GRAND RAPIDS — Aiming to create greater ethnic and racial diversity in business ownership across the region, The Right Place Inc. teamed with Bank of America and the Consumers Energy Foundation to form a capital investment fund.
Bank of America and the Consumers Energy Foundation each gave $200,000 to support planning for the New Community Transition Fund that in the next year will seek to raise $15 million to $25 million in capital from investors to support historically disadvantaged groups.
Partners target the New Community Transition Fund to launch in 2021 and intend to seek investments primarily from family offices, institutional investors and corporate partners.
“West Michigan has one of the strongest performing economies in the nation,” Right Place President and CEO Birgit Klohs said in a statement. “Yet, this economic growth has not been shared by all members of our community. By investing in companies that will create long-term economic prosperity in communities of color, this fund will increase upward mobility and ultimately build a more diverse and globally competitive economy.”
Klohs will serve as senior adviser to the fund, which will focus on “scalable early- to mid-stage businesses and transitioning succession companies” involved in advanced manufacturing, food processing and agribusiness, life sciences and medical devices, and information technology, according to an announcement today from The Right Place.
The fund would invest in “both current and prospective West Michigan companies” and require their founders and portfolio companies to locate and operate in West Michigan.
“While the West Michigan economy is booming, communities of color have not shared fully in our region’s success,” said Garrick Rochow, executive vice president of operations for Consumers Energy and a member of The Right Place board of directors’ executive committee. “In order to truly ‘win’ as a West Michigan community, our success must be collective. And to do that, we must go beyond talking about our good intentions and take action.”
The startup capital from the Consumers Energy Foundation and Bank of America will pay for designing and developing the legal structure and operational systems for the fund; establishing a management team, advisers and a board of directors; and securing local and national portfolio growth partners.
“Bank of America strives to help local economies prosper and one way we do that is by supporting business ownership to create sustainable, financially healthy and diverse communities,” said Renee Tabben, Grand Rapids market president for Bank of America and a director at The Right Place.
The Right Place, Bank of America and Consumers Energy came together to create the New Community Transition Fund amid heightened awareness of the need to grow access to capital and investments in startups owned by ethnic minorities or females.
The Michigan Venture Capital Association’s 2019 research report issued last spring offered data showing progress on that front.
In Michigan, 16 companies led by a CEO from underrepresented groups accounted for $53 million, or 13.7 percent of the $385 million in venture capital invested in 61 startups in Michigan in 2018, the most recent year for which data are available. That compared to just 2.8 percent in 2015 that went to underrepresented groups.
The MVCA report noted that 18 of the 140 VC-backed companies operating in Michigan in 2018 were led by a racial minority, an increase of 125 percent from five years earlier when the association first began tracking diversity data.
In Grand Rapids, the entrepreneurial support organization Start Garden has put more emphasis on diversity the last few years, as MiBiz reported back in June.
A survey by Start Garden showed that less than 8 percent of tech startups in Grand Rapids are owned by women, African Americans or Hispanics. That’s despite minorities making up more than 36 percent of the local population.
The Start Garden survey also found that owners of tech startups are overwhelmingly male, at 86 percent, and white, 81 percent, co-director Paul Moore told MiBiz last summer.
To create greater diversity and inclusivity, Start Garden has sought to act more intentionally and reach out to “marginalized” neighborhoods as much as possible to connect with minorities who have an innovation or idea for a business “to make sure they know we exist,” Moore said.
“It’s just being active and getting out and finding out what people are working on,” Moore said at the time. “We’re targeting populations that have felt excluded, from particularly the tech startup scene in Grand Rapids.”
In the last couple of years, the West Michigan Hispanic Chamber of Commerce also has pushed an initiative, Transformando West Michigan, to revitalize the region’s Hispanic business community, as MiBiz previously reported.