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Community equity fund v1.61

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Providing friends and family capital for Black and Brown business owners who don't have a rich uncle.

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Community equity fund v1.61

  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 at risk during Covid, nationally 41% closing, compared to 17% for white businesses.) 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 are coming back, taking on debt is irresponsible. Many black/brown businesses can’t get loans or would not be able to pay 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, paid off with revenue share, starting at month 24, with a 150% return of capital from each 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 gap between black and white families shrinks from 12 times to 3 times for African Americans who own a business, creating intergenerational wealth in a time when white people have realized the reality of systemic racism and some want to put 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 are actually donors, receiving three things 1. an immediate tax deduction 2. capital gains forgiveness and 3. a lifetime stream of income from investing in the survival of their local small businesses
  4. 4. Case Study: Bread &Butter coffee and co working • Bread& Butter, led by two black men with business experience has$100k in revenue, comparables value it at $150,000, receives $30,000 in equity from CEF for 20% ownership of the business Year one • After 24 months, B&B’s revenue has grown to $200,000. CEF receives $14k, or 7% of revenue, 10% set aside as management fee CEF ownership reduced proportionately. • B&B’s revenue grows to $300,000,the fund gets $21,000, recouping its $30k,& invests in a new business. CEF management fee of $3k, donors get their first check, $2,000. • B&B’s revenue has grown to $350k the donors get $7k for a 40% return on their donation. The fund no longer owns any part of B&B. Year two Year three Year four How it would work for Grinders abusiness in Asheville’s River Arts District
  5. 5. Case Study: replication across the fund • The fund gets 110% of the return from the revenue share dividends from each equity investment. 100% of that return is invested again, 10% retained for operations What the fund gets • Donors get the 40% of the revenue share dividends from each equity investment for life, or $12,000 on each $30,000 investment, for a 14% annual return, minus business failures • The goal is to provide equity capital to help Black & brown businesses without access to capital become viable. The fund is securing a $150,000 loan guarantee, to cover failures of 15%. • We believe the Community Equity Fund fills a gap in the local economy and we will be helping other communities replicate it, providing design & advisory services What the fund gets Guarantee for the fund Replication
  6. 6. After friends and family funding • B&B and other black and brown owned businesses are on their feet, having used the 24 months of runway offered by equity before they had to start paying six percent of annual revenue to their donors. They have paid off people who took a chance on them giving them equity, with no collateral attached. • Now more established, B&B and the other businesses in the fund portfolio are perhaps able to access expansion capital from Mountain BizWorks, Self Help, or even a traditional bank • The Community Equity Fund acts like a virtual rich uncle, providing friends & family capital to entrepreneurs who can’t access traditional sources of capital. It is a key missing link in the path to creating intergenerational wealth for black and brown families.We plan to make this model replicable to other cities and towns to solve the friends and family gap for entrepreneur who don’t have a rich uncle.

Providing friends and family capital for Black and Brown business owners who don't have a rich uncle.

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