DURHAM, N.C./PHILADELPHIA – The Sustainable Jobs Fund recently held a $14.5 million second close on its $15 million-targeted fund, making it the fourth largest community development venture capital vehicle in the country, said Associate Anne Claire Broughton.
The vehicle held a $7 million first close in June 1999 (VCJ, August 1999, page 48) and expects to back about 24 environmental businesses, particularly those involved with recycling, re-manufacturing and renewable energy, with individual investments of a few hundred thousand dollars. Those companies will be businesses that have some sales but are small enough to benefit from the venture capital they receive. Additionally, the Sustainable Jobs Fund will make follow-on investments in about 12 portfolio companies, which could bring the total invested in one company to $1 million.
The Sustainable Jobs Corp., which manages the fund and is its general partner, has invested about $72,000 in the fund, Broughton said. The remainder comes from the fund’s limited partners, which include Bank of America, the Community Development Financial Institutions Fund of the U.S. Treasury Department, Deutsche Bank, Metropolitan Life Insurance Co., MBNA America Bank (Delaware), Citibank (a member of Citigroup Inc.), the John D. and Catherine T. MacArthur Foundation and the Dakota Foundation. The fund’s management fee is 3%, and she declined reveal its carried interest structure. The fund has also been certified as a Community Development Financial Institution by the Treasury Department, which, Broughton said identifies the fund as part of a group of financial institutions that are committed to community development.
An underlying aim of the fund is to create entry-level jobs in low income neighborhoods, which are often in the manufacturing sector. As a result, the fund’s returns likely will be lower than traditional venture capital firms that do not have a social mission, Broughton noted. It is premature to discuss the fund’s returns because its first investments were made in June 1999, she said.
The fund has secured four investments and to date has signed two business development contracts totaling $700,000, which provide a smaller amount of funding for companies that Broughton said were not yet ready for more serious financing. If these companies continue to develop, Broughton said the fund might invest in them again.
Some LPs in the fund receive credit for their investments under the 1977 Community Reinvestment Act, which encourages depository institutions to help the communities in which they operate. A bank’s CRA record is taken into account when an institution applies for deposit facilities, including mergers and acquisitions.
The Sustainable Jobs Corp. and the fund were founded in 1998 by David Kirkpatrick and Rick Defieux, a general partner at Edison Venture Fund. Defiux is now chair of the fund’s investment committee and chairman of the Sustainable Jobs Corp. Kirkpatrick is a managing director of the fund for the southeast and president of the Sustainable Jobs Corp. Sandra Walker is the fund’s managing director for the northeast.