After closing an initial $20.6 million in equity investment with a handful of venture philanthropists for its Latin American social venture capital fund in a deal announced last week, Ignia Fund I moved a step closer to its goal of amassing a $75 million to $100 million war chest. The venture fund landed a highly unusual commitment of $25 million in debt funding from the Inter-American Development Bank (IDB), a non-governmental organization owned jointly by 47 sovereign countries.
IDB is backed largely by 21 non-borrowing member countries comprising the wealthiest nations, and has 26 borrowing country members in Latin America. The fund has about $100 billion in total capital.
The agreement to lend the money to Ignia is unusual in several respects. IDB seldom does business with independent funds, much less for-profit organizations, it is highly unusual for an investment fund with limited partner investors to take on debt, and the structure is not typical of senior, secured debt. Rather than simply stand at the front of the line to collect its money ahead of returns to equity investors, IDB will receive repayments at the same proportional rate on the same schedule as equity investors, as long as it meets certain milestones set in the loan agreement.
In announcing the investment, IDB president Luis Alberto Moreno, a former Colombian diplomat, touted Ignia's mission of targeting investment specifically to low-income populations, and not just low-income regions, noting that companies the fund invests in can reduce the structural economic penalty of being poor by offering quality goods and services tailored to specific needs of low-income consumers and producers. IDB project team leader Elizabeth Boggs Davidsen said Ignia's target investments are precisely the kind of companies the organization wants to encourage, and that IDB's participation will "help create an 'investment case' for these companies and highlight the benefits of empowering local entrepreneurship and generating social impact."
The money will count toward Ignia's targeted goal for the size of the fund, taking it to $45.6 million, and will serve as an enticement for traditional equity investors to sign on as partners based on its sheer critical mass, as did the earlier equity investment from eBay Inc. founder Pierre Omidyar's Omidyar Network and other philanthropic investment groups. IGNIA's co-founder Alvaro Rodriguez Arregui said he expects to raise the balance of the fund this year, and to begin announcing initial investments in the next few weeks. -- Clifford Carlsen
See June 10 post from TechConfidential
See June 10 press relase from Ignia
See June 18 press release from the Inter-American Development Bank
For more, see Greenbang, The Guardian and Greentechmedia
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