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VENTURE---VC
Firm to Target Poorer Areas With Aid for Businesses
By
AMANDA BRONSTAD
7/30/01
Despite the soft economy, a venture capital firm is being formed
locally targeting women-owned and minority-owned businesses in low-income
areas – a group long ignored by the VC community.
The
firm, to be managed by a non-profit organization, is being started
by Rhino Entertainment founder Richard Foos, who sold his record
label to Time Warner several years ago.
Foos said he has been trying to find a way to give back to disadvantaged
businesses through the use of venture capital. To do this, he came
up with Southern California Community Ventures, the first community
venture capital firm in the Los Angeles area.
Nationwide, there are more than 50 community venture funds in operation,
said Kerwin Tesdell, president of the New York-based Community Development
Venture Capital Alliance.
“People have seen the power of venture capital to form new
companies, and I think it’s because of an interest in applying
a business-driven and finance-driven method to poverty alleviation,”
he said.
Under-served firms
Thirty-seven percent of private firms in Los Angeles County are
women and minority-owned, yet they receive less than 2 percent of
venture capital and private equity investments, according to data
gathered by the new group, which has worked with the Milken Institute
and the Los Angeles Regional Technology Alliance, or LARTA.
The organization plans to target federally designated empowerment
and enterprise zones, like North San Fernando Valley and the Eastside.
The first fund is targeted to raise at least $10 million and then
invest up to $1 million each in each company. Those businesses will
span all industries and have between $1 million and $10 million
in revenue and 10 to 100 employees, said Michael Frankel, managing
director of the firm.
Frankel joined Foos with Alexis Kuta, a former PricewaterhouseCoopers
executive. Frankel was formerly head of venture capital investments
for the technology and media private equity investment group of
Comcast Corp.
Non-profit to raise funds
Separate from the fund itself, the nonprofit expects to raise $5
million for general operations and business services, which it plans
to offer to all invested businesses, Frankel said.
Foos already has invested in the organization, which is in the process
of raising money both for its nonprofit management group and its
fund.
Southern California Community Ventures is modeled after Silicon
Valley Community Ventures, a three-year-old organization that has
raised $26 million, including $10 million from CalPERS’ California
Initiative Program. The group has invested more than $2 million
each in nine companies, said Lauren Sudeall, operations and marketing
manager at Silicon Valley Community Ventures.
Investors in the Northern California counterpart include Wells Fargo,
Silicon Valley Bank and other financial institutions.
You
can visit the Los Angeles Business Journal at www.labusinessjournal.com
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