1975, catalytic convertors became mandatory for all cars in the U.S.; and now we have hybrids and the first electric cars
SO₂emissions have dropped by 40%; acid rain levels in the U.S. have decreased by 65% since 1976
Depletion of the ozone layer has been controlled

Key pollutants have decreased by -71% as cars have driven more miles, 184% increase.

Bald eagles have returned. In 1987, CFC’s were banned, reducing chances of skin cancers.

In 2015, 197 countries agreed to dramatically reduce CO2 emissions.

https://youtu.be/xClCgciaSYM

Countdown to 2020

So why is Earth Day important? Watch your kids playing ball in a park; go for a hike in the woods with your dog. Go for a run by a beach or national park. Or simply stand in your backyard and fill your lungs with fresh air.

More work is needed. The year 2020 marks the 50th anniversary of Earth Day. Education is the key to advocacy and advocacy is the key to change.

Source: Earth Day

First Circle Raises $1.3M for Philippine SME Markets

By

Gino Baltazar, MS Finance

-

April 21, 2017

businessloanphilippines — Shutterstock via PYMNTS

First Circle announced that it has raised an additional $1.3 million in venture funding. The Philippine-based fintech startup hopes to improve access to capital for SME’s in the country and in emerging markets in the Asian region.

Why It Matters – Financial Inclusion

In the Philippines, an ASEAN member country with a population of 100 million, SMEs represent 99 percent of all registered companies yet contribute to just 40 percent of economic output. Access to financing is a major hurdle for SME’s in the country, less than 20 percent have access to all bank loans.

The challenges are made more acute by lack of access to data on consumers and banks that tend to favor more established customers where risks are perceived to be lower.

However, startups like Lenddo, based also in the Asian region in Hongkong, are closing the gaps in consumer data, using alternative non-traditional data to provide better credit scoring and verification, compared to algorithms which can bias scoring against minorities. Lenddo, which announced a partnership with Experian in February, has raised $14 million from 11 investors.

And consider the opportunity – in the Philippines, SME’s represent 99 percent of all registered companies and contribute to 40 percent of the small country’s economic output.

Bottom Line

Risks to First Circle’s cash infusion are made lower by available technology and increasing growth opportunities in the ASEAN region. Alternative information can now come together to allow underwriting of loans with a degree of certainty without traditional metrics.

The capital was provided by Accion Venture Lab, part of Accion, the non-profit focused on financial inclusion, and Deep Blue Ventures. First Circle first raised $1.2 million last year, and it counts 500 Startups, IMJ, and Key Capital among its backers.

***

“Lack of access to capital is a big problem that needs to be fixed,” said First Circle cofounder and CEO Patrick Lynch in a statement. “If it isn’t, millions of hardworking entrepreneurs and their businesses will not be given the chance to reach their potential.”

According to Lynch, First Circle will continue to focus on the Philippines market in the near future but may look into expanding into Indonesia, Thailand or other Southeast Asia markets. He added that the company will look to close a Series A round of funding before the end of the year.

Last month Accion International announced $141 million in funding raised alongside VC Quona Capital, which will be used to fuel FinTech startups across the globe that aim to disrupt the traditional banking market.”

Sources: TechCrunch, CrunchBase, PYMNTS

Impact Investing Deal Report – April 19, 2017

By

Gino Baltazar, MS Finance

-

April 19, 2017

Ooho maker Skipping Rocks Labs, insurtech provider BIMA and food-waste startup Wasteless were among this past week’s notable investing deals.

Skipping Rocks Labs – this week’s spotlight (see video) is the maker of balls of water called Ooho – a replacement for plastic water bottles that is biodegradable and edible —saving the dumping of one-billion wasted bottles per year, among the chief sources of microplastics that end up in our planet’s oceans and recently evidenced off the waters of the Arctic. $1.05 million in equity crowdfunding via Crowdcube. Based in London, UK.

BIMA – an insurance technology (insurtech) firm that provides mobile-delivered microinsurance to underserved families in emerging markets including Ghana, Senegal, Tanzania, Mauritius, Bangladesh, Sri Lanka, Indonesia, and Honduras. $16.8 million in Series D to now total $82.2 million from 5 investors. Based in Stockholm.

First Circle – fintech startup based in the ASEAN region that is aiming to improve access to lending and capital for small-to-medium enterprises (SME’s) in emerging markets. $1.3 million in venture funding to now total $2.5 million from 6 investors. Based in the Philippines.

Frequency Therapeutics – develops small molecule drugs that activate progenitor cells within the body to restore healthy tissue. Invest Impactly covered how investments in small molecule drug technology can help fight Rheumatoid Arthritis. Frequency is aiming to re-create sensory cells in the inner ear to treat chronic noise induced hearing loss, which affects over 30 million people in the U.S. alone. $32 million in Series A from 5 investors. Based in Woburn, Massachusetts.

Lyndra – developer of an oral, sustained-release and long-acting drug delivery technology and platform, which its CEO claims can help the approximately 50% of patients in the developed world who do not take their medications because they feel tethered to their daily pills. $23 million Series A to total nearly $29 million in funding from seven investors. Based in Cambridge, Massachusetts.

Teamable – an employee referral and diversity hiring platform that transforms social networks into high-performance talent pools. $5 million in Series A from 3 investors. Based in Redwood City, California.

NeuroTronik – develops a medical device as an alternative for the drugs used currently to treat heart failures. Its experimental technology allows inserting stimulation catheters into a vein near the heart to increase cardiac output without increasing heart rate. $23 million in Series B to now total $36.2 million from 6 investors. Based in Chapel Hill, North Carolina.

Wasteless – is aiming to tackle food waste and inventory inefficiency, a $1 billion costly issue in retail groceries according to the startup, through a real-time tracking solution. $400 thousand in Seed A from 5 investors. Based in Tel Aviv, Israel.

Products of Note

Aipoly uses artificial intelligence (AI), augmented reality (AR) and the technology of smartphones to help the blind see. Based in New York, New York.

Bempu Health – a bracelet device that keeps a watch on a baby’s temperature in India where 8 million children are born prematurely every year. Funding via the Gates Foundation, USAID, and UKAID. Based in Bangalore, India.

Other News

Two activist law professors tried to mimic big activist hedge funds, investing their retirement savings in a small, languishing public company and trying to make impact, shake it up. They share their experience in a story this past week in the Atlantic.

Sources: Crunchbase, TechCrunch, Atlantic, CNBC, AgFunder

Wielding Investment Against Rheumatoid Arthritis

By

Gino Baltazar, MS Finance

-

April 17, 2017

AF-infographicECONOMICS — Arthritis Foundation

About 1.3 million Americans and 4.9 million globally are today affected by rheumatoid arthritis or RA, a painful, incurable disorder that costs the U.S. $128 billion economically. Its considerable impact merits more sustained investments and funding.

Unlike the wear and tear damage of osteoarthritis, RA occurs when your immune system mistakenly attacks your own body’s tissues. It affects the lining of your joints, which makes them swell, cause pain, erode bones and cause deformit. In the U.S., RA is three times more likely to occur in women than in men, and left untreated can also damage a wide variety of the body’s systems, including the skin, eyes, lungs, heart and blood vessels.

Why it Matters – RA’s Considerable Burden

Rheumatoid Arthritis is costly. Because RA is typically progressive, its symptoms worsen over time and often begins during the middle years of life. The disease often impairs many patients for as long as 30 years, which translates to considerable social and economic costs.

In the U.S., medical care, lost wages and productivity loss due to RA comprise the nation’s $128 billion costs annually, according to the Arthritis Foundation, a non-profit arthritis advocacy group based in Atlanta, Georgia.

Without treatment, 90% of RA patients stop working before retirement, and 10% stop working within a year of being diagnosed. One in three arthritis patients experience impairments at work, if they do manage to stay engaged in the nation’s labor force.

As far as its healthcare burden, the American College of Rheumatology estimates that 250,000 hospital admissions and 9 million doctor visits annually in the U.S. are due to RA. The average annual cost of RA is $8,500 per RA patient in the U.S., excluding pharmaceutical costs; 50% of all health costs for RA are related to hospital admissions.

RA patients who become disabled have higher costs, both to the economy and healthcare system. In one study by the American College of Rheumatology, disabled RA patients can cost more than three times the cost of health care compared to patients who are not. This is not insignificant, and irregardless of a planned repeal by the current administration of parts of the nation’s Affordable Care Act.

Market Size

With its considerable impact to society and the economy, RA’s drug market reach is also as big, with growth anticipated to nearly $19 billion by 2020 according to GBI Research. Large biotech players are involved: the so-called top “Big Three,” Humira, Enbrel, and Remicade, made by Abbvie, Amgen, and Johnson & Johnson respectively, represent about 67% of drug sales.

Biosimilars, a biologic medical product that is almost an identical copy of an original product but is manufactured by a different company, represent the next segment of RA drug providers that is fast growing. Market reach is projected to $5.4 billion by 2020, according to BCC Research. By 2018, a biosimilar of each of the Big Three in the US is expected to come to market. Companies that stand to gain from this trend include Pfizer, Novartis, Amgen, and Merck.

Impact Ventures

Venture capital funds like Boston Scientific, Action Potential VC in the US and Oriza Seed Venture Capital, Boyu Capital, and WuXi Healthcare Ventures in China recognize these trends and are underwriting deals so solutions to Rheumatoid Arthritis may grow to become a key destination for impact investors.

Five noteworthy ventures being invested in:

SetPoint Medical – makes proprietary implantable neuromodulation devices to supplement the body’s “Inflammatory Reflex” —the natural mechanism by which the central nervous system regulates the immune system. $78.6 million from 8 investors with the most recent syndicate funding just in March 2017. SetPoint’s proprietary bioelectronic platform consists of an implantable microregulator, wireless charger and an iPad prescription app. Based in Valencia, California.

KaloBios – biopharmaceutical focused on developing first-in-class human antibody therapeutics, targeting not only RA, but other rare diseases like cystic fibrosis. KaloBios had a rocky recent history, including the arrest of former CEO Martin Shkreli, bankruptcy, and a Phase 2 clinical trial failure for its drug candidate to treat cystic fibrosis. $93 million in 6 rounds from 10 investors. Based in South San Francisco, California.

CStone Pharmaceuticals – another biopharmaceutical focused on rheumatoid arthritis and four additional therapeutic areas – oncology, cardiovascular diseases, hematology and autoimmune diseases. $150 million from 3 investors. Based in Shanghai, China.

Axikin – a biopharmaceutical company focused on the development of small molecule therapeutics, or drugs that are made in chemical reactors rather than in cells or living tissues, for inflammatory disorders like RA as well as other respiratory and auto-immune diseases. $18.5 million in 5 rounds from 2 investors. Based in San Diego, California.

Qu Biologics – is developing a platform of new immunotherapeutic treatments, one of which is called the Site Specific Immunomodulators or SSIs (see video below) that are designed to reverse the chronic inflammation underlying cancer and immune-related diseases, such as Crohn’s or rheumatoid arthritis. $10.58 million in 3 rounds. Based in Vancouver, Canada.

Cheaper Drugs?

An easier regulatory environment in the new administration, some say, will create an opportunity for the industry to accelerate the process of new drug approvals by focusing on clinical trials.

These trials, however, are complex, costly and in many cases inefficient – the process and workflow of randomized clinical trials haven’t really changed since the 1990s.

Trump’s push for fewer regulations and more consumer choices ought to incent better ways to usher in more modern clinical trial processes.

Sources: Crunchbase, Seeking Alpha, Arthritis Foundation, RheumatoidArthritis.net, GBI Research, BioSimilar Development

Why Issuance of “Green Bonds” Is Growing – now $81B

By

Gino Baltazar, MS Finance

-

April 14, 2017

Issuance of green bonds, a tax-exempt investment vehicle to fund projects that have positive environmental and/or climate benefits, grew to about $81 billion globally last year, according to a report by the Climate Bonds Initiative. Growth is projected to nearly double in 2017 to $150 billion.

Growth Factors – Climate Change and Green Bond Standards

Several factors have been responsible for its fast growth, not the least of which has been the loud chorus of government actions to address climate change and sustainable finance. The vehicle is more popular in Europe where climate change has been a bigger rallying cry than in the US, following the passage of the Paris climate accord last year, and because the continent had an earlier head start, issuing its first green bonds ten years ago.

Green bonds are also now increasingly popular in China where dirty air has been an issue – last year, it issued a $37 billion green bond. China was a leader of green bond issuance in 2016, accounting for about 31 percent of all issuance and 65 percent of growth.

Another reason behind the rapid growth of the green bond market has been progress towards establishing a commonly accepted definition of what a green bond actually is, and towards developing standards against which green bonds can be evaluated.

What had started out as a sort of “wild west” market environment led to the establishment of the Green Bond Principles in 2014, a voluntary set of “guidelines that recommend transparency and disclosure and promote integrity in the development of the Green Bond market by clarifying the approach for issuance of a Green Bond.”

Despite the principles, risks of investing in green bonds include transparency or lack thereof and weak reporting, since the principles are voluntary.

Bottom Line – Momentum

With the growth of the green bond market, transparency is becoming more significant, given the rising trend of SRI overall, now a $23 trillion global market. A number of corporate and public bonds are being issued along with new indices that are being used to benchmark new classes of green ETFs, broadening opportunities for fixed income investing in sustainable causes.

***

A range of private and government organizations have issued green bonds, from Apple Inc. AAPL -0.53% and Toyota Motor Corp. TM -1.19% to municipalities, New York’s Metropolitan Transportation Authority and the governments of France and Poland. They have proved popular with investors, with most of the issues oversubscribed, according to the Climate Bonds Initiative.

“These are no longer niche investments,” says Neena Mishra, director of ETF research at Zacks Investment Research.

“I think people are thinking about this more over the long term in terms of being green. So trying to support any bond that has environmental and climate-positive effects is viewed as a good thing by shareholders or pension plan members,” adds Randall Malcolm, managing director and portfolio manager for Canadian public fixed income at Sun Life Institutional Investments Inc.

The growth of the market has sparked interest from fund companies, with the first U.S.-listed exchange-traded fund focused on green bonds—the VanEck Vectors Green Bond ETF (GRNB)—launched in March.

The ETF was launched to meet growing investor demand for environmentally focused products, says Edward Lopez, head of ETF product management at VanEck, an investment-management firm based in New York. The green-bond market has grown large enough in recent years to allow for an ETF to be listed, he says.

The fund tracks the S&P Green Bond Select Index, which was launched by S&P Dow Jones Indices last month to track the most liquid segment of the broader S&P Green Bond Index.

***

Selected green bond developments across the world:

Mexico City, in December, became the first city in Latin America to issue a “green bond,” a $50 million issuance to upgrade lighting, water and transit infrastructure.

Kenya’s Green Bond program kicks off with at least a $600 thousand commitment.

National Bank of Abu Dhabi issues a $587 million green bond, first such bond from the Middle East to be listed on the London Stock Exchange.

Singapore, in June, plans to launch government-sponsored green bond grant incentives. Up to S$100,000 can be granted by the program to green bonds with a minimum issuance value of S$200 million.

Poland, in December, issued a $750 million green sovereign bond, its first.

France, in January, issues 7 billion Euro in green bonds.

The World Bank’s green bond program surpasses $10 billion.

Brazil sets out “green bond” guidelines to help grow its green bond market.

Houston Texas in the US plans to roll out $99 million in green bonds for higher education.

Nigeria plans to delay its planned green bond sale.

***

Sources: Wall Street Journal, Bloomberg, Climate Bonds Initiative Highlights

Impact Investing Deal Report – April 12, 2017

By

Gino Baltazar, MS Finance

-

April 12, 2017

Agrisoma, deep-link startup Branch and micro-scholarship platform Raise.Me were among this past week’s notable investing deals.

Agrisoma – its core technology is a proprietary method to introduce, express and manage new genes in plants. It has developed oil from the Carinata seed which it says is the only scalable agricultural crop for next-generation biofuels and bio-based jet fuels. Global biofuel production is expected to reach 61 billion gallons by 2023, or 6% of global transportation fuel production. $15.4 million Series B via BDC VC to total $17.72 million raised from six investors. Based in North Vancouver, British Columbia.

Agersens – is developing a collar and phone app enabling farmers to fence, move or monitor their livestock using their smartphone. $2 million seed via Bell Potter to total $2.36 million raised from two investors. Based in Melbourne, Victoria.

Branch – is building a platform that powers deep links that point back to mobile apps for shares, invites, and referrals, promising to improve retention, discovery and the mobile customer experience. Such a platform could also help degrade referrals to fake news sites. $60 million in Series C funding led by Andy Rubin’s Playground Ventures. Based in Palo Alto, California.

Cirius Therapeutics – is developing an insulin sensitizer for the treatment of patients with non-alcoholic steatohepatitis, a type of non-alcoholic fatty liver disease (NAFLD), and liver fibrosis. NAFLD affects 20-30% of North Americans. $40 million in Series A funding via Frazier Healthcare Partners and five other investors. Based in Kalamazoo, Michigan.

Ecoation – data collection platform for early detection of pests, diseases and deficiencies that affect crop value. $1 million seed from Vancouver Angel Platform and Creative Destruction Lab. Based in North Vancouver British Columbia.

Full Harvest – an online platform selling food seconds to businesses, has closed a $2 million seed round led by Wireframe Ventures and others, raising the total funds it has raised to $2.35 million from seven investors. The startup aims to repurpose 20 billion pounds of produce that are wasted in farms each each year. Based in San Francisco, California.

Inspira – offers modular cold storage and food processing units, which run on off-grid renewable energy, to remote crop production farms in East Africa and South America, where lack of cold storage in remote locations places limits on product yield, shelf-life and revenue potential. $1.76 million in funding from five investors. Based in the UK.

Proveca – is developing medicines to treat chronic medical illnesses in children, has raised £4 million in new venture capital and debt financing via Catapult Ventures, GM&C Life Sciences Fund and Kreos Capital, raising total funds it has received to £7.27 million. Proveca has also received a total of £600k in Innovate UK grants. Based in London, UK.

Raise Labs – this week’s spotlight for their work in making higher education more affordable (see chart) is building a platform to match colleges and universities with eligible financial aid recipients in high school, via “micro-scholarships” to reward good grades or extracurricular activities. $12 million in Series A bringing total raised to $16.5 million from nine investors. Based in San Francisco, California.

Roslin Technologies – University of Edinburgh’s commercial spin-off for animal health agritech. Among its innovations planned for commercialization: a low-cost manufacturing system to produce therapeutic proteins in chicken eggs, novel vaccines to enhance animal welfare and germplasms to preserve poultry genes for future generations. $12.5 million seed from three investors. Based in Edinburgh, Scotland.

Synack – penetration tester and “good-hacker-as-a-service” with its “unique Crowd Security Intelligence” platform gets $21.25 million via Microsoft Ventures and Singtel. Based in Redwood City, California.

Waycool – aims to fix the disorganized, perishable food and produce supply chain in India. $2.7 million seed via Aspada Investments will help extend its reach to other major cities like Bengaluru and Hyderabad, and build a technology platform to track and measure supply chain inefficiencies. Based in Chennai, India.

In other news, Lyft has raised at least $500 million in new VC funding putting it at around a $7.5 billion valuation. The car-sharing platform and Uber-competitor was also in the news when one of its executives got nominated by President Trump to a post in the Transportation Department, and when thousands of its drivers failed background checks in Massachusetts.

Sources: Crunchbase, TechCrunch, SEC, ImpactAlpha, MobiHealth News, AgFunder

Impact Investors Find $10B Value in AgTech Ventures

By

Gino Baltazar, MS Finance

-

April 10, 2017

Carlo_in_the_Tea — Creative Commons: Carlo in the Tea Plants

Investors have poured over $10 billion into AgTech ventures since 2014, despite a dip in total funding in 2016, according to a report from AgFunder.

Last But Not Least

Agriculture may be the least digitized industrial sector in the world (McKinsey see figure), but the nearly $8 trillion industry remains cemented in its place for investment capital interest and innovation.

In 2015, agricultural technology, or AgTech, investments reached $4.6 billion after rising three years in a row, according to AgFunder, an online marketplace that tracks sector.

In 2016, while AgTech dipped by 30% to $3.2 billion according to the new report by AgFunder, the actual number of deals actually grew by 10% from 526 to 580 year over year. Counting 2014’s contribution, AgTech investments have thus reached $10 billion.

AgTech is no longer a unique niche that nobody is paying attention to. Yields today are falling with climate change concerns materializing and human populations rising – clearly more innovation is needed. “We’re on the cusp of the next agricultural revolution,” says Louisa Burwood-Taylor, AgFunder’s head of media and research.

Why This Matters – the Future and Costs of Food

Innovations in agriculture, no one would argue, is vital. The industry’s crops and livestock feed every human on the planet. It represents 10% of global GDP, employs close to 40% of global labor, and contributes 30% of the world’s greenhouse gas emissions, making it a prime target for SRI and SDG.

In response, new impact funds are seeking financial returns from the production of forest and agricultural goods. These returns can be boosted by environmental markets that pay for stewardship practices that have social and environmental benefits that promote the triple bottom line. So-called carbon offsets are one good example.

Investor groups are also diversifying to include private investors, companies focused on supply chain investments, and public development agencies that are motivated by sustainable development, ecosystem services, and social benefits. With diversification comes decreased risks to investors, which is particularly crucial in emerging markets.

Lastly, third-party certification standards like the Verified Carbon Standard, Forest Stewardship Council, and Rainforest Alliance have emerged. While there is no universal standard, funds develop their own impact metrics to satisfy investors’ demands for assurance that their investments have impact.

A Sampling of Ventures

Twelve noteworthy ventures being invested in:

Agronomic Technology – software tool for agronomists combining data on soil types and weather with crop modeling and field management to produce detailed fertilizer prescriptions. $2.75 million in funding from three investors. Based in New York, New York.

AgDNA – cloud-based farming app to automate data collection off farm equipment using GPS, aiding farmers better manage and control their farm investments. No data in funding, attempted raising $2.5 million in 2015. Based in Brisbane.

AgBiome – is using microbiome research to manufacture bio-fungicides (to replace synthetics) and identify plant-associated microbes that enhance plant health, pest resistance and yield. $71.5 million in funding. Based in Raleigh, North Carolina.

Anuvia – a novel slow-release uniform nutrient delivery system with little to no loss due to leaching, as is common in golf turfs. $23 million in funding. Based in Zellwood, Florida.

Benson Hill Biosystems – a “cognitive engine” platform that promises to breed new seed traits in half the time it typically takes. Raised $25 million in funding on March 28, 2017 to total $34.35 million. Based in Raleigh, North Carolina.

Blue River Technology – a robotic sprayer that recognizes and reacts to the needs of individual plants. Raised over $30 million in funding from nine investors. Based in Sunnyvale, California.

FarmDog – a data-driven digital tool coupled with an app that helps manage pest and disease. See their videos. Raised over $860K in funding. Based in Tel Aviv, Israel with offices in California.

FarmersEdge – provides a platform and scientific tools to identify and map field variability, optimize crop inputs, resulting in higher yields, better quality and less environmental impact. $103.5 million in funding from four investors. Based in Winnipeg, MB.

FreshDirect – delivers fresh groceries and links consumers to food production. $280 million in funding from seven investors. Based in Long Island, New York.

Indigo Agriculture – manipulating microbiomes and microbes to increase yield and help crops grow. $156 million in funding from two investors. Based in Cambridge, Massachusetts.

Indira Farms – offers modular cold storage and food processing units, which run on off-grid renewable energy, to remote crop production farms in East Africa and South America, where lack of cold storage places limits on product yield, shelf-life and revenue potential. $1.76 million in funding from five investors. Based in the UK.

Spoiler Alert – an B2B online platform selling food seconds to businesses, with real-time capabilities to create and manage food donations, buy-sell transactions, and distribution networks. $2.6 million in funding from seven investors. Based in Boston, Massachusetts.

The Autonomous Tractor Company – a self-driving tractor kit for transforming regular tractors into self-driving tractors. No data on funding. Based in Fargo, North Dakota.

The Yield – IoT and predictive analytics startup for aquaculture and agriculture, has raised $6.5 million in Series A funding. Based in Australia.

Bottom Line – Momentum

Investors and startups across the planet are heeding the signs to AgTech’s opportunities and ever-pressing need to feed the human demand for more food.

U.S. deals accounted for 48% of dealflow in 2016 compared to 58% in 2015 and 90% in 2014. China and India drove funding in Asia. Canada saw 40 startups complete deals, up from 25 in 2015. The UK saw AgTech deals increase from 19 in 2015 to 28 in 2016. New accelerator programs are getting initiated in other parts of the planet, such as in Latin America.

This all means that AgTech funding activity is likely to continue to diversify globally into 2017. Venture capital funds like Bridges Ventures, Mission Point Partners, Omnivore Partners, Closed Loop Capital, Fifth Season Ventures, Belgium-based agRIF which this past week announced a $120 million fund, and the FruitGuys Community fund, recognize these trends and are underwriting deals so AgTech may grow to become a key destination for impact investors.

Sources: Crunchbase, Conservation Finance Network, McKinsey, AgFunder News, More AgFunder Ventures, Global AgInvesting

LISC to Issue $100M in Bonds – a CDFI first

By

Gino Baltazar, MS Finance

-

April 7, 2017

LISC, a large, national non-profit and a Community Development Financial Institution (CDFI) is tapping the bond market to raise $100 million in capital, a first of its kind, “game-changing” public investment.

Why This Matters – U.S. Budget Threat

As covered earlier this week, sixty days into the new administration, perhaps the most noteworthy development last month was the proposed US budget threat to eliminate the CDFI and NMTC programs.

These programs are crucial to the support of low-income communities through a tax credit for private lenders if they invest in underserved areas. Discontinuing CDFI and NMTC will be seriously short-sighted and damaging.

Invest Impactly advocated for the permanence of NMTC in December last year, arguing the clear impact it has demonstrated to ordinary working Americans and communities, such as those showcased by US Representative Pat Tiberi in Ohio.

CDFI’s Net-Positive Impact

Community Development Financial Institution funds or CDFIs have grown in activity and popularity in the past 20 years and have turned small amounts of capital into billions of dollars of economic activity.

In 2016, after the US Congress devoted just $233 million to the CDFI Fund, $2.1 billion in loans and investments created 28,000 jobs in poor communities.

So it is noteworthy to receive news that the Local Initiatives Support Corp or LISC, a national nonprofit and one of the nation’s largest community development intermediaries, is announcing a $100 million bond issuance to help drive investment capital into distressed urban and rural communities across the U.S.

The offering is said to be the first time a CDFI is tapping the bond market for capital, a large market that last year stood at $39.3 trillion. Morgan Stanley will underwrite LISC’s planned financing.

***

“Impact investors are looking for proven ways to help revitalize communities and restore economic mobility for people fighting to compete in the current economy,” said Maurice Jones (photo), LISC president and CEO. “LISC has been leading that work for decades, building a track record that improves the quality of life for people all across the country.”

The move is even more notable coming at a time when Community Development Block Grants and other federal community development programs are proposed for drastic cuts or elimination by the Trump administration.

“It has never been more important for us to invest in local economies so families can raise their standards of living,” stressed Jones. “This new capital will not only help us fuel businesses, jobs and large-scale redevelopment efforts, but also help address the persistent social and economic challenges preventing people from maximizing economic opportunities.”

The bond offering received a ‘AA’ rating from Standard & Poor’s.”

Source: LISC, Housing Finance

Gino Baltazar, MS Finance

Unfounded Biases Can Get in the Way of Impact Investing

More Women Are Leading SRI but Few are Engaging, TPI reports

Advocating for Earth Day 2017

First Circle Raises $1.3M for Philippine SME Markets

Impact Investing Deal Report – April 19, 2017

Wielding Investment Against Rheumatoid Arthritis

Why Issuance of “Green Bonds” Is Growing – now $81B

Impact Investing Deal Report – April 12, 2017

Impact Investors Find $10B Value in AgTech Ventures

POPULAR POSTS

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

How 3 Social Enterprises in Colombia are Making Impact

How IoMT Can Help Meet Elderly Health Care

POPULAR CATEGORY