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Expressions of Interest: Spark+ Fund Management Partners Selection Process

Spark+ Fund Management Partners Selection Process

Call for Expressions of Interest

Seeking Expressions of Interest from fund managers to partner to implement Spark+, an early-stage investment facility focused on the Sub-Saharan African clean cooking sector

Background

The Global Alliance for Clean Cookstoves (“Alliance”) is currently working to establish the Spark+ Pipeline Development Facility (“Spark+” or the “Fund”) to support innovation and growth in the clean cooking sector in Sub-Saharan Africa (“SSA”). The Alliance is in discussions with a development finance institution (“DFI”) regarding a $5-10m investment in a $30-40m fund which would provide mission-driven, risk-tolerant investment capital and technical assistance (“TA”) grants to manufacturers, distributors and others that scale-up cleaner and more efficient cooking solutions. Spark+ would provide much needed early-stage growth capital to a newly emerging set of high-potential companies developing innovative models that demonstrate profit potential at scale, but that have limited access to capital given their current size, maturity, and risk profile.

To that end, the Alliance is seeking to establish a joint venture or similar collaboration agreement with an established fund manager to structure, fundraise and manage Spark+. The Alliance and its selected partner will contribute dedicated staff who will comprise the “Fund team”, as well as other institutional resources and expertise. The Fund team will include investment professionals and sector specialists from both organizations responsible for all aspects of the Fund’s establishment and execution. The Fund team will begin working together on the Fund’s design, strategy and legal structuring, as well on fundraising – immediately following the conclusion of this selection process. The anchor investor aims to receive approval for its commitment by end of 2018, which would enable a first close in early 2019.

Key Details

The following is a summary of the Fund’s currently envisaged thesis, which will be refined together with the selected fund management partner:

  • Spark+ will focus on an emerging set of businesses that are leveraging technological and business model innovation to make clean fuels affordable (e.g. PAYG LPG, innovative distribution of ethanol, biomass pellets and gasifiers, biogas) as well as on efficient biomass cookstoves, particularly in markets where alternative fuels are non-viable.
  • Spark+ aims to bridge the gap to traditional debt finance from commercial banks and DFIs, and to larger, later-stage investors by taking on relatively higher risk and providing TA.
  • Spark+ seeks to invest in high-potential businesses with quality management teams capable of scaling, but whose business models are still relatively unproven at scale.
  • Spark+ is not envisaged to be an angel or seed equity fund, but rather to invest in businesses that have demonstrated proof of concept and now require risk-tolerant capital to grow/de-risk to the point of attracting larger rounds of institutional debt and equity capital.
  • Spark+ is not envisaged to be a traditional debt fund, but rather to be structured in a manner which recognizes that the majority of the target pipeline is not “creditworthy” from a typical underwriting perspective; and that the pipeline requires growth capital through customized, flexible, subordinated debt/mezzanine capital structures combined with TA.
  • Spark+ aims to accelerate the growth of its investees not only through its investments but will also mobilize interested co-investors, share due diligence, and otherwise reduce transaction costs for other capital providers. It will also provide TA and grant funding to complement and enhance the success of its investments and those of its co-investors.

The following is a summary of the Fund’s currently envisaged strategy, which will be refined together with the selected fund management partner:

  • Spark+ will provide investment capital and grants to 15-20 businesses over 3 years.
  • Spark+ will retain flexibility around capital type and terms, though mezzanine financing structures may fit well with the financing needs and maturity of the target pipeline.
  • Spark+ will invest $500k – $2m per investee, in milestone-based tranches.
  • Spark+ may provide up to 10% of the investment in the form of grants for TA or pilots.
  • Spark+ will leverage Alliance market expertise, and the investment process and experience of the fund management partner, through an operating arrangement which will leverage dedicated staff from both organizations, as well as other institutional and ad hoc resources.
  • The Fund’s success will be measured by:
    • Financial returns (e.g. IRR/ROI)
    • Co-investment in Spark+ transactions – concurrent investment alongside Spark+
    • Follow-on equity/debt capital – future investment in growing Spark+ investees
    • Future sector investment and sector growth – linked to the Spark+ track record
    • Progress towards SDG 7 – target metric TBD (e.g. number of households adopting a certain tier of improved cooking solution)

Process and submission requirements

The Alliance is inviting Expressions of Interest (“EOIs”) from eligible fund managers in advance of a Request for Proposals (“RFP”) in late June. Based on responses to this request for EOIs, a shortlist will be selected and further discussions will be held with shortlisted parties. Following 1-2 weeks of post-EOI / pre-RFP conversations with shortlisted parties, each will be invited to submit a full proposal based on a specific Request for Proposals.

With regards to this EOI, interested firms should provide information that indicates that they are qualified to enter into such a joint venture / collaboration agreement with the Alliance to manage Spark+, including a description of similar fund management experience and track record, profiles/presentations of funds under management, investee case studies, team profiles, experience in similar conditions and markets, regional experience, availability of appropriate staff skills, etc.

Please review the evaluation criteria below to ensure that your submission provides the Alliance sufficient information to evaluate each of the stated criteria. EOIs must be received by 5pm CEST on 8 June 2018 at pgeorge@cleancookstoves.org.

Evaluation Criteria

  • Capability and experience to actively manage equity and/or debt investment funds, including structuring new funds with public-private partnership features, strong internal governance frameworks and a track record of fiduciary responsibility and accountability.
  • Track record of successful impact-oriented debt and/or equity investments in early-stage companies in emerging markets, particularly in sub-Saharan Africa.
  • Track record of activities related to the clean cooking sector.
  • Track record of successful relationships with DFIs, foundations, family offices and other potential fund investors. Ability to leverage existing and additional funds/funding sources.
  • Track record of successful relationships with other impact investment fund managers, family offices, DFIs, angels, angel networks and other potential co-investment partners.
  • Experience mentoring, or supporting through technical assistance, early stage businesses in emerging markets, particularly in Sub-Saharan Africa.
  • Existing presence or ability to establish a presence in Sub-Saharan Africa.
  • Proven team capability and experience and/or ability to attract and build a strong team of individuals with necessary skills. Include details on the profile of the principal managers likely to be involved in Spark+, and their relative time commitment to the Fund.
  • Ability to implement and maintain appropriate financial management and reporting processes and a comprehensive impact assessment strategy.

Selection process terms

  • EOIs may be submitted any time up to the deadline.
  • The Alliance reserves the right, in its sole discretion, not to consider any proposal submitted after the deadline, and to extend the deadline.
  • A selection committee will evaluate all proposals and select a shortlist of finalists for further consideration. During the shortlisting process, the committee may contact fund managers to request further clarification of information provided in the EOI. Applicants will be notified on the outcome of the evaluation within 2 weeks of the above deadline.
  • The Alliance maintains strict confidentiality with respect to all confidential business information. The Alliance will not, however, treat as confidential or proprietary general ideas and concepts contained within any proposal.