Flexible Contingency Funding

Building an Impact VC Fund & Next Billion Tech

If you are an impact investor or entrepreneur, it might be relevant for you to spend some time reading this.

I am swamped in with messages from my peers, who are investors and social entrepreneurs regarding COVID-19. I know many entrepreneurs are struggling currently, whether in terms of fundraising or thinning revenue. It is tough times for a lot of us, and especially the ones who have not modeled the risks and have not considered in their cash flow and fundraising plan as an entrepreneur and portfolio management as an investor. Drop me an email if I can be of any help at this moment.

I know about the Open Road Alliance for quite some time. ORA is fix-it funders, filling a void of fast, flexible contingency funding. They ensure impact and work with other donors to adopt risk mitigation and contingency best practices.

"The world is unpredictable. No amount of planning can prevent unscripted events from causing disruption. However, the philanthropic financial market is not structured to deal with the unexpected."

They have two lines of investments: 

• Charitable grants are one-time infusions of cash to help a mid-implementation project overcome an unexpected roadblock.

• Loans help organizations manage through unexpected obstacles with working capital, capital expenditure, or bridge loans. 

  • They have recently launched a USD 40 mn impact fund to build on Open Road Alliance's market-leading expertise providing loans to help social entrepreneurs overcome unexpected funding obstacles. They have a fantastic track road with this debt product for social enterprises. 

  • Open Road's first loan fund, Open Road Ventures, launched in 2017 with proprietary capital, has invested more than $19.5 million across 65 deals with a low 0.3% default rate. 

Also, they have put together something around fighting this unexpected COVID-19, please do share it with any relevant organization which is either responding directly to COVID-19 (eligible up to $100,000 grant) or organizations affected by COVID-19, with following four loan products: 

• Lost Event Revenue: $50,000 loan to organizations that are rescheduling/postponing their fundraising event at a 1-2% simple interest

• Accelerating Incoming Emergency Funds 

• Co-investment to Support Social Enterprises

• Deep Impact Loans

Time for impact investors to shine

Last not but not least, they do cover some excellent stuff around how philanthropists, investors, and investees should think about risk modeling and management. Here is a link to learn. It is a must-read if you are an impact investor trying to manage your portfolio during this crisis and hopefully learn for next time how to include risk management considerations for the future, some ideas include:

• Raising grant dollars that can be used for entrepreneurs to recover

• Setting up an in-house emergency bridge loan fund for their existing portfolio

• Pooling and managing emergency relief funds for small businesses

“Know this: you have a choice about how to weather this crisis as a player in the impact marketplace, and it is not a binary one. Your actions today can determine the longer-term impact and returns you help generate.” - Maya Winkelstein and Caroline Bressan

Stay Safe. Be Cautious. Remain Calm. 

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I am continuously looking for emerging impact fund managers who are looking to create their first-time impact funds with an edge or a differentiated value proposition in emerging economies. If you are building one, please do write to me. I would love to learn more from you and would be happy to help in any way.

With Love,

Sagar

About

"first followers" is founded by Sagar Tandon, a founding member at Moonshot Ventures. You can reach him at sagar@moonshotventures.org.

Occasionally, he blogs about the responsible investing, tech for good, venture capital, investment thesis, conscious capitalism, collaborative consumption, community, and humane lifestyle.