Mission-driven Venture Capital

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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 27701
  Phone [phone], ext. 406 rickl_at_sjfund.com

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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? Its risky. 1/3 of companies fail,
  1/3 return investment, 1/3 generate some return
• Patient capital? Yes, no immediate repayment
  required), but... VCs are results oriented, with
  enough control to make changes if see fit)
• Whose do VCs invest? Pension funds,
  foundations, banks, high net worth individuals

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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 (www.cdvca.org)
• 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

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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

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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

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SJF Advisory Services Allied 501(c)(3)

• Assisting companies (Get Ready for Equity)
• Supporting high performance workforce (including
  asset-building)
• Showcasing/supporting cleantech innovators
  (Cleantech CEO panels)

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SJF I Companies 1,900 Jobs Since 1999
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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 www.sjfund.com

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Survey of 20 CDVC Funds

• Asset-Building and Wealth-Sharing Tools
• CDVC funds utilize a broad set of asset-building
  tools

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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

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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
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Company Example -- Business Services
Location Kennesaw, GA, S. Providence, RI
Business Description Minority owned Business to Business contact center (voice, email) 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