Recent investments lift fundraising prospects for New Community Transformation Fund

Author: Carol Zichi

Posted Date: October 31, 2023

New Community Transformation Fund co-founder and Executive Chair Birgit Klohs, (second from the left) and Managing Director Ollie Howie (center) with fellow fund board members Kwame Anku (left) Christal Jackson and Skot Welch.

A series of recent investments totaling $1.1 million provides fundraising momentum for the New Community Transformation Fund, which invests in businesses owned by people of color.

The Steelcase Foundation and Novi-based electric transmission company ITC Holdings Corp. each invested $500,000 this fall in the New Community Transformation Fund. Their investments were followed by $100,000 from the City of Grand Rapids.

The New Community Transformation Fund previously received a $500,000 investment back in March from the Frey Foundation.

The investments elevated the New Community Transformation Fund’s fundraising total to date to nearly $12 million and were “an indication of not only interest but a commitment to the goal of the fund, which is diversification of our business ownership in West Michigan,” said co-founder and Executive Chair Birgit Klohs.

“Those were all great indicators of an engagement by those companies and institutions and organizations that they believe in the goal of the fund and that it is a necessary thing,” Klohs said. “

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The city’s $100,000 investment “is aligned with the city’s strategy of supporting entrepreneurship and creates access to investment opportunities for historically marginalized communities, including communities of color,” Grand Rapids City Manager Mark Washington said in an Oct. 10 statement.

“This investment also is aligned with the city’s values of collaboration, innovation, and equity to help remove barriers created by systematic and institutional injustice,” Washington said.

The New Community Transformation Fund invests $500,000 to $1.5 million in mid-stage businesses owned and operated by people or color or companies transitioning to new owners that are involved in financial technology, health care, advanced manufacturing and information technology. Companies receiving investments must relocate to West Michigan or already have their home base here.

Sending a signal

Launched in 2020, the fund seeks to raise $25 million and presently has a request pending for $7.5 million from the Michigan Strategic Fund, Managing Director Ollie Howie said.

If approved, the investment from the state would come from the nearly $237 million that Michigan’s getting from the $10 billion federal State Small Business Credit Initiative (SSBCI) created under the American Rescue Plan Act that Congress authorized and President Joe Biden signed into law in 2021.

The Michigan Strategic Fund in 2022 allocated a portion of the first $75 million of the state’s share of SSBCI funding toward venture capital investments.

Securing an investment from the state would further the New Community Transformation Fund’s momentum toward the $25 million goal, Managing Director Ollie Howie said. The $7.5 million also could help lure another $8 million in additional investments into the venture capital fund, Howie said.

“We think that could be catalytic for new private dollars as well,” Howie said. “We continue to have other private institutions that are interested, and with the state state’s support, we think we could get to our goal of $25 million.”

This year’s investments in the fund “give us a lift, for sure” that can support the fund’s pitch to prospective investors and to the state, Klohs said. The city’s investment was a “validating moment” for the fund, she said.

“Anybody who invests, in my mind, gives the state an indication that there is faith and trust in the fund,” Klohs said.

The New Community Transformation Fund’s recent progress comes as venture capital fundraising overall has been down across the U.S. coming out of the pandemic.

The third quarter Venture Monitor report from PitchBook and the National Venture Capital Association shows that through the third quarter, 344 U.S. venture capital firms raised $42.7 billion. That’s well below the pace of 2022, when 1,278 venture firms raised $172.5 billion through the full year.

The New Community Transformation Fund’s focus on investing in entrepreneurs of color who historically have received a small fraction of the venture capital invested annually in the U.S. can help to overcome the present national fundraising sluggishness, Klohs said.

“This is also a special fund and people still see the need for investing in this particular group of entrepreneurs,” Klohs said.

Investments the fund has made so far include Grain Technologies Inc., an Oakland, Calif.-based fintech that planned to move its headquarters to Grand Rapids; Zil Money Corp., a Texas fintech that moved to Grand Rapids; and Grand Rapids-based BAMF Health Inc., which developed and launched an advanced cancer treatment.

The pipeline for future deal flow remains good, Howie said.

“We have a lot of great opportunities,” he said.

Media Contact: Mark Sanchez - Crain Grand Rapids Business