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Community equity fund v1.5

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Friends and family equity funding for Black & brown entrepreneurs who don't have a rich uncle.

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Community equity fund v1.5

  1. 1. Community equity fund F r i e n d s & F a m i l y f u n d i n g f o r e n t r e p r e n e u r s w i t h o u t a r i c h u n c l e
  2. 2. Problem: minority biz funding gap G L O B A L P A N D E M I C 50% of black &brown businesses atrisk during Covid,nationally.) N o r i c h u n c l e O n a v e r a g e A f r i c a n A m e r i c a n f a m i l i e s h a v e $ 1 1 k i n n e t w o r t h , w h i l e w h i t e f a m i l i e s h a v e $ 1 4 1 , 9 0 0 . S o b l a c k e n t r e p r e n e u r s c a n t a s k a r i c h r e l a t i v e f o r t h e $ 1 5 , 0 0 0 t o $ 3 0 , 0 0 0 n e e d e d t o g e t t h e i r b u s i n e s s t o p o s t C o v i d v i a b i l i t y . N o t a t i m e f o r d e b t If you don’t know when your customers arecoming back, taking on debt is irresponsible. Manyblack/brown businesses can’t get loans orwouldnot be abletopay it back
  3. 3. The Solution P h i l a n t h r o p i c f r i e n d s a n d f a m i l y f u n d i n g The Community Equity fund invests equity, not debt, paidoff with revenue share, starting at month 24, with a 150% return of capital fromeach business over 4-5 years. R a c i a l w e a l t h g a p c l o s e s The wealth gapbetween black andwhite families shrinks from 12 times to 3 times for African Americans whoown a business, creating intergenerational wealth in atime when white people have realized the reality of systemic racism andsome want toput their money where their mouth is. I n v e s t o r s a r e d o n o r s Using the pooled income model, investors areactually donors,receiving three things 1. an immediate tax deduction 2.capital gains forgiveness and3. a lifetime stream ofincome from investing in the survival of their local small businesses
  4. 4. Case Study: Bread &Butter coffee and co working • Bread& Butter, led bytwo black men with business experience has$100k in revenue, comparables value it at $150,000, receives $30,000 in equity fromCEF for20% ownership ofthe business Yearone • After 24 months, B&B’s revenue has grownto $200,000. CEF’s receive $14k, prm7% of revenue, 10% set aside as management feeCEF ownership reduced proportionately. • B&B’srevenue grows to $300,000,the funddonors gets $16,000, recouping its investment,& uses it to invest in anew business. The fund’s donors get their first check $5,000. • B&B’srevenue has grown to $350,000 but the funds’ donors get $10,000, or 50% oftheir originalinvestment notthe $27,000 that would be seven percent ofrevenue. The fund no longer owns any partofB&B. Yeartwo Yearthree Yearfour HowitwouldworkforGrindersabusinessinAsheville’sRiverArtsDistrict
  5. 5. Case Study: replication across the fund • The fund continues to get 100% of the return fromthe revenue share dividends from each equity investment. 90% of that return is invested again,10% retained foroperations What the fundgets • Donors continue toget the 50% of the revenue share dividends fromeach equity investment for life, or $15,000 on each $30,000 investment, fora 14% annual return, minus business failures • The goal is toprovide equity capital tohelp Black & brown businesses without access tocapital become viable. The fund will secure a $150,000 loan guarantee, to cover failures of15%. • We believe the Community Equity Fund fills a gapin the local economy andwe will be helping other communities replicate it, perhaps providing consulting &advisory services What the fundgets Guaranteefor the fund Replication
  6. 6. After friends and family funding • Grinders and other blackand brown owned businesses are ontheir feet, havingused the 24 months of runwayoffered by equity before they had to start payingsix percent of annual revenueto theirdonors. Theyhavepaid off people who took a chanceon them giving them equity, with nocollateral attached. • More established, Grinders and theother businesses inthe fund portfolio are perhaps able to access expansion capital from MountainBiz Works,Self Help, or even a traditional bank • TheCommunityEquity Fund acts likea virtual rich uncleproviding friends andfamily capital to entrepreneurswho can’t access traditional sources of capital. It is a keymissing link inthe path creating intergenerational wealth for black and brown families. We plan to makethis model replicable to other cities and towns to solve the friends and family gap for entrepreneurwho don’t havea richuncle.
  • kevindoylejones

    Oct. 15, 2020
  • CherylDahle

    Oct. 15, 2020

Friends and family equity funding for Black & brown entrepreneurs who don't have a rich uncle.

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