Report: Boost investment in low-income areas by training impact fund managers
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Increasing private investment in lower-income and underserved communities takes more than a few well-heeled supporters, says a new report from Boston Impact Initiative, a nonprofit impact investing fund.
It takes better-trained investment managers.
Since 2013, Boston Impact Initiative has brought more than $15 million of capital to entrepreneurs and communities of color across Massachusetts and the Northeast. Since April 2020, BII has also been training people to launch and lead other funds that can have impact of their own on the racial wealth divide.
A report issued this week by BII, “Fearlessly Funding Economic and Racial Justice,” makes a case for that training and presents some of the results to date.
“Many (fund managers) have strong connections within their own communities,” the report says. “But to succeed, they must also be able to build relationships with investors, philanthropic institutions and other valuable partners.”
Mentoring, professional development and knowledge-sharing are essential, according to the BII report.
So far, BII has helped a total of 69 fund managers from 38 community organizations develop the skills, resources and connections to grow investment where it’s sorely needed. The fund managers and their organizations have launched a total of 18 funds and pilot projects to date.
“Fearlessly Funding” examines some results from 17 of the organizations, which collectively aim to raise $378 million of investment for communities of color in the U.S. and Canada. By the start of 2024, nearly $9 million had already gone into those communities.
Results to date
The 42-page report includes results from a survey of the fund managers, most of whom were looking to raise between $1 million and $10 million in capital over the next 12-24 months — money that can support startups and budding entrepreneurs in diverse communities.
Those would-be businesses typically can’t access investment the way many of their peers do, the BII report says.
It cites a 2020 study from the National Bureau of Economic Research that found Black-owned startups launched with average funding of $35,205, while white-owned startups began with an average of $106,720.
When the businesses went to raise equity from angel and venture investors, white entrepreneurs came away with an average of $18,500. Black entrepreneurs averaged just $500.
“Traditional financial institutions, like banks, often overlook or undervalue the innovative businesses that are emerging from our communities,” said Betty Francisco, CEO of Boston Impact Initiative. Typical requirements around credit scores and collateral can be impassable roadblocks.
“In contrast, our fund managers take an integrated capital approach, combining flexible financing with deep community relationships,” she said. “It’s these fund managers, from our cohorts, who are pioneering incredible new models of community-centered investing.”
Boston Impact Initiative, headquartered in Roxbury, has trained four cohorts of managers from funds and community development organizations throughout the U.S. In Boston, they’ve included groups such as the Black Economic Council of Massachusetts, which began in 2015 as a policy advocate.
Last year, with training and support from Boston Impact Initiative, BECMA launched an impact investment fund that has already provided financing for several Black-owned businesses, including a Boston-based mental health care practice, And Still We Rise LLC.
William Hall is a reporter for Boston Business Journal.
