Eco-minded startups eligible for small business venture capital fund
Startups with a social bent, particularly those that serve the underserved, have a potential new funding source.
On Thursday, the U.S. Small Business Administration announced licensing of the first nationally focused impact investment fund, SJF Ventures III LP.
"SJF Ventures is yet another important ally in SBA's commitment to foster small-business growth and job creation in emerging sectors," SBA administrator Karen Mills said in a statement.
The new fund, fueled entirely by private investors rather than federal tax dollars, will commit up to $75 million of investment capital over the next five years.
During a morning Web conference, David Kirkpatrick, managing director for SJF Ventures, said the Durham, N.C.-based partnership recently had a substantial initial fund closing led by Citibank and expects to reach its $75 million target later this year.
SJF Ventures' first two funds $17 million and $28 million, respectively were not national in scope and were used to invest in 34 companies in 25 states with 113 facilities.
Those companies employ more than 7,500 people, have provided educational services to 350,000 students and helped facilitate $2 billion in donations to 300,000 charities, Kirkpatrick said.
"We focus on companies that are scaling rapidly" and have positive impacts as a clear part of their business model, Kirkpatrick said.
This third fund will continue SJF Ventures' focus on eco-friendly themes such as recycling, solar energy, sustainable agriculture and food safety, as well as efficient infrastructure for water, wastewater and the electric grid.
More than 40 investors were involved in the fund's initial closing, including Deutsche Bank, Calvert Equity Portfolio, Armonia, Abacus Sustainable Fund, Trillium Asset Management LLC, The CAPROCK Group, OpenBox, ImpactAssets and multiple families and individuals.
Sean Greene, SBA's associate administrator for investment, touted SBA's Impact Investment Initiative, which SJF Ventures became a part of last fall. Launched last year, the initiative committed to deploy more than $1 billion to attract investments in economically depressed regions and also spur growth in the clean-energy and education sectors.
"Small businesses are incredibly important to the economy as a whole," Greene said, crediting them for creating two-thirds of the country's net new jobs.
However, in today's economy, startups are finding it especially difficult to access long-term capital.
"So we have been busy growing the Small Business Investment Co. platform in general," Greene said of the market-driven program established in 1958 that oversees the Impact Investment Initiative.
That push has evidently paid off. In 2011, the SBIC provided $2.8 billion in capital to help finance 1,339 small businesses nationwide the largest amount in the program's history.
In November, SJF Ventures received SBIC impact fund designation, which exempts banks that invest from the Volcker Rule, part of the federal Frank-Dodd legislation that takes effect July 21. The Volcker Rule will restrict U.S. banks from investing in most forms of private equity and venture funds, Greene said.
Banks investing in SBIC impact funds can also qualify for federal Community Reinvestment Act credits.
Businesses that SJF Ventures helped launch:
Vermont-based groSolar • solar installation for homes, businesses and utilities
Texas- and Missouri-based RecyclingCorps • reprocessing wireless devices
Pennsylvania-based Community Energy Inc. • renewable-energy developer
Texas-based Living Earth Technology Co. • organic waste recycler