It’s a long-running contradiction of impact investing.
Emerging fund managers, including those raising their first, second and even third funds, generally outperform more experienced general partners. And investors are keen for new strategies that can help them diversify their portfolios and gain exposure to untapped opportunities with potential for impact and alpha.
Yet emerging managers often have the toughest time raising capital, fenced out by perceptions of risk and investment policies that exclude them from even being considered by many asset allocators. The current political and market volatility may be casting even longer shadows on managers without long track records.
All that also presents an opportunity for asset owners and allocators with the commitment and flexibility to back fresh talent.
The majority of funds that appear on ImpactAlpha’s monthly Liist of impact funds in the market raising capital are emerging and/or diverse fund managers with an eye on overlooked market opportunities.
Last year, the median fund size on the Liist was $50 million. Funds featured on the Liist tend to be more diverse, more niche and more focused on underinvested opportunities. More than half of the funds featured in 2024 have at least one female general partner. The same proportion also have at least one general partner of color.
Liist 2.0
On this month’s Liist: three first-time managers who are in the market with strategies that lean into inclusivity and climate tech to deliver both financial and impact alpha. Chasing Rainbows is betting on the lived experiences of LGBTQ+ founders to deliver better healthcare and other life-improving services. The firm says such founders have a track record for producing exceptional business outcomes, job creation and patents.
Atlanta-based Renew VC, a venture building studio that is raising its first impact fund, has an eye for both new social and climate solutions and companies led by underinvested founders, including women and people of color. “Success in VC is fundamentally about seeing markets that others miss,” the firm writes. Both are first-time fund managers.
Variant Investment’s evergreen impact fund directed nearly half of its available capital to diverse founders in the US. It’s once again open and raising new capital from investors.
Two funds on this month’s Liist are supporting Africa’s climate resilience and transition. First-time fund manager Holocene, based in South Africa, is in the market with a planned $3 million to $5 million fund for early stage climate tech ventures. Mercy Corps Ventures is continuing to raise for its Resilient Futures Fund, which backs tech solutions in Africa enabling communities’ climate resilience.
This month’s Liist comes with a refresh of ImpactAlpha’s Liist database of dozens of impact funds that are actively fundraising. The database is now updated regularly (even between these monthly roundups), so bookmark it and check for new entries and status. We’ve standardized the categories to make it easier to filter by asset class, geography, investment focus and fundraising targets. And we’ve revamped the entry form, making it easier for both general and limited partners – and their friends – to share strategies on the Liist.
On this month’s Liist:
- Chasing Rainbows Fund I
- Holocene Ventures’ Fund I
- Mercy Corp Ventures’ Resilience Future Fund
- Renew Venture Capital Impact Fund I
- Variant Investment’s Impact Fund
Disclaimer: The Liist and this post are based on available information, sourced by ImpactAlpha. Information has not been further reviewed by the managers nor verified by third parties, is not guaranteed for accuracy or completeness, and should not be relied upon as investment advice or recommendations. Nothing in The Liist, this post or on ImpactAlpha.com shall constitute an offer to sell or the solicitation of an offer to buy securities.
Chasing Rainbows Fund I
San Francisco-based Chasing Rainbows invests in startups led by LGBTQ+ founders, who, like other diverse demographics, are under-represented and under-invested in venture capital. A survey by the company found that 75% of LGBTQ+ founders conceal their identity from investors due to concerns of bias. Its “only thesis requirement is that one of the founding team members identifies as part of the LGBTQ+ community,” the firm says. “Traditional investors see LGBTQ+ founders as niche; we see them as a massive, untapped market poised for outsized returns.”
Chasing Rainbows is raising its first fund, originally with a goal of $10 million, but the firm is now aiming to close fundraising by the end of March. It plans to make equity investments of $50,000 to $250,000 in companies focused on healthcare, sustainability, education and financial inclusion.
- Type of investments: pre-seed and seed-stage equity
- Fund structure: Traditional GP/LP venture fund with a 2/20 model
- Where fund is domiciled: US
- Leadership: LGBTQ+ founders
- Commitments/investors: $1.2 million from high net-worth individuals
- Who is eligible to invest: Accredited investors, philanthropists and donor advised funds via the fund’s partners Impact Assets and Catacap.
- Sample investments: 16 portfolio companies, including TomTex which makes biodegradable textiles from mushrooms and shrimp; ForThem, an online community for transgender and non-binary individuals; Dionysus Digital Health, a mental health care platform that carries out home-based epigenetic testing
- Sample impact metrics: capital deployed to LGBTQ+ founders, follow-on funding raised, job creation
- Contact information: Ben Stokes
Holocene Ventures Fund I
Holocene is a Cape Town-based climate tech advisory and venture capital firm that spun out of Stellenbosch University‘s climate lab. The new firm is looking to raise about $4 million for its first fund to invest in early stage startups helping ease Africa’s climate transition. Holocene will look to make up to 15 investments with the fund in the energy, agriculture, food and mobility sectors, as well as “nature tech.”
Southern African startups’ relative underinvestment to their capital needs means there are opportunities for fund managers’ capital to stretch in relation to valuations, Holocene’s Abby Stern told ImpactAlpha.
“For us, that’s an opportunity,” she said. “We can find companies that fit the size of the check we’re able to write. Hopefully that gets a better return for our LPs, which then helps us get more people funding these investments.”
“Sustainable change is about creating something that makes economic as well as social sense,” she added. “I want to create solutions that create a more sustainable environment, that create jobs, that help to boost the economy and have a positive environmental impact.”
Holocene has raised more than $950,000 for the fund, including a $150,000 returnable grant from UK government-backed FSD Africa, and contributions from 13 commercial investors, half of whom are local entrepreneurs. The general partners have committed $200,000 of their own capital.
- Type of investments: $100,000 to $500,000 equity checks
- Fund structure: Close-ended, 10-year fund
- Where fund is domiciled: Delaware, US
- Leadership: Woman-led
- Commitments/investors: $950,000 by its first-close in June 2024, including a $150,000 returnable grant from FSD Frica and $200,000 from the general partners
- Unique fund features: Non-traditional fee structure: no carried interest for the GPs nor for grant funders; GPs aim to earn upside on their $200,000 investment, and they charge a 3.5% fee on cash invested and 1.9% on total invested capital (including equity earned)
- Sample investments: Seven deals, including The Awareness Company which provides resource optimization software for businesses; Asoba, a smart grid management platform; Switch Energy which offers software and hardware solutions for utility management.
- Contact information: [email protected]
Mercy Corps Ventures Resilient Future Fund
Global humanitarian NGO Mercy Corp’s venture investing arm is in the market with a $50 million Resilient Future Fund to back early stage entrepreneurs that are bolstering the climate and financial resilience for underserved communities in Africa and emerging markets. The organization is leaning into private-sector solutions at a tumultuous and uncertain time for traditional humanitarian aid.
The fundraising environment is challenging, too: Mercy Corps Ventures has raised $5 million toward its goals in the past 12 months.
The second venture fund from the NGO will cut checks of $250,000 to $1 million in Seed and Series A-stage ventures in climate adaptive agtech, fintech and other climate-smart technologies serving women, rural communities and refugees. It is structured with a $5 million technical assistance facility to provide post-investment support to very early portfolio companies.
The organization says its goal is to build on “the success of Mercy Corps Ventures’ first fund,” which made 54 investments, more than 80% of which survived. The organization says its first fund reached 25.5 million people, achieved a 29% internal rate of return, and has so far notched four exits.
- Type of investments: Equity
- Type of fund structure: GP/LP fund structure with a blended capital catalytic layer
- Where fund is domiciled: US
- Commitments/investments to date: $5 million, including $1.5 million from USAID Digital Invest (unaffected by the ongoing USAID shut down and disbursement freeze), Cisco Foundation, Rippleworks, Mercy Corps and individual investors
- Eligible investors: foundations, family offices, development finance institutions and individuals
- Unique fund features: $5 million in a sidecar technical assistance facility
- Example impact metrics: number of users served, percentage of female users, percentage of low-income users, user income growth
- Contact information: Scott Onder
Renew Venture Capital Impact Fund I
Atlanta-based Renew VC is building on to its venture studio with its first impact fund. The fund, which is aiming to raise $50 million, will invest in companies supported by the studio. Renew’s impact focus is two-fold: 1) to invest in early stage startups addressing social and climate issues, including mobility, food systems and the future of work; and 2) to invest in diverse-led founders.
“Success in VC is fundamentally about seeing markets that others miss,” the Renew VC team writes. “When investors ignore entire classes of founders, by definition, they miss out on venture scale opportunities that only those founders can see.”
The firm says its goals are to “generate excess returns for investors” while changing “systems that artificially limit investor yields and founder outcomes.”
The firm plans to invest anywhere between $500,000 to $5 million in companies at the pre-seed to Series A-stage. It’s aiming to write up to 40 equity checks and serve as the lead investors and take a board seat in all of its deals.
Renew VC has not yet made any investments for the fund but it has warehoused more than a dozen deals from its venture studio.
- Type of investments: Equity
- Type of fund structure: Traditional GP/LP venture fund with a 2/20 model
- Where fund is domiciled: Delaware, US
- Commitments/investments to date: $10M commitment from an SDG-focused fund of funds
- Eligible investors: corporations, institutional investors, registered investment advisors, family offices, high net-worth individuals, donor advised funds
- Example impact metrics: both environmental, social and equity-focused workforce metrics, including founder demographics, as well as company-specific metrics (for example, it might track patient health outcomes for a female-focused health tech venture)
- Get in touch online
Variant Impact Fund
Oregon-based Variant Investments operates two evergreen funds for accredited investors: the Variant Alternative Income Fund, whose portfolio covers everything from real estate to litigation finance; and the Variant Impact Fund, which invests in companies all over the world that support financial inclusion, responsible consumption, and equitable economic growth. Since launching in 2021, it has close to $90 million in assets under management and has backed companies in 24 countries. More than 40% of its commitments last year went to companies that are majority-owned by women, people with disabilities, veterans, LGBTQ+ individuals, people of color, and Indigenous people.
Variant raises for its impact fund on a rolling basis. The fund is currently open to accredited investors with a $1 million investment minimum.
- Type of investments: senior secured private debt investments of $1 million to $5 million
- Fund structure: Closed-end interval fund
- Where fund is domiciled: US
- Who is eligible to invest: Accredited investors
- Unique fund features: 1.3% management fee and quarterly redemptions of up to 5% of the fund’s net asset value. Separately, Variant as a business operates a profit-sharing model with full-time employees, and donates $5,000 annually for each employee to a nonprofit of their choosing.
- Sample impact metrics: number of students financed, number of affordable housing units developed, number of housing units rented to low-income families, tons of CO2 emissions avoided, amount of clean energy generated, acres of sustainably managed farmland, etc.
- Sample investments: Zanifu, a short-term inventory finance company for small businesses in Kenya; Sunnova, a US-based company providing residential solar and energy storage services; Lundy Nigerian Cocoa Finance, which provides pre-export financing for cocoa processors; Dream America Residential Leases, a lease-to-own real estate company for single-family properties for borrowers with low credit scores
- Get in touch by email
