Momentus Capital’s Chief of External Affairs, Robert Villarreal, recently testified in front of the Senate Committee on Small Business and Entrepreneurship about improving access to capital in disinvested communities through the Small Business Administration (SBA) Community Advantage (CA) loan program.
The Community Advantage pilot program was launched in 2011 to expand the points of access that small business owners had for getting loans from mission-driven financial institutions. These lenders intentionally support underestimated community members, businesses, and organizations – with an emphasis on assisting people of color, women-owned businesses, and startups.
2022 is a special year for us at Capital Impact Partners as it marks our 40th anniversary. Four decades of leaning into helping people build communities of opportunity and developing pathways to success.
And while this is an exciting time for us as we embark on a new strategy under Momentus Capital, it is equally important to remember our roots as a champion for the cooperative movement.
By Ellis Carr, President and CEO of Capital Impact Partners and CDC Small Business Finance (each is part of the Momentus Capital branded family of organizations)
In 2022, a Fast Company piece by Porter Braswell released new statistics that painted a telling picture: in 2021, only 1.4% of Black founders received venture capital funds. That’s a stark number when you consider that more than 13 percent of the U.S. population is Black or African American. It is not surprising, however, given that Black investors only make up 3% of the venture capital industry. The numbers are similarly poor for women-led startups, which only receive 2.3% of venture capital funding, and whose leaders only make up 5.7% of venture capital partners.
When you think that racial inequality, specifically as it relates to Black Americans, has cost our economy over $16 trillion over the last 20 years, it’s clear that our approach to investing in diverse entrepreneurs needs to change.
Companies serving historically disinvested communities, especially those led by entrepreneurs of color, often face barriers to securing the investments that they need to grow. This may include business knowledge that is limited as a result of not having a formal education or not being able to pursue an advanced degree. Limited networks and lack of access to family wealth can create obstacles to securing basic startup costs or working capital. Seeking traditional financing has been an ongoing barrier to success for generations due to systemic biases.
Entrepreneurs of Color traditionally face multiple barriers to launching and growing their business. The Momentus Capital branded family of organizations’ Impact Investing program is designed to support those growth-staged businesses that have a positive impact on communities.
While local leaders are best positioned to drive community-driven solutions, they still consistently butt up against systemic barriers to accessing capital. It is often confusing for business owners to know where to start or who they can turn to. This situation often forces entrepreneurs to rely on extractive capital or on the onerous requirements of debt like putting up collateral or personal guarantees that are often predicated on and exacerbate an inequitable system. Generations of inequality have made it harder for entrepreneurs of color and women to accumulate wealth that could be leveraged for investment. Having less existing wealth means one receives less favorable terms of financing, putting at risk the disproportionately smaller amount of wealth one does have.
The Momentus Capital branded family of organizations aims to interrupt this vicious cycle. We envision an economic system that respects and uplifts all peoples’ right to achieve the dreams they have for themselves, their communities, and generations to come by changing the way community-centric businesses secure capital.
Turning Traditional Venture Capital on its Head
Led by a diverse team of experts, Momentus Capital’s approach is fundamentally different. Starting with a listen-first approach, our focus is on social impact and on growing companies in a culturally respectful manner.
We are uniquely positioned to grow mission-aligned companies by acting as a single source with the ability to provide them with a continuum of financial, knowledge, and social capital.
To us, this takes many forms:
We provide financial capital through flexible financing options – a range of debt and equity products to meet our partners’ needs, as well as access to new markets and investors.
We provide knowledge capital through business advising, assistance, and training.
We provide social capital through connections to networks and people that can help our partners succeed.
In addition to this holistic approach, where we truly differentiate ourselves from traditional venture capitalism is through our philosophy on equity. It is our intention that any impact investment we make is designed to be regenerative or non-dilutive. Our end goal is focused on helping companies grow while also ensuring that the entrepreneurs, employees, and community members retain the equity.
Momentus Capital is uniquely positioned to grow mission-aligned companies by acting as a single source with the ability to provide them with a continuum of financial, knowledge, and social capital.
Investments That Support Community-Focused Companies
Our impact investments team also takes a unique approach that begins by getting to know the company from the inside. This helps us understand what impact the company wants to have on its community; what unique solutions it is seeking to deliver that support equitable outcomes for health and wealth building; and what challenges the company has faced in raising capital as a result of being led by an entrepreneur of color or of serving a disinvested community.
Armed with that knowledge we can develop a flexible and patient approach that is first and foremost designed to help businesses achieve their growth visions sustainably.
non-dilutive preferred equity whereby cash flow positive businesses pay a fixed payment and dividend
revenue/profit-sharing structures that are structured to help companies manage volatility
Our Sector and Geographic Focus
We put these tools to work by engaging with diverse entrepreneurs focused on building healthy, inclusive, and equitable communities. This includes companies that:
Create economic opportunities to support intergenerational wealth-building
Improve access to affordable, healthy food
Improve access to healthcare and insurance
Grow employee-ownership structures such as cooperatives
We’re further helping to fuel economic growth and opportunity by fostering deep connections in our communities. Currently, the Momentus Capital impact investments program target geographies include Atlanta, Ga.; California; Detroit, Michigan; the Washington, D.C. metropolitan region; Miami, Florida; New York Tri-State area; and the Texas Triangle (Austin, Dallas, and Houston).
We envision an economic system that respects and uplifts all peoples’ right to achieve the dreams they have for themselves, their communities, and generations to come by changing the way community-centric businesses secure capital.
Demonstrated Success
We’ve already demonstrated the positive impact that our approach is creating with and for community-minded companies.
Take, for example, Abner Mason the president and CEO of SameSky Health. Mason launched SameSky in 2013 to advance health equity for Americans who are marginalized or under-resourced by helping them better navigate the complex health care system.
To grow his company, Mason needed investors but has long been frustrated by those who either would not invest in him as a Black CEO, or were not supportive of his solutions that focused on disinvested communities.
Where others saw risk, we saw an opportunity. Through our impact investing program, we provided SameSky Health with a $5 million venture debt bridge loan to support the growth of the company as they progress to raise Series C funding.
We also worked with Obran Health, a unique company that operates worker-owned health care companies designed to give decision-making processes and capital back to caregivers, operators, and health care workers. A lot of Orban’s affiliates are managed by worker-owners who are women of color, and so this was an excellent opportunity to make an investment that supported wealth building in a way that would stay with the employees in their communities.
When Obran Health sought to acquire Physicians Choice Home Health, a home health care provider in Los Angeles, we provided a $1 million preferred equity investment. This allowed Obran to avoid the traditional route of syndicated loans and debt which would have hampered their long-term growth.
Abner Mason came up with the idea for SameSky Health in 2013 with a dream of creating a company that is on a mission to advance health equity. From its inception, SameSky Health has been focused on engaging and helping Americans who are marginalized or under-resourced.
To advance that mission, Mr. Mason worked with Momentus Capital, a family of mission-driven organizations that includes Capital Impact Partners, CDC Small Business Finance, and Momentus Securities. Through our impact investing program, SameSky Health received a $5 million venture debt bridge loan to support the growth of the company. We talked to Abner about how this investment is helping SameSky Health in its efforts to address a significant market challenge to help disinvested communities get guidance and navigate a complex health care system.
Q: What do you feel you have achieved the most since starting the company?
Abner: I’m very passionate about the mission of SameSky Health, to create cultural connections for a healthier, more equitable world. I feel fortunate to have built a company where people who are just as passionate as I am about our mission have joined the organization. We’ve built a team of incredibly talented people who are focused on creating a solution that enables equitable health care.
Health equity is at the center of everything SameSky Health does. We have established ourselves as a leading health equity company. We are focused on raising the bar in America for health equity and how we should treat the people we are trying to help navigate our complex health care system.
We have built a leading, scalable health equity technology platform, unlike no other, that enables health plans and other health care stakeholders to comply with new health equity-related requirements that they will have to comply with now and in the future.
Q: The need for funding means that you’ve achieved a certain amount of growth. What challenges/barriers have you faced in terms of attaining funding for SameSky Health?
Abner: One of the major challenges I have run into over the course of my career is trying to raise money as a founder of color. I am optimistic about the future, as I have seen great progress being made from investors in startups supporting new businesses founded by people of color, which has more than doubled since 2020.
Another challenge I have faced in the past is gaining support from investors to raise funds for a solution that addresses low-income, underserved communities, particularly those people who are enrolled in Medicaid. Up until recently, venture capitalists did not understand the Medicaid market or the extraordinary need for advancing health equity. I am very optimistic about the traction in investment and innovation in this space over the past two years to help address health disparities.
Q: Momentus Capital, however, is able to offer something that hopefully can make an impact with a lower risk. Any thoughts on that relationship so far?
Momentus Capital is essential for a company like SameSky Health. The company played a crucial role in helping SameSky Health secure bridge funding as we progress to raise our Series C funding, which is the next step. We are deeply grateful for their flexibility and support of SameSky Health.
Momentus Capital is essential for a company like SamSky Health. [They] played a crucial role in helping us secure bridge funding.
– Abner Mason, Founder & CEO SameSky Health
Q: Why did you choose Momentus Capital versus another investor? What was the difference maker for you?
Abner: It was clear to us that Momentus Capital values working with partners to impact change in the health care system and drive health equity. This aligns well with our values and mission. Their approach allowed us to easily structure a deal that was fair to everyone given our alignment around advancing health equity. Momentus Capital stands out from others for their flexibility in working with our team and their ability to quickly move toward a transaction to help us continue scaling and driving equity in health care.
Q: How do you think SameSky Health improves the lives of people in the community through health care, and how does proper investment into funding drive these positive aspects?
Abner: SameSky Health has built an innovative solution that combines technology and human touch to deliver a culturally tailored, personalized experience to members of health plans. If the health care industry continues to try to address challenges the same way they always have, we’ll never achieve better outcomes. Innovation and investment in health care IT innovations are so important. Investors need to support startups that are building solutions that will meet the needs of low-income, underserved communities. Investors need to be more proactive in seeking opportunities to work with companies such as SameSky Health.
Healthy communities are built by their residents. Small business owners, local real estate developers, and other local leaders are the engines of job creation and economic activity in communities across the country. When these leaders have the opportunity to succeed, their communities, their residents — and our country — thrive.
Unfortunately, leaders in communities all across the country are missing a key ingredient to success: access to the capital. For too long, many communities have been denied the types of capital and support they need to realize the dreams they have for themselves, their families, and their neighborhoods.
In 2019, Capital Impact Partners and CDC Small Business Finance began an incredible journey with an ambitious — some might say audacious – goal: to devise new, transformative ways to meet the capital needs in communities across the country. We asked ourselves a question: How does the financial sector — including mission-driven financing organizations in our sector — need to change to really support communities? What can we do differently to help our communities really thrive?
Like 2020, 2021 presented challenges for small business owners, often revealing historical and systemic disinvestment in communities of color. It also created opportunities for businesses to adapt and rebuild.
While communities and businesses are still dealing with the repercussions of the pandemic, we can work together to foster a positive outlook for the year ahead.
With our sister organization CDC Small Business Finance, our team has taken a look at what our community members, partners, and investors may experience in 2022.
Take a look at our predictions for this year and how trends and policies may affect you and others in the community development/small business space.
Over the past 10 years, Capital Impact Partners has invested more than $300 million to foster equitable and inclusive Detroit communities, and we are committed to achieving that vision with the city’s residents. To celebrate our 10th anniversary of working side-by-side with Detroiters, we look back at what worked and the work that remains in a video series with our staff and partners. Watch all the videos in our series here!
A decade ago, Detroit was on the verge of a landmark municipal bankruptcy. Emergency response times were among the slowest in the nation. Blight abounded in nearly every neighborhood. In the prior decade, Detroit had lost one-quarter of its population — more than 244,000 residents.
Amid the chaos, seeds of a resurgence were beginning to sprout in the city, and Capital Impact Partners entered the market in 2011. 2021 marks the 10th anniversary of Capital Impact creating a place-based presence in the city. It was a seminal moment in our organization’s history, resulting in key shifts to our strategy and how we thought about investing in communities. During our time working with Detroit residents, we learned that community transformation takes a holistic, integrated approach, a place-based strategy that allows investors to go deep in order to build communities.
In the last 10 years, we have worked to support Detroit’s revitalization: we have used our lending expertise to build density on main corridors and increase growth, and have targeted programs to build the capacity of community members to build neighborhood assets and opportunities for wealth building for long-term Detroit residents.
We followed up with some of the people who made our 10 years of investment in Detroit possible. What follows is an oral history of Capital Impact Partners’ journey in Detroit, in the words of our staff and partners.
*The interviews have been edited for clarity and length.
Interviewees include:
Scott Sporte, former Chief Lending Officer with Capital Impact Partners
Melinda Clemons, VP & Detroit Market Leader, Enterprise Community Partners, Inc.
Elizabeth Luther, Director of the Detroit Program, Capital Impact Partners
Aaron Seybert, Managing Director of the Social Investment Practice at The Kresge Foundation
Ian Wiesner, Director of Business Development at Capital Impact Partners
Edward Carrington, Detroit developer and graduate of Capital Impact Partners’ Equity Development Initiative
*The interviews have been edited for clarity and length.
The Beginning (2011-2013)
Developers like Joel Landy had a vision for a revitalized Detroit, one that benefitted all city residents.
Capital Impact Partners entered the Detroit market in 2011 at the invitation of the Kresge Foundation and the Living Cities Foundation, who were gathering partners to focus on Detroit’s redevelopment. The first project Capital Impact participated in was the Woodward Corridor Reinvestment Fund, a $30 million fund to finance real estate development in Downtown and Midtown. Investors in the fund included MetLife, Inc.; PNC Bank; Prudential; Calvert Foundation; Living Cities; and the Max M. & Marjorie S. Fisher Foundation.
Scott Sporte: The process that brought us to Detroit was a long and deliberate one. It began with a phone call from the Kresge Foundation inviting us to be a part of the Living Cities Integration Initiative, along with Midtown Detroit, the vanguard community development corporation in the North End, and a couple of other partners. The Integration Initiative sought to drive reinvestment along the Woodward Corridor and generate benefits for area residents. And we just began by touring the area and seeing what made the most sense and the ways that we could use our capital to help advance development in Detroit over time.
Ian Wiesner: Capital Impact Partners had done a little bit of lending in Detroit, prior to 2010, but we didn’t have a local presence. We were recruited to come to Detroit by our local partners, the Kresge Foundation and Living Cities Foundation. We were invited because of our track record as a national lender able to deliver capital to grow communities. In the beginning, we were really following a strategy that was laid out by local partners. We weren’t necessarily bringing our own perspective. And then over time, as we grew our own presence and developed our own perspective and strategy, our lending shifted to align more with Capital Impact’s goals and strategies.
Melinda Clemons: There was a real need for capital in Detroit, and one of those needs was for real estate capital. Even if a developer could cobble together financing to get a construction project completed, they didn’t have the resources for permanent loans, so they could hold their projects long-term. And it wasn’t unique. At the time, there were a lot of organizations that had that challenge.
Scott Sporte: We just began by touring the area and seeing what made the most sense and the ways that we could use our capital to help advance development in Detroit over time. We were a national organization, and at the time, we hadn’t really focused on individual places. So to move into a place and commit to a particular city, especially at a time when Detroit was having difficult times coming out of the last recession, took a lot of conversation and a lot of thinking about how we wanted to position ourselves.
Scott Sporte: To move into Detroit and then commit ourselves to an area that we could actually draw a line around and define on a map and say, we are going to work here, that required a different kind of thinking, a different engagement at the local level and a real understanding of what was going on in the neighborhoods that we were trying to serve.
Aaron Seybert: I’d known of Capital Impact for a long time as a national CDFI lender, a very sophisticated lending outfit. I got a lot more familiar with their adaptability by working closely with them in Detroit, and I saw the way that they were able to really be that linkage between traditional financial services and the community development space. They were able to accelerate capital in the market in a way that we at the Kresge Foundation really hoped would happen. But I think the biggest impression is the people that they have had in this Detroit office and the quality of individuals that have been committed to the work here.
Michael Rhodes: In Detroit, following the bankruptcy, JPMorgan Chase worked to create a model — a data-driven strategy based on months of on-the-ground conversations and planning — for tackling big economic challenges, believing that the private sector can be an agent for the public good. We saw collaboration between government, business, community, and nonprofit leaders integrating with our philanthropic and business expertise. Capital Impact Partners represented one of those key foundational relationships.
Building the Program: Impact & Vision (2014-2020)
The Auburn, one of Capital Impact Partners’ first deals in Detroit, provided vital housing and neighborhood vitality.
As Capital Impact got its feet wet in Detroit, it began to better understand community needs and what it would take to fulfill those needs through place-based investments. At an enterprise level, Capital Impact began developing a place-based strategy that targets capital and commitment across multiple sectors simultaneously in one geography.
With this strategy, Capital Impact aims to innovate how capital flows into communities to foster economic empowerment and community power holistically. During this period, Capital Impact completed its first major Detroit project, The Auburn, a mixed-use development in Detroit’s Midtown area, and partnered to launch a coalition of Community Development Financial Institutions in the city. It also partnered with JPMorgan Chase to launch the Detroit Neighborhoods Fund, a $30 million fund focused on developing multifamily residential properties, mixed-use real estate, and grocery stores in Detroit neighborhoods.
Scott Sporte: We started out as the lender in the Integration Initiative. About two years as a lender in the Integration Initiative, we became the sponsors and added Brad Frost, who was the key staff person working on the program. He helped lead our efforts on the ground to build a strategy around both lending and community engagement in Detroit…So we went from being sort of an outsider doing transactions and gradually moved into a place where we had become fully invested and fully present in the city.
Melinda Clemons: As community development organizations, we need to serve the communities in which we work because we have control over the process and wee can ensure that resources are properly delivered. Once we got knee-deep in the work, it was clear that there was so much more we needed to do. And commercial real estate was a fairly new market segment for Capital Impact, but because of the need, they really doubled down and they did more lending than they had anticipated in that field, which really helped spur economic growth in the city.
Ian Wiesner: The Capital Magnet Fund, which was a grant from the CDFI Fund, was really our first foray into affordable housing in Detroit. Prior to that, we really hadn’t done income-restricted, affordable housing. We were really doing more mixed-income, multi-family development. That was a really important tool because we knew that we needed to be focused on greater affordability. The Capital Magnet Fund helped us do that. To date, we have used it to create more than 850 units of housing around Wayne County, including more than 250 units of housing for families earning 50 percent of the Area Median Income or below.
Aaron Seybert: Capital Impact is really focused on serving communities — it is not only about buildings. It is about the people who are living there, who are the developers doing the work, who are their client base, and what sort of lasting imprint are they leaving on the city from a capacity perspective? Who are the people that they are empowering with their tools? And I think that that is quite emblematic of the evolution of Detroit and its revitalization over time. We started out by just saying, we have got to get something done. Anybody want to build a building in Detroit? Anybody want to rehab something? Anybody have any money to invest? And we are now to the point of being very intentional about what the long-term impact of that revitalization is, and who is at the table.
Ian Wiesner: Detroit is a place where about 35 percent of the population lives in poverty. So if we are not creating affordable development, then we are not serving the community. It is absolutely critical that we are making investments and supporting development that is reflective of the community here and that can serve the folks here. And if we are not addressing affordability and making sure that those developments are affordable, we are not doing that.
Michael Rhodes: Capital Impact established a Detroit Neighborhoods Fund as a financing vehicle to support the construction and rehab of multifamily housing and mixed-use projects throughout Detroit. The $30 million Fund was capitalized with $20 million of Chase debt and $10 million in Capital Impact subordinated debt. The Fund capital has been fully deployed and has provided construction and permanent financing for several projects across a number of Detroit neighborhoods. The Fund supported the development of 11 projects leveraging funds from other sources, with total project costs over $100 million.
Elizabeth Luther: We felt good about our role (helping to develop the Woodward Corridor) and the outcomes that were taking place in terms of quality construction projects, quality housing being developed, increased density, and supporting all of the other work taking place in Midtown. But we wanted to understand how longer-term residents, particularly renters living with lower incomes, were or were not benefiting from those interventions. So we took a deep dive into the data. One of our main findings was that residents living in unsubsidized affordable housing were the most at-risk for experiencing displacement. So we engaged in a set of recommendations, some of which we adopted as internal policies, to support longer-term residents, like stipulations such that if we were to look at financing for a project that was already occupied, we would ensure that residents would have the opportunity to return to the project post-construction.
Ian Wiesner: I think there are really two things needed to be a place-based lender. One is being in the community where you are working and knowing that community, knowing its needs. The second part of it is also making sure that you are adjusting your strategy, your products, and your credit guidelines to align with the needs of that community. Detroit was starved of investment for decades, but was able to be resilient despite that. So now, as investment is coming back into the city, it is really important that that investment is feeding and growing the resilient community that was already here and not just washing that out.
Expanding Our Approach to Creating Impact (2016-2020)
The Michigan Good Food Fund provides good food businesses across Michigan with capital and technical assistance to scale.
Since entering the Detroit market, Capital Impact learned a great deal about what it truly takes to foster opportunities and change for communities living with low incomes. It takes a holistic approach, partnerships, and programs paired with capital solutions to address deeper issues of poverty. In this period, we strengthened partnerships and created programs like Stay Midtown, an initiative that helped longtime Detroit residents remain in their homes in Midtown as the city’s recovery led to increased housing costs.
Elizabeth Luther: Capital Impact’s programmatic work has evolved hand-in-hand with our lending work both in Detroit and around the country. At that time, this kind of place-based focus that took advantage of knowledge-sharing across teams and capital tool development was very new for the organization. At the enterprise level, we have evolved our focus to look not just at a sector, but at a place, and to look at programmatic interventions that lead to capital access alongside the development of capital products and lending activities.
Elizabeth Luther: We developed a new, philanthropically subsidized program called Stay Midtown, which was a three-year, rental subsidy program. Stay Midtown was created to support residents earning between 30 and 80 percent of the Area Median Income who had lived in the district for at least two years. Ultimately, the program helped 150 households in Midtown stay in their units over the course of three years.
Ian Wiesner: The Michigan Good Food Fund is a great example of how we collaborate with partners. It is a collaboration between the core partners the Fair Food Network, Michigan State University Center for Regional Food Systems, the W. K. Kellogg Foundation, and Capital Impact Partners, and including other partners, such as Northern Initiatives and the Detroit Development Fund. It is really just a table where we all come together to figure out all the resources that we can individually bring to the table to collectively help increase access to affordable food for families living in poverty in Michigan. We all do different types of lending – small business, grocery – and technical assistance. It is a great example of how Community Development Financial Institutions like ourselves can collaborate to have a greater collective impact than we could individually. And it has really helped Capital Impact learn about the small business community in Michigan.
Immersing Ourselves in Detroit to Understand Challenges (2017-2020)
EDI participants gain mentorship and a network that helps them participate in the transformation of their communities.
By immersing ourselves in Detroit and engaging with local residents, Capital Impact began to understand the challenges ensuring development would benefit all Detroiters. Capital Impact created its EDI program, where emerging real estate developers will receive the tools they need to grow their businesses — including training, technical assistance, mentorship, networking, and potential pathways for financing. It has become a core focus of our work in the city.
Melinda Clemons: When I joined Capital Impact, there was an existing loan portfolio and pipeline. Upon a further look at our Detroit loans, it was clear that there wasn’t a large representation of developers of color, and those loans that were to developers of color were challenged. That was for a number of reasons: lack of resources, lack of knowledge, lack of know-how, and lack of projects on the part of the developers. I raised the alarm internally at Capital Impact, and all hands were on deck, which inevitably led to the creation of the EDI program. I think it really shed light on a problem that we were having in Detroit. It hadn’t been pointed out that there was such a lack of capital for developers of color. And it was one of the first programs that really did that, which was truly innovative at the time. And it also allowed other organizations to see this issue and participate as well.
Elizabeth Luther: The EDI program is focused on supporting emerging real estate developers through training, technical assistance, and capital solutions. It has really two goals, which are supporting neighborhood improvements in Detroit, and then wealth building for real estate developers. We have since replicated it in Washington, D.C., and are now looking to replicate it in at least two other markets around the country over the next one to two years. So it is really exciting to have incubated a program in Detroit that we are now scaling and developing more resources for nationally and shoring up at the enterprise level in order to be able to meet those same goals in other markets, hopefully with even bigger and better outcomes.
Ian Wiesner: Local residents, local leaders, local stakeholders understand what the community needs better than Capital Impact ever will. So it is really critical that we listen to those voices and those informed opinions. Because that is how we are going to be successful. If we ignore that, we are going to end up putting our resources in the wrong places, and that is not going to help the community. By listening to community voices, we are able to better understand where our capital is needed, and that is ultimately going to be what benefits the community most. It is also what is going to make our investments most successful.
Eddie Carrington: When I found out about the EDI program, immediately, I knew I wanted to apply and try to take advantage of this program that basically upskilled local developers to a point where hopefully we feel comfortable developing larger projects outside of the single-family projects that we usually take advantage of. And I came to understand that CDFIs are a little bit different than a typical bank because they are willing to make adjustments and accommodations. And with EDI, Capital Impact is providing solutions that can help us take better advantage of the redevelopment opportunities here in Detroit.
Clifford Brown: I think in addition to creating developers, we are creating people who are more knowledgeable within the real estate space. Almost more importantly, we have taken this population and we have explained to them how real estate development works, how capital works, how wealth works. What it has done is create an environment where, even if somebody goes through the program and decides, “this is not my passion. This is not for me,” they are able to have conversations with developers who are coming to their neighborhood and say, “this is what I want. This is what is acceptable. And this is what’s not.”
Elizabeth Luther: Community development is really about supporting real estate developers who come from the places where they are working and who know how to serve the residents in the areas where they are looking to do development work. Ultimately, the city will benefit from projects that meet the needs of all residents and align with a master vision for thoughtful growth in the city. Building out the kind of professional cohort of thoughtful community-focused real estate developers in the city who are incentivized to do good work here is another benefit. Long-term local ownership of assets in the city and local stewardship of assets in the city will lead to better neighborhood-level outcomes over the years.
Michael Rhodes: A focal point of our investment has been making sure that Detroit’s economic recovery encompassed all neighborhoods. The constant feedback we got from all of our partners had been “what about the neighborhoods?” In our earliest conversations with Mayor Mike Duggan, he shared that, as important as all the economic development activity in downtown and Midtown Detroit was, Detroit would not be whole if we didn’t bring back the neighborhoods. Taking what we heard, we knew that our supportive Detroit Neighborhoods Fund would be an ideal vehicle to help drive development in the neighborhoods. The Coe at West Village, a $4 million mixed-income, mixed-use development that opened in November 2017, is a case in point. That was the first new mixed-use construction project in a neighborhood in more than 30 years.
Melinda Clemons: I think (the EDI program) is going to have an amazing impact each year that it has a new cohort of developers. They not only have a personal asset now, which helps with their own personal economic development, but they also have the asset of knowledge, which they can then transfer to others. We are seeing the field grow bigger and bigger each year as new cohorts come out, which is really amazing and nice to see. I still get calls all the time about the program. Like, can you get me in, or can you talk to someone, or when is the next project coming along? It really has clout in the industry, which, to Capital Impact’s credit, is really a great thing that we can expand nationwide.
Opportunities & Challenges Moving Forward (2021+)
Building the future of Detroit hand-in-hand with city residents through capital solutions and programmatic support is how we create a promising future.
With 10 years of place-based investment in the city, Capital Impact is committed to a promising future for all Detroiters. Even though challenges continue, the resources, capacity, and partnerships Capital Impact has built in the first 10 years of its Detroit journey will form the foundation for success in the next decade and beyond. Wherever that road goes, Capital Impact knows community will be at its center.
Ian Wiesner: There is no shortage of challenges. Poverty is still prevalent. The city needs huge investments in infrastructure and schools and homes. I think most of all, we are trying to increasingly make sure that we are listening to the community, that we are not operating in a bubble, but working with community leaders who can help us identify where the gaps are, where the needs are.The challenge for Capital Impact is to really understand what tools we can bring and what is the most effective way for us to try and address these challenges.
Aaron Seybert: This sector of philanthropic-nonprofit development has a lot of legitimacy in delivering results in the city. We can use that position to really stay focused on delivering projects in development that serve existing residents really, really well. As development gets easier because valuations get higher, there is more money in the market.
None of us love doing the really hard things, but it is our job to do the hard things. The hard things from a decade ago are not so hard anymore. We could migrate into the space that is hard now, which is a lot of neighborhood-based development where scale is smaller. Poverty is more deeply entrenched. We have got a lot of other sorts of social issues that we can’t ignore. It would be easy to stay in the place where we are comfortable, or we can collectively push into that harder space.
Eddie Carrington: I think Detroit can learn a lesson from Chicago. It has a number of hubs that have the density that Detroit is striving for. And that is one thing the city of Detroit’s outer neighborhoods are missing. Density is going to assist with expediting the resources and amenities that the community is asking for because, if there are more people that are able to walk and bike to this amenity that we are putting in the community or to this development that is standing up, that will, in turn, attract the small businesses that the community is asking for.
Clifford Brown: In the city of Detroit, we often talk about rents increasing. And we look at it from a lens of why? And we don’t ever question why construction costs are going up, but more importantly, we do not ask the question about why are incomes not going up? To me, that is a much more relevant and much more pressing question.
Michael Rhodes: when we announced our commitment to Detroit, we were motivated not simply by a city we have been a part of for more than 85 years, but by the spirit and determination we saw in the people of Detroit. When we first began our work in Detroit, there was no shortage of challenges. Our initial strategy really focused on how we could help accelerate development in the city. Having pledged half of our initial $100 million dollars to two CDFIs — including Capital Impact — for community development and witnessing Detroit’s progress, I am optimistic about the future.
Scott Sporte: CDFIs play a very important role in the community and economic development space. They are usually the first organizations to bring capital to an area that has been experiencing poverty. They opened the door to bring private investors in to continue to grow the level of capital investment and project-based investment that is occurring in an area. A CDFI is thinking carefully about the equitable distribution of their capital and the ways that can benefit people who are most in need. Rather than just focusing on what is glitzy and glamorous and eye-popping, it is really doing the things that you need to do day after day after day to really understand and recognize the needs of these communities.
In August, our President and CEO Ellis Carr participated in “Catalyze,” a podcast of the Greater Washington Partnership. “Catalyze” brings together leaders from Baltimore to Richmond who are working to make this the highest growth region in the country. It features leaders from across the Capital Region in conversation about how business is taking a stand to catalyze solutions to close the wealth gap.
Ellis sat down with the Greater Washington Partnership’s CEO J.B. Holston and Peter Scher, Vice Chairman at JPMorgan Chase & Co., for a conversation about how Community Development Financial Institutions (CDFIs) and traditional financial institutions can take learnings from work in other regions and foster growth for communities living with low incomes in the Washington Metro area.
Peter Scher: We have to look at economic growth as a region, we have to collaborate, we have to understand that there are projects that may sit in Virginia that will have enormous benefits for DC and Maryland. This does not have to be a zero sum game. If one jurisdiction can win, we can all win.
Ellis Carr: To me, the most important, the single most critical component is a common vision. The greater DC area has an enormous amount of both CDFIs and MDIs that are really focused on communities living with low incomes across the region.
JB Holston: Welcome to Capital Region Catalyze, a monthly podcast from the Greater Washington Partnership featuring thought leaders who are shaping the future of our region. The podcast focuses on growth from Baltimore to Richmond. I’m J.B. Holston, your host and the CEO of the Partnership. Today, we’re going to talk about financial institutions that are critical to sustainable and equitable growth: CDFIs, and MDIs.
Today, I’m pleased to be joined by Ellis Carr and Peter Scher. I’d love to have each of you introduce yourselves and share a bit about your professional backgrounds and the path that led you here today.
Ellis Carr: I’m Ellis Carr, President and CEO, Capital Impact Partners and CDC Small Business Finance. We provide holistic community and economic development across the country in communities living with low incomes. I’m also an advisor to the Greater Washington Partnership’s Inclusive Growth Advisory Committee.
So, I actually have been at Capital impact for just about nine years. Prior to coming to Capital Impact, I spent a little over a decade and a half in for-profit financial services. And I came to Capital Impact because I wanted to use my time and talents to really help and support other people. And so, a CDFI was a great destination for that. CDFIs are mission-driven financial intermediaries who work in support of the community, really to create economic opportunity. We provide things like financing and technical assistance for affordable housing, community facilities, small businesses, and alike.
JB: Thanks, Ellis. Peter.
Peter Scher: My name is Peter Scher. I’m the Vice Chairman of JPMorgan Chase. I oversee our firm’s corporate responsibility efforts as well as Morgan Health, a new initiative focused on health care. I also chair our business efforts in the Mid-Atlantic region. And most importantly, I’m the chair of the board of the Greater Washington Partnership. I’ve been with JPMorgan about 13 years; most of my career has been in the law and politics, and spent 10 years in government, the federal government here in Washington, D.C. I became the head of corporate responsibility 10 years ago. I have had the privilege of working with people like Ellis, around the country and around the world on issues around economic development and economic growth and addressing some of the big social divides that are facing the country. And one of the things I’m most thrilled about is the opportunity to bring some of the lessons we’ve learned to this D.C. region.
JB: Thanks so much. It’s great to have you both with us today. Peter, you mentioned Detroit, and I gather that’s where you two originally met? Can you share a bit more about your work together there.
Peter: So back in summer, fall of 2013, JPMorgan decided to take a much closer look to see if there was something more we could do to help the revitalization of the city. Our firm had been part of Detroit for 80 years and has watched the ups and downs. And this period was definitely a down — the city was in bankruptcy, gone from 2 million residents to less than 700,000. And what we saw in the fall of 2013, was a new mayor who had just been elected in a write-in campaign on a platform of getting things moving and fixing things and working with a Republican governor and working with the business community and working with community groups to really make a difference. And it’s something that inspired us. And one of the things that we saw, as we evaluated the type of investments we were going to make, was how critical the role of CDFIs were in doing that. And in fact, the initial investment was $100 million, half of that went to two CDFIs — Capital Impact and Invest Detroit — because we felt that was the best way to leverage our resources and also reach the community in the most impactful way. And that’s when Ellis and I started to get to know each other.
JB: And Ellis, was Detroit the first place that Capital Impact Partners was working or was this one of many places?
Ellis: Prior to coming into Detroit, which was about 10 years ago, I think most would know Capital Impact as a national sector-based lender, so really focusing on education and health care, food and housing. And we were invited into Detroit about 10 years ago because we had a number of learnings across the country and we had a proven track record around being able to deliver capital at scale. So, Detroit was actually a first for us into a place-based initiative. And it actually has transformed the way that we do work today. You know, we were invited in by a bunch of local partners; we began to do kind of sporadic deals there. And over time, we really became part of the fabric of Detroit.
Over that 10-year period, we’ve invested about $270 million in Detroit through the efforts of Peter and JPMorgan Chase. It was really critical for us to get a lot of projects off the ground, because, at the time, when you thought about or considered the acquisition costs and you coupled in the rehab cost, they were actually more than the completed value of the project. So you needed time to allow the market to recover. So you had to take a longer term view. And so we needed to have patient capital to really be able to invest in the fabric of Detroit. And so, through the investments that JPMorgan Chase provided with us, we were able to leverage that capital six fold. So it really allowed us to kind of get almost $60 million. Now it’s out of capital out on the street at a time where a number of other large financial institutions actually step back.
JB: Wow, $60 million. That’s impressive. I’d love to know more about the type of business you lent to with that investment.
Ellis: For us, primarily in Detroit, I think the work started really in kind of mixed-use commercial real estate. Detroit has a great housing stock and a lot of land given the population decline. And so, you really had a lot of units that were in disrepair and or vacant that really needed to be revitalized. So, we would work with a lot of local organizations. And we would lend to both real estate developers and other entrepreneurs who were rehabbing these properties, and then bringing in local, small businesses to kind of occupy the retail space at the bottom.
We’re providing a range of affordability within the apartment units. And we also began to get into, for a variety of other things, recognizing that there was a dearth of incapacity across the ecosystem. We had to partner with other organizations to really provide capital to other community-based organizations as well, and also provide seed capital for development entities because there was a dearth of development entities that were really focused on the work that we were doing.
JB: Peter, you co-founded the Partnership, and you’ve been a pioneer on inclusive growth. But what are some of the similarities and some of the differences that we’re looking at in this region compared to the experience in Detroit?
Peter: Well, I think some of the similarities are on the challenges side. Ellis talked about affordable housing. We’ve talked about lack of access to capital, particularly for minority small business owners, skills training, you know, many of the issues that the Greater Washington Partnership is focused on. There are very few cities or regions, literally in the world, you can walk into that don’t have the same set of challenges. I think that the lesson for us — Detroit was a seminal experience for Capital Impact Partners. It was really a seminal experience for JPMorgan and how we approached economic development. And when Ellis mentioned becoming part of the fabric of the community — having that fabric in a cohesive, collaborative, coordinated way — that was the thing, the secret sauce: if you don’t have, it is incredibly difficult to make a difference.
And one of the interesting things when we first got to Detroit, whether I was meeting with the mayor or some of the, you know, city business leaders, everyone had their view. But then everyone said, ‘Go talk to Dave Blaskowitz,’ who was the head of Invest Detroit, one of the local CDFIs there. And the fact that they knew we have a lot of managers here, we got a quarterback who’s on the field, and that kind of collaboration, it was essential to the success and the revitalization of the city. And it gave us an opportunity to really help scale some of the programs and ideas and projects on the ground.
And that was really the premise when Russ Ramsey and Ted Leonsis and I started talking. One of the challenges we have faced historically in this region is three separate jurisdictions going their own way. And we have to look at economic growth as a region, we have to collaborate, we have to understand that there are projects that may sit in Virginia that will have enormous benefits for D.C. and Maryland; this does not have to be a zero sum game. If one jurisdiction can win, we can all win. And so that’s been the key. And frankly, I think it’s been one of the things that’s been so inspiring about the work in this region now, is we see so many companies, education institutions, CDFIs and other organizations, MDIs like Harbor Bank in Baltimore, really coming together and saying, ‘let’s develop a strategy for this region,’ which is really what Detroit did.
JB: Peter, you mentioned that this was kind of the starting point for a lot of JPMorgan Chase initiatives in the category. Could you talk a little bit about how that came to be, what its focus is, and then how it works with folks like Ellis’ Capital Impact Partners.
Peter: So, when we initially went into Detroit with our $100 million investment, to be perfectly honest, I wasn’t thinking a lot about small business. But we, you know, we made some investments in some local incubators. And you know, Ellis was talking about some of the work in the city to rebuild housing stock. Borrowers who lack access to traditional banking solutions wanted to be part of that, but couldn’t. When we first started, I would do quarterly reviews with the mayor. We have all of these small business owners who want to be part of the revitalization, but they can’t get the capital from normal banking channels.
And so we went off and basically said, Well, let’s think about how we can do this. It was hard at this time to do it, it’s still hard in many cases to do this through some of the regulatory constraints that banks have. And so, we said, let’s create a new mechanism to do this. And it started as a $6 million investment with the Detroit Development Fund, which is another CDFI. And in the first two years, we did about 50 loans that had two defaults, which is a pretty good track record. Ultimately, that scale to $25 million in the city, we’ve now made it a national program and expanded it with Capital Impact to D.C., to Chicago, to San Francisco, South Bronx. And just last year, we announced we were going to make it a national program. And it just shows the power: if you can get capital to the people who want to be part of the economy, and if you can get the training and the connections, it could just, it could have an exponential impact on the development of a community.
JB: Ellis, I was struck that Forbes is characterizing the alliance between the organization and CDC Small Business Finance — now one organization — as the most transformative merger you never heard about. So, could you talk a little bit about what that merger was about, what it means to bring these institutions together.
Ellis: As we worked in Detroit, I think we realize the power that we could bring to a place, by bringing the totality of the work that we’ve done across the country, and focus that and align that with a common strategy. When we got to Detroit, a lot of the work that we did was in the housing space, and broadly defined as economic development. Small businesses weren’t something that we were focused on. But as we began to kind of refine our approach, we began to hear more and more about how Detroiters that grew up in the city wanted to be part of the revitalization. But they couldn’t. And one of the ways that was important was that folks wanted organizations like Capital Impact to really invest in them.
And so we began to think about how we could also both invest in the infrastructure in terms of buildings, but also people. That really launched the EDI program, which is really focused on providing technical assistance, training and mentoring, and capital for real estate developers so that folks who were from Detroit, and who live in Detroit could actually begin to participate in the resurgence of that area, and actually drive it themselves. And so that really led us to kind of beginning to think about how we could create opportunity beyond the building and the services that come out of the building.
And so, that led us to CDC Small Business Finance. We began to have conversations with them, and we had the opportunity to really kind of dream about a vision of being able to create not only community development, but community and economic development solutions at scale, centered in place. CDC is the largest mission-driven SBA lender in the country. And thinking about a way to kind of provide the scale and capacity that they provide, coupled with technology, really was something of interest to us, not only for ourselves around how we could drive impact and scale in communities, but how we could also empower others who we’re standing side-by-side with within the community to also access and harness that technology capacity as well.
JB: Let’s talk a little bit about some of the small businesses that are directly benefited by this. And Peter, what motivates you about some of the small businesses? What are some of the stories about some of the small businesses that you see affected by this work?
Peter: What motivates me from a macro level is, if we’re going to solve the economic challenges in our region, small businesses have to play a big part in that, and they’re close to the community. They’re part of the community; they create jobs and employment and opportunity, and this is about opportunity. And so, it’s a huge part of the sector and we actually track how much small business growth drives economic growth in the community. But from a personal perspective, you see the passion and the commitment and the dedication that a lot of people, who haven’t had an opportunity, want to have. And I’ll tell you one example: just here in our region, Pinke Reddick, who is a caterer who I met two or three years ago. And at the time, she had four people working for her, and she now has 26 employees. She got a contract during the inauguration from the D.C. government to provide 10,000 meals. And she also just got a contract from the Department of Defense.
Pinke Reddick: My name is Pinke Reddick, or Chef Pinke. My business is Pinke’s Eats LLC. We’re a food experience company. Our slogan is “Eats that Excites the Eyes.” I grew up spending summers with my grandmother, my granddad in Georgia. We used to go into the garden, pick food up out of the garden, six o’clock in the morning. Me and my grandmother would make breakfast, lunch, and dinner. And I did that for, like, three or four summers. That birthed cooking to me; I was like 12,13, and 14. I would say food is love.
When people are happy, they eat; when people are sad, they eat. Food is love. When somebody makes the food, they’re happy. And you just enjoy it because you can feel the love through the food. And right now, I live in Ward 7 in D.C., and we don’t have many food options at all. I’m 35. I went to school there, I graduated there and bought my first house there, and they’re still McDonald’s, Wendy’s, and the carryout. They are trying to bring some options to Ward 7, but 35 years… That’s what we had over there. And then I worked for a large food chain managing for 10 years. And it was exciting. But I was working 70 hours a week and pay for 50. And I just felt like I could do it for myself.
So I started 2016. And then March of last year, like everybody else, we just completely shut down, nothing going on. So the Coalition for Nonprofit Housing and Economic Development (CNHED) is an organization that’s an anchor partnership, and they’re funded by JPMorgan Chase. So the president there called me a month in, and was like, ‘how are you panning out?’ and I was like, we have absolutely no work, nothing going on. And we started producing meals for local hospitals and nurses. And they basically funded meals for the nurses and emergency staff for about two months to just get the ball rolling, get us back in the door, bring some of my team members back in. And then, when that started, and World Central Kitchen picked up on what we were doing, they reached out and we were able to partner with them as well. And now, we have 26 employees.
Going from, oh, I may not be in business ever again to JPMorgan funding some food opportunities and allowing us to show our capacity to partner with World Central Kitchen, then swinging back around to D.C. government and Department of Defense, being able to secure some contracts. And we’ve survived, we survived. Things are opening back up; we’re booked for the month. We have a food truck now. So we’re just really growing in all areas. I’m most proud of having a profitable, sustainable business. But nobody in my family has ever been bold enough to do that. And everybody was scared. And my mom looks at me every day and she says, I can’t believe you, girl, like, I would have never done that. But just being brave enough to start my own business and be profitable, and hire other people and give them opportunities. I think I’m just so proud of that.
Peter: In this region, there is just an ocean of opportunity; in a sense, direct spend to small businesses that want to grow and want to create employment, and just think of what that can do for this region. As you said, our goal is to make this the most growing region in the country. We think that will attract more investment. If we’re going to do that, small business — particularly small business in lower-income parts of our region — are going to have to be a really critical part of it, and it’s going to be capital, and it’s going to be connections to big contracts, and it’s going to be technical assistance, all of these things. And if we can get the kind of collaboration that we’re seeing through the work of the Inclusive Growth Council, I think we can achieve enormous progress here.
JB: Ellis you’ve been on the front lines of this work for a decade. What’s missing from our region in particular? What are the gaps that we need to fill to deliver on our promise of being the best-in-class in the country in this area?
Ellis: To me, the most important, the single most critical component is a common vision. Because all of the things that we mentioned and we know about this region, and all the assets that it has within it, can’t be fully utilized if we don’t have that broader vision that we’re all buying into. There’s a great representation of CDFIs in this region that are clamoring for some alignment around a common vision. D.C., actually in the greater D.C. area, has an enormous amount of both CDFIs and MDIs that are really focused on communities living with low incomes across the region.
Peter: And I’m glad Ellis brought up MDIs because you know, there are a number of MDIs in the region, throughout the region. You know, one of the important things that we had to recognize is, as a large global bank, we are not going to be as close to the people in these communities. And so, rather than just trying to knock against that wall, we have to reach all the people. And if the best way to do that is through a Capital Impact Partners, or WACIF, or Harbor Bank, that’s what we have to do. And I think this is where the Partnership can make an enormous difference. We need to all sit at the same table.
I mean, if we can increase the pie, there’s plenty to go around. Let’s create the money, let’s get the resources, let’s get the technical assistance. So I think the opportunity right now for all of us, all the big financial institutions, and the CDFIs and the MDIs is to really come together around a common strategy. I think that’s what we should be doing. And I think, so far as you know, we’ve gotten great response from the other financial institutions, and everyone’s checking their parochial interests and the egos at the door. And look, the reality is — Ellis talked about this — it takes a lot of forms of capital to grow these communities. It’s going to take philanthropy; it’s going to take free capital; it’s going to take low-cost, patient capital. And in a lot of these projects, there are opportunities for market capital, and we are all used to working with each other, and different institutions can bring different forms of capital. This is why the table that the Greater Washington Partnership has created is so critical to the success of all this.
JB: That’s great. Thanks, Peter. I, just looking back at the last year, what did you learn about yourself as a leader over the last 12 months, 15 months now since the pandemic started?
Ellis: So I’ve learned several things coming in, as I reflect back on the pandemic. And I think, the first is really around starting with empathy and open mindedness, focusing on mental health and making sure folks are in the right mental space is really important. I think everyone would agree that having a different understanding and respect for flexibility, and being able to be adaptable.
And I think for me, the point that I think I’m constantly thinking about is disruption, thinking new and differently about how we can bring new approaches to the challenges that we’re seeing is going to be really important. So I think, what has really helped me to do is just to really be bold, and really think differently about how we’ve done it in the past, or really kind of reimagine what could be in the future.
Peter: I certainly haven’t fully processed what the last year and a half has meant and I think we’re, you know, we’re just every day just trying to get through the day and survive. I think the two things that I reflect on, one is the strength and resilience of people. I mean, if someone had said, we’re all going to go basically operate our businesses and our work from home for a year and a half, I don’t know that anyone would have said that that’s possible. And the fact that we were able to do that, I think, is a real testament to people’s strength and resilience. At the same time, we’ve seen how vulnerable people are and how fragile humanity is and how fragile life is and forced us all to reflect on how we want to live our lives, and I just can’t imagine. And so, I do think empathy is a great word, and I think we’re going to be processing a lot of this for a long time. And I think we’re still going to face challenges as people now come back to the office and create whatever the new normal is. We have to really be attuned to people’s complete needs, and I think we still have a lot to learn and process.
JB: Ellis, let me return quickly to the challenges facing our region. Is there anything you want to add?
Ellis: Again, when I think about the region, we all know the region is one of the strongest in the country. But while the region is incredibly strong and has an abundance of assets, those assets are not available to everyone. And as we talk about what we’ve learned in Detroit – how we can potentially adapt here – I think there are a lot of lessons that we can carry here. The greater D.C. region is a very different market than Detroit, but I think there is a strong foundation from which we can build off of.
JB: Those statistics are just phenomenal. I’d love to move to the “Ask the Other Guy Anything” part of our podcast, and I’m also curious to know what you’ve learned from each other after working together for so many years. Ellis, I’ll start with you.
Ellis: What have I learned from Peter? That obviously Peter’s day consists of more than 24 hours by seeing him show up on everything. I think the other part really is around the power of relationship and partnership. In particular, I’ve seen Peter work seamlessly throughout Detroit. We’ve bumped into each other in Baltimore, D.C. and the like. And I think that when it relates for us to be successful in executing business anywhere, relationships are key to that. And I see how Peter and JPMorgan Chase are using the power of relationship so that they can provide the resources for those communities to really thrive. And then, the question I would ask Peter would be, what advice would you give me as a CDFI leader?
Peter: Oh, that’s great. Actually, the advice I would give you relates to the question I was going to ask you, which is: if you’ve got all the major banks and financial institutions that were investing in CDFIs — around the country, in the regionx — together in a room, and you were King for the day and say, “This is exactly what I need you to do,” what would you tell them? Because part of what I was going to say my advice is, tell us what we need to do.
I think we’re at a point that we don’t have time for the pleasantries and the formalities and the warm up; we need a plan. So my advice is, don’t be shy about saying to these large partners, “this is what I need JPMorgan to do. This is where I need Goldman, this is where I need CapOne.” But let’s get these guys lined up. This is the plan. And this is the role I need you to play in the plan. And I think as we saw with what you guys did in Detroit, be the quarterback, because I think we’re all looking for that quarterback. And I don’t think you should hesitate to call the plays. Since we’re led by the president of the Washington Football Team, I guess it’s okay to use a football analogy. So my advice would be, call the plays.
JB: Now, what are the plays?
Ellis: I think for me, one of the things that our organization struggles with is being steeped in the community, understanding the community’s needs, and understanding what products and services need to be brought to communities, but not having the right type of resources at enough scale to be able to prove the model. Using Detroit as an example, the funding that JPMorgan Chase provided to Capital Impact that allowed us to create the Detroit Neighborhoods Fund was transformative at that point, because nothing was getting done. So, we prove the model. And what happened, resources rushed into Detroit. We need the same thing here.
And when you think about the after effects of a pandemic, we have to think very differently. So we are thinking about a technology-enabled way of reaching more entrepreneurs of color that don’t use traditional underwriting. And with an organization that is growing, but still needs additional capacity, we need to make some bets. And we need partners to make bets with us. So we can prove the model and create opportunities for others.
Peter: One of the interesting things now with the banks is when we talk, we’ve been thinking a lot about this whole underwriting question, because there are a lot of loans we can’t provide. But we’ve done the underwriting, and how do we create a more vibrant referral network, so we can hand you the underwriting file. You may be in a position to make a loan we couldn’t make. And so, getting a number of the banks together with you and looking at how do we create a technology-enabled referral network? So, from our perspective, when we have to say no to someone, I’d rather be able to say no, I can’t do this, but let me introduce you to my partners at Capital Impact, or my partners at WACIF, or my partners at Harbor Bank, and I’m going to hand them the file, so they don’t have to go do all the legwork to recreate that. And they may be in a position to do that. So I think there’s an enormous opportunity in that space.
Ellis: Absolutely. Completely agree.
JB: Hey, before we go, just Peter, one quick question. You didn’t have a chance to answer, but what have you learned from Ellis?
Peter: I will tell you. Ellis has been a real inspiration, seeing what his career was before he decided to leave big finance. You know, a lot of people don’t get off that track; they stay and they work their way up that ladder. And your decision to really take a very different path than a lot of people in finance take is a tremendous inspiration. And so, I say from a personal standpoint, that’s one of the things I have always just admired so deeply about Ellis.
The other thing that, you know, we’ve touched on is really the proximity of the community. I think the biggest danger in all these conversations and exercises, we can sit in these nice rooms and conference rooms, and I can sit in New York on the 48th floor of some high rise on Wall Street and have these great theories about how to help communities. But it doesn’t mean a thing if you’re not actually talking to the community. And I think what Ellis and his colleagues and so many of the other CDFIs, they stay so proximate, so close to the communities in ways that we can’t, and I think that’s one of the many secret sauces of being able to reach these communities.
JB: Gentlemen, thanks so much for the conversation. It was terrific. Peter, thanks for joining us.
Peter: JB. Great to be with you and Ellis, thank you for your efforts.
JB: Ellis thank you as well.
Ellis: Thanks so much, JB, and great to see you again, Peter.
JB: Thank you for listening to Capital Region Catalyze. Next episode, I’ll be joined by Robbie Moser, CEO of Clark Construction and a board member of the Partnership. In the meantime, check out our interview series called “Fresh Take,” where we talk one-on-one with thought leaders from across the region. For more information on what we do, follow us on Twitter and Instagram, or visit GreaterWashingtonPartnership.com. Thanks for joining us.
On behalf of the entire team at Capital Impact Partners and CDC Small Business Finance, I want to express my deepest sorrow at the passing of Chuck Snyder.
To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behavior or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.
Functional
Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
Preferences
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
Statistics
The technical storage or access that is used exclusively for statistical purposes.The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
Marketing
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
