Mission-driven Venture Capital Rick Larson, Managing Director SJF Ventures Building Assets of People, Families & Communities Jessie Ball duPont Fund October 25-27, 2006 Contact information: 400 W. Main St, Suite 604, Durham, NC Phone: , ext. 406

What is Venture Capital? What? Equity investments (not debt) in rapidly growing private companies (not publicly owned) How long is it invested? 5-7 years Level of return? Goal: 5 – 20 X initial investment (15 – 20 + % per year) Why so high? It’s risky. 1/3 of companies fail, 1/3 return investment, 1/3 generate some return Patient capital? Yes, no immediate repayment required), but... VC’s are results oriented, with enough control to make changes if see fit) Whose $$ do VC’s invest? Pension funds, foundations, banks, high net worth individuals

Mission-driven VC Flavors: People, place, purpose Community Development Venture Capital 82 funds; $870 M under mgmt. Investors: Banks and foundations, CDFI Fund; insurance cos. Trade association CDVCA ( New Markets Venture Capital 6 funds; $150 M (SBA) Investors: SBA leverage, Banks “Second-generation” Funds Approx. 15; $2.5 B Investors: Banks, insurance cos., public pension funds, foundations, funds of funds

Mission-driven VC can help… Innovate in traditional industries Capture outsourcing opportunities Generate quality employment --7 of 10 fastest growing skilled positions are health care related -- 3 of top 4 occupations creating the most jobs are health care/fin. services related

SJF Ventures – Mission Driven Approach  Industry Focus: Clean Technologies, Business Services, and Organic Consumer Products  Investment Stage: Expansion stage companies with revenues of $1M to $20M & at growth inflection point  Investment Size: $500K to $1.5M per company  Strategy: Targeting companies whose rapid growth yields strong community, environmental and financial results: quality entry level job creation & environmental improvement.  Return: Projected IRR to investors in mid-teens with lower volatility than conventional VC returns

 Assisting companies (Get Ready for Equity)  Supporting high performance workforce (including asset- building)  Showcasing/supporting cleantech innovators (Cleantech CEO panels) SJF Advisory Services – Allied 501(c)(3) SJF Advisory Services – Allied 501(c)(3)

SJF I Companies: 1,900 Jobs Since 1999 SJF I Companies: 1,900 Jobs Since 1999

Beyond Paycheck-to-PaycheckReport Beyond Paycheck-to-Paycheck Report  “Best Practices” survey of industry  Framework for matching CDVC funds and companies with best asset-building strategies  Marketing and educational pieces for funds and portfolio companies  Documentation of tools and case studies  Full report available at

Survey of 20 CDVC Funds Asset-Building and Wealth-Sharing Tools ►CDVC funds utilize a broad set of asset-building tools

Asset-Building Tools Used by SJF  Broad-based stock option plans (SJF has set up 8)  IDAs -- Individual development accounts (SJF has linked 2 port. cos. to local nonprofits providing IDAs)  Retirement plans such as 401(k)s (SJF has facilitated several)  Employee stock ownership plans (ESOPs)  Profit sharing and bonuses (SJF now facilitating one)  Home ownership assistance programs  Employee credit unions

Company Example – Consumer Products Location:Harrison, NY and Yonkers, NY Business Description: DDF produces skincare products, including cleansers, moisturizers, anti-aging and acne treatment products SJF Investment:$200K, November 2001; $610K exit, April 2004 Jobs Creation:75 jobs at investment, 132 Jobs at exit (73% entry- level) Highlights:3X return in 2.5 years for a 67% IRR Early exit through sale to private equity fund Employee stock option plan and other benefits Relocation to expanded facility in Empire Zone in Yonkers, NY

Company Example -- Business Services Location:Kennesaw, GA, S. Providence, RI Business Description: Minority owned Business to Business contact center (voice, ) serving a range of industries: financial information, faith-based, government SJF Investment:$875K (Aug. ’02, Feb. ’03, June ’05) Jobs Creation:21 jobs at investment, 385 today (90% entry-level) Highlights: Revenue growth - $1.5MM in ‘02, $15MM in ’06 Highly diverse workforce; opportunities for advancement; broad-based stock option plan; EAP and health/education programs