June 24, 2020
Black Companies Matter
“Success is to be measured not so much by the position that one has reached in life as by the obstacles which [one] has overcome while trying to succeed.”
Booker T. Washington, educator, author, activist, and presidential adviser
Last month we sent you an email focused on the social and economic impacts of manufacturing. Since then, our world has changed. Protests around the globe are shedding light on the deep social and economic inequities of systemic racism. The murder of George Floyd was the tipping point that galvanized a multiracial, multigenerational drum beat of stubborn resistance to accepting the status quo. Much is being discussed about desperately needed moral and structural changes on all levels of society – justice, education, healthcare and employment – except one very, very important and essential white male dominated industry – the capital markets that rule the world.
We all agree that capital is the engine of business growth and intergenerational wealth. However, less than 1% of venture capital is invested in black and brown owned businesses, and less than 2% in women owned businesses.
Now, private equity firms and venture capital firms are jumping on the bandwagon, proclaiming new emphasis on investing in companies founded and owned by people of color, attempting to pivot from their 98% focus on white men. We can only hope that they fulfill their promises and are not just grabbing the limelight, profiting on the buzz to improve their public image, maybe even enjoying “a feel good moment”.
We at the The 22 Fund do not need to pivot. The foundation of our strategy is investing in women and people of color, and has been since our inception.. because we ARE women and people of color.
Forever, excuses by traditional sources of capital have been:
- Businesses owned by women and people of color that are high growth are too few – “pipeline problem.” False.
- Businesses owned by women and people of color are “riskier”. False.
- Businesses owned by women and people of color are “small time”. False.
- Businesses owned by women and people of color are not “high tech”. False.
- Businesses owned by women and people of color are not “global”. False.
However, this is what is true:
- People of color and women owned businesses added over 72% of new jobs during the Great Recession.
- During the last downturn, combined gross receipts of firms owned by people of color increased 35% between 2007 and 2012.
- 94% of businesses owned by people of color did not get PPE loans.
There is no doubt that there are incredible investment opportunities that have been ignored, overlooked and marginalized by institutional investors who cannot see beyond the color of someone’s skin and their gender.
Frankly, women and people of color have been vetted more than any other groups in history. Yet, systemic racism in the capital markets continues to arbitrarily shut them out. This is not only ignorant, this is an ongoing story of missed opportunities, over and over again. Numbers do not lie (source: NAICand Prequin).
- Diverse PE Funds outperformed 62.5% of the time (IRR and MOIC)
- Diverse PE Funds outperformed both U.S. Buyout and All U.S. Private Equity funds 1.39x vs 1.32x and 1.27x
- First-time funds outperformed established managers in every year except 1 over the past 13 years
Fairview Capital Case Studies:
- Diverse Manager #1: 40% of underlying 650+ portfolio companies featured women or people of color executives
- Diverse Manager #2: 31% of 125+ portfolio companies featured woman or people of color executives
- Diverse Manager #3: 58% of 100 portfolio companies featured woman or pwople of color executives.
One of the best investments you can make is in women and people of color fund managers, like The 22 Fund.
This is the one time when “trickle down economics” actually works.
Please, reach out to us for more information and/or to discuss a potential investment in The 22 Fund and our vision to invest in diverse businesses.
Thank you and stay safe!
The 22 Fund
Tracy, Monica, Rajan and Holli
May 12, 2020
Manufacturing’s Social & Economic Impact
This past month, the Brookings Institution published an important study affirming undeniably that never has the investment opportunity of The 22 Fund been more relevant and timely than today.
“…rapidly evolving manufacturing technologies including artificial intelligence, advanced robotics and the “internet of things” – Industry 4.0 – will reshape the manufacturing landscape with important consequences. Developing countries’ comparative advantage in low-skill, low labor cost tasks is at risk as these low skill tasks are increasingly automated. Countries that currently possess or are investing actively in the skills, capital and infrastructure of the future are the ones that will dominate global manufacturing.” (Brookings Institution)
As you may recall, The 22 focuses on investing in U.S. tech-based manufacturing companies (intentionally targeting women and people of color business owners) to:
- increase their global competitiveness and diversification through exports
- create the clean, quality jobs of the future in low- and moderate-income communities (LMI)
- deliver both high ROI and social/economic/environmental impacts.
The entire world has been experiencing significant disruptive changes to everyday life and many people believe that we will never go back to the way things were. Spurred by supply shortages, job losses, a dismal stock market, systemic social inequities, climate change, and overall social distancing, a massive rethinking of how we organize our society is happening at breakneck speed.
Our investment strategy has always addressed the social inequities that the COVID-19 crisis has brought into the light, while delivering competitive market returns. Essential businesses that make products needed by all of us are being brought to the forefront, especially as manufacturing does not lend itself to remote work and shortages exist all along the supply chain.
Globalization is here to stay and it is imperative that we rethink our priorities to rebuild our economy. There has also been increasing public pressure on our over dependence on imports and the slow demise of the U.S. domestic manufacturing sector over the past 20 years. In response to COVID-19, many public officials want to shore up our manufacturing sectors and increase U.S. exports through financial incentives in order to address our current and future vulnerabilities in existing global supply chains.
Investing in U.S. manufacturing 4.0 increases our global competitiveness and national preparedness. Growth sectors like med tech and climate tech will offer new areas for job growth and opportunities in LMI communities largely ignored until now.
THIS is the best investment strategy to realize the highest social, economic and environmental impacts while scaling to meet the needs of the global market.
We would like to share with you The 22 Fund’s real solutions to create high impact with a high ROI opportunity for investors to expand our manufacturing sector in domestic and global markets. Please reach out to us for more information and/or to discuss our vision to invest in the future of industry 4.0.
Thank you and stay safe!
The 22 Fund
Tracy, Monica, Rajan and Holli