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Investment fund aims to ensure Grand Rapids is not ‘flyover city for entrepreneurs of color’

Author: Carol Zichi
Posted Date: January 26, 2021

GRAND RAPIDS, MI — An investment fund aimed at bolstering minority-owned businesses in West Michigan has raised more than $8.5 million and expects to begin making its first contributions by early summer.

The New Community Transformation Fund, which is based in Grand Rapids and launched in early 2020, announced its fundraising progress in a virtual news conference on Tuesday, Jan. 26. In addition to the $8.5 million in committed investments, the fund has $17 million in investments “in the pipeline,” officials said. We want “to make sure we are no longer a flyover city for entrepreneurs
of color,” said Skot Welch, a Grand Rapids-based consultant focused on
diversity, equity and inclusion who helped found the investment fund.
“We want to be a place where people say you’ve got to go to West
Michigan because that’s where some really important work is occurring.”

Welch founded the fund in partnership with Birgit Klohs, president and CEO of The Right Place, a Grand Rapids-based economic development organization. She said the idea is to build a more diverse economy and create economic prosperity in West Michigan’s communities of color.

“There’s a lot of venture fund money floating around for young white kids coming out of Stanford, but not so much for young people of color,” said Klohs, who’s retiring from The Right Place on Jan. 31 after spending more than three decades at the organization.

A range of local, state and national companies have invested in the fund. That includes the Consumers Energy Foundation and Bank of America, which provided the initial seed investments to launch the fund. Other donors include Spectrum Health Ventures, Mercantile Bank and Autocam-Medical.

Next steps for the fund include reaching a $10 million fundraising goal, and hiring a day-to-day manager of the fund, financial analysts and administrative assistants.

Kwame Anku, a California-based entrepreneur who’s serving as an adviser to the New Community Transformation Fund, said he expects the fund will reach its $10 million goal by next month and have a management team in place by April. He also said the fund has “$17 million in the pipeline.”

“Realistically, with due diligence, you’re probably looking at the first investments being late summer,” said Anku, who also serves as CEO and general partner of Black Star Fund.

The initial investments provided by the fund to businesses are expected to range between $250,000 and $500,000. The businesses being targeted by the fund are established businesses in the following sectors: advanced manufacturing, food and agribusiness, e-commerce and information technology, life sciences, finance technology, as well as legacy and transitioning succession businesses.

The fund will focus on providing funding to minority-owned businesses in West Michigan. However, it will “entertain investments in non-local companies if the company pledges to move most of its operations to the region,” according to a news release.

People of color are vastly underrepresented in business ownership.

In the Grand Rapids-Wyoming Metropolitan Statistical Area, about 6 percent of the businesses in the sectors being targeted by the fund are owned by people of color, according to data provided by The Right Place.

“We only have a paltry handful of wealth-creating, multi-generational businesses owned by people of color in the region,” Klohs said. She added that most of the businesses owned by people of color fall into the category of “lifestyle businesses,” which is not among the sectors the fund is targeting.

“What the fund really is meant to do is increase ownership and multi-generational wealth creation so that the ownership in 5, 10, 15 years in this region looks different than it does today,”

When the New Community Transformation Fund was announced in January 2020, officials said the goal is to raise up to $25 million, and that they hoped to do so by the end of 2020.

When asked about the failure to reach that goal in 2020, Anku said the COVID-19 pandemic “did change the timeline.” But it and other events, such as the social unrest that rocked the nation following the death of George Floyd, did not “change the interest in the fund,” he said.

“With the momentum that’s happening … we should be able to hit our goal,” Anku said.