Impact Esq Vol. 9

A big hello to all the legal impact geeks I met at SOCAP this week. It’s the second Saturday of the month, so that means it’s time for the Impact Esq!

Social Enterprise

  • Social Impact Incentives (SIINC) is a new Blended Finance model enabling high impact social enterprises to improve profitability and reach scale by paying for proven results. With SIINC, social enterprises earn additional revenues by monetizing positive externalities. The basic mechanism is very straight forward: An outcome payer – usually a public funder or philanthropic organization – agrees to act as a key customer to the enterprise, paying premiums for its social contribution. These premiums are then disbursed in addition to the enterprise’s regular revenues. Thus, impact is incentivized very directly: It becomes linked to the social enterprise’s levels of profitability and automatically raises its attractiveness for investors. The temporary payments have a catalytic effect on all parties involved: they accelerate the social enterprise’s process of achieving long-term financial viability while offering the outcome funder and the impact investor strong, ongoing social returns on the resources they invest. Roots of Impact (18 minutes)
  • PBC Docs. Thanks to my friend Jen Barnette, social entrepreneurs who want to integrate sustainability and social impact into their company can choose to generate incorporation documents for a Delaware public benefit corporation (PBC) on Cooley’s platform CooleyGo. There has been a surge of interest among social entrepreneurs and investors in the PBC and, until now, there has been no publicly available set of incorporation documents for Delaware public benefit corporations. By making the PBC incorporation package publicly available Cooley hopes to add efficiency to the early-stage social impact startup ecosystem and provide the opportunity for entrepreneurs to reflect on whether the public benefit corporation may be appropriate for their business. CooleyGo (2 minutes)

Impact Investing

  • $2 Billion. Private equity firm TPG collected $2 billion for The Rise Fund, tapping growing demand for impact investing to create the largest pool of its kind. The fund, which TPG raised in about seven months, surpassed its $1.5 billion target and hit its $2 billion hard cap, or the maximum amount of outside capital allowed by its agreement with investors. The head of the fund Bill McGlashan said, “we would do a grave disservice to the industry if we did what a lot of others have done, which is compromise on what it means to deliver impact,” he said. “When you have a soft view on that topic, all it does is reinforce the skepticism that’s frankly justified. This can’t be feel-good investing.” The Rise fund’s backers include Washington State Investment Board and Swedish pension fund Andra AP-fonden, Bank of America Corp and Regents of the University of California and UBS Group AG. Blomberg (5 minutes)
  • Political Capital. A group of former Obama staffers is applying venture-capital tactics to progressive politics. Higher Ground Labs (HGL), whose founders also include former Obama-administration staffers Shomik Dutta and Andrew McLaughlin, debuted in May. Since then, some 150 groups have applied to participate in the accelerator program and a related fellowship program. HGL has raised $2.5 million from investors spanning politics and the tech industry and has invested nearly $1.5 million in 10 startups, enrolling them in a five-month accelerator program, during which they’ll work with mentors from the political-tech space to build their businesses. I was fortunate enough to represent 2 of the companies: 1) I partnered with Suz Mac Cormac and Jess Bissey at MoFo for the new app from Purpose called Hope and 2) I also did Tuesday Strategies deal. Wired (4 minutes)

Deals

  • ADAP Deal Room. This week at SOCAP my firm Westaway partnered with ADAP Capital to embark on a bold experiment. Namely, could you meet entrepreneurs on a Tuesday and cut a $75K check by Friday? Based on ADAP’s entrepreneur-friendly “four-hour due diligence process”, on Tuesday 8 companies pitched, the team narrowed down the field and had some follow up conversations, then by Friday they took the stage at SOCAP and announced investments in Neopenda and Good Nature Agro. In addition to the $75K of investment, we’re also providing a year of legal service to the winners.
  • Andela. Andela, a startup that trains developers in Africa and hires them out to global tech companies, has raised $40 million in Series C funding. The financing came from CRE Venture Capital, a pan-African venture firm, with additional participation from DBL Partners, Amplo, Salesforce Ventures, and Africa-focused TLcom Capital. Previous investors, including the Chan Zuckerberg Initiative, GV, and Spark Capital, also joined in funding what is now one of the most highly funded African company not based in Africa. Andela says it will use the money to fund aggressive expansion plans — including the launch of two additional offices in other African countries. A big congrats to my friends Christina Sass and Jeremy Johnson, it’s great to see that their hard work is paying off. Medium (3 minutes)

Books

  • Social Enterprise Law. In her new book, Dana Brakman Reiser weaves innovation in contract and corporate governance into powerful protections against insiders sacrificing goals such as environmental sustainability in the pursuit of short-term profits. Creating a stable balance between financial returns and public benefits will allow social entrepreneurs to team up with impact investors that share their vision of a double bottom line. She shows how novel legal technologies can allow social enterprises to access capital markets, including unconventional sources such as crowdfunding. With its straightforward insights into complex areas of the law, the book shows how a social mission can even be shielded from the turbulence of an acquisition or bankruptcy. It also shows why, as the metrics available to measure the impact of social missions on individuals and communities become more sophisticated, such legal innovations will continue to become more robust. Buy now!
  • Benefit Corporation Law and Governance. In his new book, Rick Alexander notes that corporations today are embedded in a system of shareholder primacy. Nonfinancial concerns—like worker well-being, environmental impact, and community health—are secondary to the imperative to maximize share price. Benefit corporation governance reorients corporations so that they work for the interests of all stakeholders, not just shareholders. This is the first authoritative guide to this new form of governance. It is an invaluable guide for legal and financial professionals, as well as interested entrepreneurs and investors who want to understand how purposeful corporate governance can be put into practice. Buy Now!

About

Impact Esq is a monthly email summarizing the best articles on social enterprise and impact investing law edited by Kyle Westaway – author of Profit & Purpose, Managing Partner of Westaway and Lecturer on Law at Harvard Law School. Thanks for being a member of the Impact Esq community. I truly enjoy curating this email every month and love hearing your thoughtful insights. Feel free to shoot me an email with any feedback or suggestions. If you like what you’re reading, I’d be honored if you share it with other social impact attorneys. Have a restful and thoughtful weekend.