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Community equity fund v2.0

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friends and family funding for entrepreneurs who don't have a rich uncle.

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Community equity fund v2.0

  1. 1. Community Equity Fund
  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.) I n t h e a b s e n c e o f t h e o p p o r t u n i t y f o r f i n an c i a l s u p p o r t f r om “ f a mi l y a n d f r i e n d s ” 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 . T h e r e f o r e B l a c k a n d B r o w n 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 T h e C o m m u n i t y E q u i t y F u n d - Philanthropic “friends andfamily”,donor-investors inject equity, not debt, paidoff through revenue shared, starting at month 25, the Fund will recapture 100% ofthe donated capital plus 50% over a 60 month period. At this point you havethe opportunity tocontinue with yourlegacy orreceive a reward. R a c i a l W e a l t h G a p C l o s e s The wealth gapbetween non European families andEuropean American families shrinks from 12 times to3 times for African Americans whoown abusiness and creating intergenerational wealth in a time when European American people have realized the reality of systemic racism D o n o r - I n v e s t or Using the pooled income model, donors areactually investors, whohave the option to receive: a.) an immediate taxdeduction b.) capital gains forgiveness or c.) a lifetime stream ofincome from investing in the survivalof local small businesses.
  4. 4. Case Study Bread &Butter - Coffee and Co-working Space Bread& Butter, led by two African American males with business experience the business has $100k in annual revenues Comparables value the business @ $150,000 Community Equity Fund, provides an injection of $30,000 in equity capital for 20%ownership stake in the business for the life of the transaction, approximately 84 mos. Inaugural Injection
  5. 5. Life Span – Flow of Injection After the grace period, 24 mos. Bread & Butter’s (B& B) revenuesgrows toa minimum of $200,000 Starting in month 25, B & Bbegins repayment to the fund, dividendshares,7% of annual gross revenue,payable monthly or quarterly typically a period of 3/5 years At full repayment the Fund receives 150% return on capital invested
  6. 6. $30, 000 – to Community Equity Fund – 100% $3,000 - Management Fee – 10% $12, 000 - Donor-Investors Income Pool – 40% $45,000 = 150% Allocation of Dividend
  7. 7. Replication Across the Fund The fund continues to get 100% of the return from the revenue dividends shares from each equity injection. 100% of thatreturn is invested again What the fund gets
  8. 8. Replication Acrossthe Fund contd. 40% of the revenue share dividends flow to the pool which pays lifetime income to donors Yourdonationcontinuestocyclethrough yourcommunity
  9. 9. The goal is to provide equity capitalto help Black& Brown businesses who often lackaccess to capitalbecome viable. The fund will secure a $150,000 loan guarantee, to cover potential failures rates of 15%.
  10. 10. After friends and family funding • B & B and other Black and Brown owned businesses are on their feet, havingused the 24 months of runwayoffered by equity before they had to start payingseven percent of annual revenueto theirdonors. Theyhavepaid off people who took a chanceon them giving them equity, with nocollateral attached. • More established, B & B and theother businesses in thefund 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.

friends and family funding for entrepreneurs who don't have a rich uncle.

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