Leaders of a Grand Rapids investment fund formed to support entrepreneurs of color hope a similar venture in Colorado will become the first of several funds that replicate the model across the country.

The New Community Transformation Fund-Denver represents the Grand Rapids-based company’s first affiliate New Community Transformation Fund. The Denver fund aims to raise $50 million to invest in companies owned and operated by various executives.

Other affiliates could form elsewhere. Leaders of the Transformation Fund in Grand Rapids are currently talking with their peers in other U.S. cities about creating similar investment funds in their markets, Executive Chairman Birgit Klohs said.

“It was born here in Grand Rapids and it’s now becoming something people in other cities want to do,” Klohs said. “There are people in other cities calling us, ‘How do you do that?’ It takes time to put everything together, but without a doubt, we started something in Grand Rapids that had never been done before.

Klohs conceived of the New Community Transformation Fund four years ago when he was CEO of The Right Place Inc. as a way to diversify the economy and focus more on diversity, equity and inclusion.

The fund invests between $250,000 and $500,000 in minority-owned second-stage businesses in advanced manufacturing, food and agribusiness, e-commerce and information technology , life sciences and fintech. The Grand Rapids fund will also support entrepreneurs of color who buy businesses undergoing ownership transitions, including businesses based outside the region that want to relocate to West Michigan.

Grand Rapids New Community Transformation Fund chief executive Ollie Howie said “active” conversations are underway with parties in two other markets about forming additional affiliates. Howie hopes another new affiliate can launch by the end of 2022 as the new Community Transformation Fund builds a network of what “hopefully will be a series of great funds impacting diversity, changing the narrative around venture capital and creating economic opportunity across the country.” .”

The fund’s goal is to have up to 10 affiliates “in a fairly short period of time,” Howie said.

“This is the first step for us and we will continue from there,” he said. “We are excited to promote diversity and equality globally. For too long, the venture capital numbers paid out to diversity-led businesses have been abysmal. »

Affiliates will operate under a holding company, New Community Transformation Fund Holdings LLC, which was established in November 2021.

Only a small percentage of venture capital invested in the United States each year has historically gone to startups led by people of color, and the industry’s workforce is dominated by white men.

A March 2021 diversity report from the National Venture Capital Association and Deloitte indicated that only 4% of the workforce of venture capital firms is black, even as more and more companies promote a greater diversity and inclusion.

Creating new funds led by people of color and dedicated to investing in minority-founded businesses can diversify the flow of capital into the United States and create greater diversity in the industry’s workforce, Howie said.

“Hopefully with this model, we can think differently about where venture capital can go, but also allow new fund managers of color to gain experience and experience in the field while having a group of investors veterans behind them,” he said. . “It’s a good mix to allow new fund managers and new regions to think differently and have a fresh pipeline of opportunities that actually have a place to go to get funding.”

Replicated in Denver

New leaders at the Community Transformation Fund in Grand Rapids worked with organizers in Denver to replicate the model, Klohs said. They traveled to Denver earlier this month to join their colleagues to launch the new fund and hold a seminar.

While leading the formation of the New Community Transformation Fund in Grand Rapids, Klohs was unclear if or how the concept would spread elsewhere.

“I had no idea where all this could lead. What I wanted was for Grand Rapids, in an economic development slice, to make a serious effort to diversify our business community where entrepreneurs of color and BIPOC folks had the opportunity to put their idea to paper and possibly getting funding for it,” she said. “For other people to notice…wasn’t even on my radar, but for us to do that is really fantastic.”

In a recent email to supporters, fund organizers in Denver said they expect to close in August on the first $20 million of their $35-50 million goal. Like the Grand Rapids fund, the Denver affiliate aims to create “a growing pipeline of founders of color and other underinvested businesses suitable for sustainable scale,” and will invest in “early to mid-stage scalable ventures and companies estates in transition founded and or operated by people of color.

“The fund’s mission is to be a driving force in promoting racial diversity and business ownership by raising capital for founders of color and other underinvested entrepreneurs,” the Denver organizers recently wrote to supporters. of the fund. “The fund will be intended to prepare these entrepreneurs to be ready to invest and stimulate wealth creation and business development in communities that have traditionally been unserved.”

The Denver fund is led by Danielle Shoots, who also runs her own venture capital fund, a real estate investment firm, and a leadership and executive coaching firm.

In Grand Rapids, the founders of the New Community Transformation Fund have so far raised more than $10 million from investors toward the $25 million goal and “we continue to seek new applications,” said howie.

“We continue to walk towards our goal,” he said.

The fund made its first investment in BAMF Health Inc., which is opening an advanced cancer treatment clinic in Grand Rapids. The investment was part of a $30 million seed round for BAMF Health, whose founder Anthony Chang plans to open a series of cancer treatment centers across the country that use radiopharmaceuticals for molecular imaging. and artificial intelligence.

Howie expects the fund to close its second investment soon.

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