Mission-driven Venture Capital
Rick Larson, Managing DirectorSJF Ventures
Building Assets of People, Families & Communities Jessie Ball duPont FundOctober 25-27, 2006
Contact information: 400 W. Main St, Suite 604, Durham, NC 27701 Phone: 919-530-1177, ext. 406
What is Venture Capital?• What? Equity investments (not debt) in rapidly
growing private companies (not publicly owned)• How long is it invested? 5-7 years• Level of return? Goal: 5 – 20 X initial investment
(15 – 20 + % per year)• Why so high? It’s risky. 1/3 of companies fail,
1/3 return investment, 1/3 generate some return• Patient capital? Yes, no immediate repayment
required), but... VC’s are results oriented, with enough control to make changes if see fit)
• Whose $$ do VC’s invest? Pension funds, foundations, banks, high net worth individuals
Mission-driven VC Flavors: People, place, purpose
Community Development Venture Capital • 82 funds; $870 M under mgmt. • Investors: Banks and foundations, CDFI Fund; insurance cos.
• Trade association CDVCA (www.cdvca.org)
New Markets Venture Capital• 6 funds; $150 M (SBA)
• Investors: SBA leverage, Banks
“Second-generation” Funds• Approx. 15; $2.5 B• Investors: Banks, insurance cos., public pension funds, foundations,
funds of funds
Mission-driven VC can help…
• Innovate in traditional industries
• Capture outsourcing opportunities
• Generate quality employment
--7 of 10 fastest growing skilled positions are health care related
-- 3 of top 4 occupations creating the most jobs are health care/fin. services related
SJF Ventures – Mission Driven ApproachSJF Ventures – Mission Driven Approach
Industry Focus: Clean Technologies, Business Services, and Organic Consumer Products
Investment Stage: Expansion stage companies with revenues of $1M to $20M & at growth inflection point
Investment Size: $500K to $1.5M per company
Strategy: Targeting companies whose rapid growth yields strong community, environmental and financial results: quality entry level job creation & environmental improvement.
Return: Projected IRR to investors in mid-teens with lower volatility than conventional VC returns
Assisting companies (Get Ready for Equity)
Supporting high performance workforce (including asset-building)
Showcasing/supporting cleantech innovators (Cleantech CEO panels)
SJF Advisory Services – Allied 501(c)(3)SJF Advisory Services – Allied 501(c)(3)
SJF I Companies: 1,900 Jobs Since 1999SJF I Companies: 1,900 Jobs Since 1999
0200400600800
1,0001,2001,4001,6001,8002,000
Jobs CreatedJobs Retained
Beyond Paycheck-to-PaycheckBeyond Paycheck-to-Paycheck ReportReport
“Best Practices” survey of industry
Framework for matching CDVC funds and companies with best asset-building strategies
Marketing and educational pieces for funds and portfolio companies
Documentation of tools and case studies
Full report available at www.sjfund.com
Survey of 20 CDVC FundsSurvey of 20 CDVC FundsAsset-Building and Wealth-Sharing Tools
►CDVC funds utilize a broad set of asset-building tools
33%
19%14%
86% 86%81%
10%
43%
5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
IDAs Home
Owner
Assist.
Emp.
Credit
Unions
Broad-
Based
Options
Profit
Sharing
401(k) ESOPs Financial
Literacy
Other
Asset-Building Tools Used by SJFAsset-Building Tools Used by SJF
Broad-based stock option plans (SJF has set up 8)
IDAs -- Individual development accounts (SJF has linked 2 port. cos. to local nonprofits providing IDAs)
Retirement plans such as 401(k)s (SJF has facilitated several)
Employee stock ownership plans (ESOPs)
Profit sharing and bonuses (SJF now facilitating one)
Home ownership assistance programs
Employee credit unions
Company Example – Consumer ProductsCompany Example – Consumer Products
Location: Harrison, NY and Yonkers, NY
Business Description:
DDF produces skincare products, including cleansers, moisturizers, anti-aging and acne treatment products
SJF Investment: $200K, November 2001; $610K exit, April 2004
Jobs Creation: 75 jobs at investment, 132 Jobs at exit (73% entry-level)
Highlights: • 3X return in 2.5 years for a 67% IRR
• Early exit through sale to private equity fund
• Employee stock option plan and other benefits
• Relocation to expanded facility in Empire Zone in Yonkers, NY
Company Example -- Business ServicesCompany Example -- Business Services
Location: Kennesaw, GA, S. Providence, RI
Business Description:
Minority owned Business to Business contact center (voice, email) serving a range of industries: financial information, faith-based, government
SJF Investment: $875K (Aug. ’02, Feb. ’03, June ’05)
Jobs Creation: 21 jobs at investment, 385 today (90% entry-level)
Highlights: • Revenue growth - $1.5MM in ‘02, $15MM in ’06
• Highly diverse workforce; opportunities for
advancement; broad-based stock option plan; EAP
and health/education programs
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