RESILIENCE. The events of 2020 and the resulting changes to how we work, live and interact with each other were understandably accompanied by a great degree of anxiety and uncertainty. It was a profound year that made many of us redefine success and question our fundamental assumptions about how to operate in the world. It’s also led some to say that resilience is the new ROI.
This concept hits home for us. After all, investing in and helping to build resilient ventures is the only way to safeguard the impact we aim to achieve. But what are the ingredients of resilience? How can you tell if a company you’ve invested in, or might invest in, is resilient? Are we, as investors, resilient ourselves? These are the types of questions that came up for us as we reflected on the last year and tried to relive what happened while we were in survival mode and, frankly, scrambling to support our portfolio and continue to move capital.
This report is peppered with what we came up with. In it we look at a few dimensions of resilience that are important to Mercy Corps Ventures, like climate resilience and financial resilience. Then we examine our own failings and lessons learned over the last year and how we can make changes in 2021 to improve our own resilience as investors. We hope you enjoy this glimpse into some amazing enterprises, emerging technologies, and much-needed shifts in systems perpetuating an inequitable status quo.
Wishing you tenacity in uncertainty,
The Mercy Corps Ventures Team
Customer Spotlight: Health insurance for all.
Lack of access to health and life insurance leaves low-income populations vulnerable to financial shocks from unexpected injuries and illnesses. In Africa, 90% of the population has no safety net if they get sick, and most people only receive the health care they can pay for out of pocket. Turaco is changing that by designing simple and affordable insurance products for low-income consumers like Mercy. Mercy had health complications resulting from the birth of her daughter and had to be hospitalized for a week to receive ongoing care. She submitted her paperwork, and her claim was paid the same day. Mercy’s insurance policy allowed her to get the necessary medical treatment without worry that it would push her family into poverty, like it does almost 100 million people each year. Turaco is currently providing coverage to over 550,000 low-income people in East Africa, and it is growing fast.
Turaco made COVID-19 insurance a reality. Most insurance companies in Africa decided to exclude COVID-related claims, leaving people at risk. Turaco figured out how to provide COVID-19 inclusive health and life microinsurance and supplied over 5,000 policies.
Sokowatch opened its network to new players. When the pandemic struck, Sokowatch recognized that its logistics infrastructure, supply chains and network of retailers could help provide food aid and other essential goods to people struggling with the crisis. It partnered with Mercy Corps to provide vulnerable families digital vouchers, which could then be redeemed at local shops for essential goods.
Valiu launched a direct cash transfer program in Venezuela. Through Valiu.org, the company can now airdrop dollars to people in critical socioeconomic situations. Valiu successfully piloted this offering with 120 medical workers fighting COVID-19 and then dropped $100,000 to 1,000 more frontline workers.
Lynk joined the Safe Hands Kenya initiative and used its gig economy platform to recruit nearly 400 people overnight to earn an income by providing disinfection services, education and masks to some of the hardest hit informal communities in Nairobi. Additionally, as more than 80% of the working population in Kenya operates in the informal sector — with no unpaid leaves, furloughs, salary cuts or severance payouts — Lynk created a safe working environment for “Pros” and their customers by providing free education and protective wear.
Advice From Entrepreneurs
Whether it’s COVID-19, economic fallout, a government coup or some other crisis, social enterprises often find themselves working in communities where disruption is the rule rather than the exception. Learning how to build organizations that can weather the storm and stay relevant is key to staying afloat. We gathered some advice from entrepreneurs who have done just that:
Find video interviews on talent, money, addressing impact tradeoffs and much more in our co-created Scaling Through Mass Disruption series.
Photo credit: LYNK
Entrepreneurs are creating the tailored, scalable solutions needed to meet the demands of climate-vulnerable, last-mile consumers, empowering them with the tools they need to adapt, overcome shocks and diversify their livelihoods. We’ve invested in some of these market-based solutions and will expand our investments in climate adaptation solutions in the years to come.
Smallholder farmers are particularly vulnerable to the effects of climate change, like erratic rainfall and extreme weather events. Pula insures farmers against weather-related risks by bundling its insurance into farmers’ purchases of inputs such as seeds and fertilizers — making its insurance affordable, accessible and customized to the needs of farmers. This doesn’t just protect farmers against the negative impacts of climate change — it can also incentivize them to purchase climate-resilient seeds and other inputs that will help them adapt to a changing climate.
Providing information about how to adapt to climate change (for instance, introducing climate-resilient agricultural techniques) is another essential approach. Arifu’s mobile phone-based educational platform is reaching smallholder farmers and other vulnerable populations with advice and information on climate-resilient practices. After all, knowledge is power — in this case, the power to adapt to the impacts of climate change.
Gaining legal title to one’s land — especially for smallholder farmers — unlocks financial services and government resources that incentivize resilience-building investments (e.g., crop rotation, tree planting, etc.) and enable adaptation. Meridia and Suyo are tackling the problem of landlessness across multiple markets in Latin America, Africa and Southeast Asia. Coupled with smart partnerships and on-the-ground community engagement, their innovative technology solutions significantly lower the costs to map and title a property and create profound, immediate impact that can last a lifetime and be passed on to future generations.
Photo credit: Suyo
To accelerate financial resilience, we must design financial products and services to meet the unique needs of these populations. This year we supported a portfolio of enterprises at the forefront of this endeavor and launched a new initiative to deepen our efforts to serve the unbanked and underbanked.
We’re living in a unique moment in history when emerging technologies have the potential to radically transform the existing financial system and create revolutionary new pathways for people to spend, save, send and secure money.
While these emerging fintech, crypto and blockchain technologies present great potential, they also pose substantial risks for the world’s most vulnerable people if their needs are not taken into consideration during design and deployment.
FinX is designed to leverage Mercy Corps’ 40+ years of experience in frontier markets and financial inclusion to reimagine the financial system with the world’s most vulnerable at the center of its design. To do this we are making equity investments in emerging fintech companies, piloting new products and services tailored to vulnerable populations and humanitarian use cases, rigorously measuring impact to build the evidence base, and sharing learnings and failures along the way. But many threats confront us in this endeavour.
Our first FinX investment was in Valiu. This company is an amazing example of how emerging fintech solutions that leverage crypto DNA can bring about positive impact for vulnerable populations — in this case, for Venezeulan migrants, refugees, and those who remain in the country watching their savings slip away as a result of rampant inflation and currency volatility.
Curious how Valiu works and its link to the SDGs? Check out this video:
The first FinX pilot was kicked off at the time this report was published. In it we experiment with using stablecoins to make cost-effective, crossborder micropayments to low-income youth conducting digital microwork from their phones. The outcome remains to be seen. Will the payment rails work? Will the stablecoin-based digital wallet unlock new digital employment and earning opportunities for vulnerable populations?
Valiu is a digital financial institution designed from the ground up around the needs of migrants, refugees and people facing hyperinflation.
“Seeing my family’s savings and life’s work quickly go to zero while growing up in Venezuela made me want to dedicate my reputation, money and time to make cryptocurrencies successful so that anyone, regardless of their socioeconomic status, can access transparent, safe, fast and minimal cost financial services, and so no one has to see their life’s savings go to waste. As a team, we’ve built Valiu because we want to enable financial prosperity for anyone, anywhere.”
Simon Chamorro | Founder & CEO
Photo credit: Valiu
Turaco is an insurtech company designing simple, quality health insurance products for urban and rural poor living on less than $5 a day.
"I founded Turaco to free people from the fear of financial shocks. Insurance is such a simple tool to help people stay out of poverty. Yet almost none of the people who need it most have it. We are going to change that."
Ted Pantone | Founder & CEO
Photo credit: Turaco
Powered by People is a marketplace platform and digital tools designed to empower skilled producers in low-income countries and create connections to (and transparency for) global buyers.
“After a decade of working in and gaining an understanding of the local markets in Afghanistan and Kenya, my co-founder Hedvig Alexander and I have seen firsthand the incredible human potential that goes untapped. We plan to unleash this potential with Powered by People by equipping millions of creators with the technology they need to compete, bridging the economic and digital divide, and enabling strong, global, profitable businesses.”
Ella Peinovich | Founder & CEO
Photo credit: Powered by People
Boost offers digital solutions, stock deliveries and inventory financing designed for informal small and medium businesses in Africa.
“I founded Boost with the mission of enabling millions of small businesses to thrive in Africa’s digital economy to create sustainable jobs and income.”
Mike Quinn | Founder & CEO
Photo credit: Boost
Teliman is Mali’s very first moto-taxi ride hailing app. It provides unemployed youth with decent work and financing to own their own motorcycle.
“Upon returning to Mali we were struck by the lack of road infrastructure in Bamako. Getting around was always a big hassle and something needed to be done. But that something needed to be in accordance with local culture. This is how we slowly ventured into a sustainable moto-taxi service, built around a strong leasing model that would not only solve the transportation issue but also contribute to creating jobs for unemployed youth.”
Elay Maiga | Founder & CTO
Photo credit: Teliman
Five years ago, Mercy Corps Ventures was just a concept. Today it is one of the most active seed stage investors in the market and has built out a venture support and partnership capability that has helped companies raise over $90M in follow-on capital. This track record was possible thanks to the support of the Mercy Corps’ board and leadership, countless others within the agency, and a group of individuals who were brave and bold enough to seed our early fund. We are truly grateful for your support and the doors it’s allowed us to open.
Over the years, we’ve also been fortunate to be able to recruit interns that bring serious value to the table. This past year, it was our interns who saved the day. They were focused. They were motivated. They were extraordinarily productive. They became true team members and we really could not have moved capital without them. We cannot thank them enough for their dedication during this crisis. Whether they were technically classified as an intern or not, we want to give a deep and supreme thank you to Wendy Foo, Frederick Toohey, Lizzie Merrill and Nautika Simon. You all rock!
Additionally, moving capital this past year would not have been possible without our legal advisor, Joe Meginnes, as well as the generous pro bono support provided by Morrison Foerster. Donna Rocco provided exceptional financial and accounting support. We can’t thank you enough for your time and dedication to our mission.