Many financial experts will note that one of the main reasons why minority and women-owned businesses are fewer in number and often lag behind the financial success of businesses run by their white counterparts is simple: they don’t get the same degree of growth capital.

It is by filling this void in the market that the Cleveland Mezzanine Fund comes into play.

“What I want to focus on is a more intentional deployment of capital so that the outcome is more beneficial for women and people of color,” Mezzanine Fund Founder and CEO Anne Richie said. “There is now a lot of data on women and people of color outperforming, but there is not enough capital funding for that outperformance.”

The Mezzanine Fund is a flexible debt fund that seeks to pool $100 million for investments in aspiring growth entrepreneurs who run businesses with approximately $10 million in revenue.

These are the kind of companies that are too established for seed money and usually too small to interest private equity firms, but could secure their place in a supply chain with just a little more scale or sophistication.

The building capital that will be made available by the Mezzanine Fund is designed to help support businesses run by diverse people who are unwilling to give up their capital but are ready to take it to the next level.

The type of business that could fit into a supply chain with just a little more scale or sophistication than an injection of capital could support is the type of target Richie has in mind.

Bridging the gap between a company and that higher level is where the fund’s name comes from. Its minimum investment would be $2 million.

Keeping these businesses around and owned by their various founders, Richie said, is one of her goals because it’s part of the recipe to help women- and minority-owned businesses claim a bigger slice of the world. Business.

“We’re trying to build businesses that are going to stay,” she said.

Richie estimates that there are about 10,000 companies in the Midwest that could meet the fund’s criteria, making Cleveland a central and perfect market to launch Mezzanine.

There is no complete and comprehensive data on the amount of investment capital flows to diversified versus non-diversified companies, but the information available is quite revealing.

A Crunchbase data analysis, for example, found that female black startup founders received just 0.34% of venture capital spent in the United States in mid-2021—a trend that held despite the level of venture capital funding— Risk for startups led by black women at five-year high.

Now Richie isn’t chasing startups with his fund.

But as a black woman with a long and successful career in banking and finance, she has a unique perspective on the movement of capital. Statistics can be helpful when it comes to painting a picture of what’s going on in the world of investing, but Richie doesn’t necessarily need them to validate what she already knows all too well.

She has witnessed the lack of support for women- and minority-owned businesses through decades of working in financial services. That’s what inspired her in the first place to launch The Mezzanine Fund, whose slogan is “elevate diverse businesses”.

Richie’s resume includes tenures at Citicorp, Wells Fargo, JumpStart and KeyBank, where she managed distressed assets, restructurings and workouts. She is also a faculty member of the Goldman Sachs 10,000 Small Businesses program.

While she may never have managed funds before – which could pose challenges on the fundraising circuit – she has worked with entrepreneurs from diverse backgrounds at a range of companies large, small and intermediate. Young to old. Managed to struggle.

It’s a skill set that her supporters say makes her uniquely qualified for this endeavor.

“The key here is that Anne is very experienced. She’s made these kinds of similar investments not in a fund structure but in her ability to work with banks over her career,” said Fred Cummings, chairman. of the Pepper Pike hedge fund. Elizabeth Park Capital Management and one of the advisers of the Mezzanine Fund.

“Raising capital is a challenge for anyone, whether you’re black or white, yellow, orange or brown,” Cummings said. “But there aren’t many people like Anne – African American women – who work in asset management. And I think someone with her background and level of experience deserves an opportunity to show what she can do.”

If successful, the Mezzanine Fund could play an important role in supporting the development of women- and minority-owned businesses while offering potentially outsized returns to investors.

A lot of information shows that various companies tend to perform better than those that are not diversified. However, the capital does not follow this sector as it apparently should.

“I see the problem. And I think Anne has a solution with her builder capital philosophy to make a difference with The Mezzanine Fund,” said Jeffrey Kadlic, managing partner at Evolution Capital Partners and another from the fund advisors. “That’s why I wanted to get involved.”

With the driving goal of supporting diverse entrepreneurship, Richie notes that her fund could even help a female or minority-owned entrepreneur acquire a non-diversified business, making them diverse in ownership.

After all, the fastest way to build a $50 million diversified business is to buy a non-diversified one.

With the high level of mergers and acquisitions in the market today, largely due to the retirement of baby boomers, there could be plenty of opportunities to do so.

And with recent news of Intel building a massive chip factory in Columbus, Richie is all the more excited about the potential to develop various companies that could work with the company.

“We could grow and build businesses to sell to Intel forever, and I’m not talking about typical janitorial or staffing services, but mission-critical supply vendors,” she said. “There are so many opportunities in our state and our region.”