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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: 919-530-1177, ext. 406 rickl@sjfund.com 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? It‟s risky. 1/3 of companies fail, 1/3 return investment, 1/3 generate some return • Patient capital? Yes, no immediate repayment required), but... VC‟s are results oriented, with enough control to make changes if see fit) • Whose $$ do VC‟s invest? Pension funds, foundations, banks, high net worth individuals 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 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 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 SJF Advisory Services – Allied 501(c)(3)  Assisting companies (Get Ready for Equity)  Supporting high performance workforce (including assetbuilding)  Showcasing/supporting cleantech innovators (Cleantech CEO panels) SJF I Companies: 1,900 Jobs Since 1999 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Jobs Created Jobs Retained 99 00 01 02 03 04 05 20 19 20 20 20 20 20 20 06 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 Survey of 20 CDVC Funds Asset-Building and Wealth-Sharing Tools ►CDVC funds utilize a broad set of asset-building tools 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% IDAs Home Owner Assist. Emp. Credit Unions BroadBased Options Profit Sharing 401(k) ESOPs Financial Literacy Other 86% 86% 81% 43% 33% 19% 14% 10% 5% 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 Company Example – Consumer Products Location: Business Description: SJF Investment: Jobs Creation: Highlights: Harrison, NY and Yonkers, NY DDF produces skincare products, including cleansers, moisturizers, anti-aging and acne treatment products $200K, November 2001; $610K exit, April 2004 75 jobs at investment, 132 Jobs at exit (73% entrylevel) • 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 Company Example -- Business Services Location: Business Description: Kennesaw, GA, S. Providence, RI Minority owned Business to Business contact center (voice, email) serving a range of industries: financial information, faith-based, government $875K (Aug. ‟02, Feb. ‟03, June ‟05) 21 jobs at investment, 385 today (90% entry-level) • 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 SJF Investment: Jobs Creation: Highlights:

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