When The Rise Fund, founded by TPG growth, the growth investing platform of Private Equity giant, The Texas Pacific Group (TPG) raised a record $2 billion, there were many who were sceptical about whether impact investing at such a large scale could be successful. A few months ago (September 2018), TPG announced that they are planning to raise another $3 Billion for its second social impact fund, therefore defying all scepticism and positioning themself at the forefront of the social investment industry, which is expected to be worth more than $300 billion by 2020.
In this article we will run you through the inspiration for Rise, its founders and partners and some of the companies currently in its portfolio.
What is TPG Growth
TPG Growth was founded in 2007 to specialize in growth equity and middle-market buyout opportunities, across the U.S., Europe, Africa, and Asia. TPG Growth currently manages approximately $13.2 billion in assets across a variety of sectors including media, technology, and industrials.
Where did The Rise Fund come from?
The Rise Fund was born out of TPG Growths outstandingly successful investment in Apollo Towers, Indian mobile phone tower company which helped the country progress from zero cell phone penetration to roughly 70 percent, which has subsequently increased GDP by 5 percent whilst simultaneously doubling the value of TPG’s initial investment.
Who is Involved
There are a number of well-known investors/philanthropists on the board including Bono, eBay founder Pierre Omidyar, Jeff Skoll, the first president of eBay, Laurene Powell Jobs, Richard Branson, Reid Hoffman, Mellody Hobson, president of Ariel Investments, philanthropist Lynne Benioff, and investor Mo Ibrahim. The idea of having such big names being that they both market the fund and sway investors.
TPG Growth and Rise Fund head Bill McGlashan has cited that “India is our priority; 400 million of the world’s unbanked people live in India. In healthcare, 65% of the population does not have access to sanitation; India has 65 million diabetics; farmers in India grow 46% less rice per acre than their counterparts in China; literacy lags by 20% and teacher absenteeism rate can be as high as 40%. Meanwhile, you have some of the most extraordinary talent in the world; 70% of the population now has access to mobile connection and smartphone adoption will increase 400% over the next five years.” These factors represent a huge growth opportunity; McKinsey & Co. has published a report stating that impact investing in India has the potential to grow from $1 billion to $6-8 billion between 2015 and 2025.
Already, out of a total of five investments made by the fund, two are in India. In May, the fund invested $50 million in Hyderabad-based Dodla Dairy, its first investment in India. The fund has also partnered with impact investor Elevar Equity and will work closely with the latter’s team in India.
May 2018 saw The Rise Fund’s first investment in Africa; a purchase of a stake in digital payments provider Cellulant worth $47.5 million, making it the largest recorded deal involving a FinTech company which trades exclusively in Africa. Cellulant, founded in 2004 operates in 11 countries and works with 94 banks and mobile money platforms that have a combined customer base of over 130 million. It has the potential so be an extremely successful venture; in an interview with The Financial Times, Cellulant co-founder Ken Njoroge said; “the payment market on the continent is [worth] anywhere between $20bn and $40bn over the next couple of years while all of the FinTech players in the market [currently] collectively generate a little shy of $2bn.”
As mentioned earlier, in response to investor demand, TPG is planning to launch their second impact fund, rumoured to be called The Rise Fund 2. Investor interest comes not only because of the funds high profile and successful investment record, but also due to their valuation methods when measuring social impact and financial return; TPG created a complicated system with partners like the Bridgespan Group, a non-profit consultancy, and KPMG to incorporate what the firm said were hundreds of academic studies.
The second fund will focus on four core sectors: health care, education, financial services and energy, Private Equity News wrote. It will also invest in food and agriculture, technology, and growth infrastructure as secondary sectors. The group is also in talks to take over management of Abraaj’s $1bn healthcare fund. “We are excited to build on the important work commenced by Evercare (the healthcare fund’s platform) to build an integrated healthcare delivery network in growth markets across Africa and South Asia that will help communities thrive,” said Bill McGlashan, chief executive of The Rise Fund.
The Rise Fund continues to fund extremely important projects worldwide, and in the following weeks we will go into more detail on a few of the funds more notable investments.