SJF Ventures. CFED Business Roundtable. September 11, Anne Claire Broughton. Durham, NC New York, NY

Transcription

1 SJF Ventures CFED Business Roundtable September 11, 2008 Anne Claire Broughton Durham, NC New York, NY >

2 SJF: History of Innovation SJF Ventures (formerly Sustainable Jobs Fund) $45 MM capital under management Founded 1999; Durham, NC & NYC offices Investing in companies that have a positive impact on the world 20 portfolio companies SJF Advisory Services Nonprofit firm, founded 2001 Entrepreneurial assistance In-depth workforce & cleantech assistance Showcasing innovators Building the field SJF Ventures

3 SJF VENTURES: INVESTMENT STRATEGY Industry Focus: Clean Technologies, Tech-Enhanced Services, and Premium and Natural Consumer Products Investment Stage: Growth stage companies with revenues of $1MM to $20MM & at growth inflection point; traditional investor: hands-on for 5 years, then hope to exit with strong returns Investment Size: $1MM to $2MM from SJF in financing rounds of $500K to $10MM Strategy: Targeting companies whose cleantech and socially responsible innovations are providing a competitive advantage in large, high growth markets Geography: Invest nationwide with syndicate partners, lead transactions with firms headquartered in Eastern U.S SJF Ventures

4 SJF ADVISORY SERVICES Providing entrepreneurial assistance to high-growth companies in distressed or underserved areas, from one-on-one assistance to Getting Ready for Equity TM training events Showcasing innovative cleantech and other companies via events and other publicity to encourage the adoption of excellent cleantech and workforce practices widely in the economy Providing in-depth workforce and cleantech assistance to SJF Ventures portfolio companies to show that excellent workforce and cleantech strategies go hand-in-hand with strong financial results Building the field of sociallyresponsible venture capital via research reports, presentations, and participation in industry initiatives SJF Ventures

5 SJF Advisory Services Board of Directors Elizabeth Butler, Community Economic Development Consultant Majora Carter, Founder, Sustainable South Bronx and President and CEO of Majora Carter Group Catherine Clark, Adjunct Asst. Professor and Director, Research Initiative on Social Entrepreneurship, Columbia Business School Deborah Gallagher, Assistant Professor, Duke University's Nicholas School of the Environment Van Jones, Founder and President, Green for All Franklin Madison, Technology Program Developer, Industrial and Technology Assistance Corporation (ITAC) David McGrady, Community Development Financial Institution (CDFI) Consultant Henry McKoy, Founder and CEO, Fourth Sector Bancorp Gregory Ratliff, Senior Program Officer, Bill & Melinda Gates Foundation Morgan Simon, Co-Founder and Executive Director of the Responsible Endowments Coalition SJF Ventures

6 SJF ADVISORY SERVICES: CURRENT INITIATIVE PARTNERS Bank of America: Getting Ready for Equity trainings in NYC, Miami, and Chicago in advance of Inner City Capital Connection events Economic Development Administration: Assisting businesses in LMI areas of the Northeast Mary Reynolds Babcock Foundation: Assisting businesses in LMI areas of the Southeast Appalachian Regional Commission: Assisting companies and providing Getting Ready for Equity trainings in Appalachia Deutsche Bank and Citigroup Foundation: Cleantech Innovators Initiative, assisting and showcasing companies whose growth is driven by environmental innovation F.B. Heron Foundation: Assisting companies, update of Beyond Paycheck to Paycheck report, Getting Ready for Equity SJF Ventures

7 ENTREPRENEURIAL ASSISTANCE Targeting LMI and underserved areas in the Northeast, Southeast and Appalachia In 2007, SJF assisted 221 companies, 57 in-depth (several months engagement, site visits, coaching, showcasing at SJF events) Providing one-on-one technical assistance, including business plan feedback, financing strategy and referrals, strategic partner referrals, coaching, and workforce development assistance Getting Ready for Equity TM trainings: in 2008, one in NYC for ICIC s Inner City Capital Connections event; two for ARC in Appalachia for cleantech companies; one in Orlando for B of A SJF Ventures

8 SHOWCASING INNOVATORS Cleantech Companies in Mainstream Markets: Fourth Annual CEO Panel on Innovative Strategies held June 11, 2008 at Deutsche Bank on Wall Street 10 CEOs describe the innovative green strategies that have driven their companies growth by reducing costs, improving quality and delivering unique new services to customers; featured companies have raised $130 MM+ Winning Workforces: A CEO Panel on Engaging All Employees to Achieve Success held April 25, 2007 in Atlanta in partnership with Winning Workplaces 6 CEOs described the workforce strategies that help their companies thrive while creating great places to work SJF Ventures

9 BUILDING THE FIELD OF SOCIALLY RESPONSIBLE VENTURE CAPITAL Beyond Paycheck-to-Paycheck published by SJF in 2004, documented asset-building tools for entry-level employees in venture-backed co s Industry Collaborations: New Horizons in Workforce Development: Adding Value to Portfolio Companies by Meeting Human Capital Needs, published by CDVCA in 2003 Measuring Impacts Toolkit published by CDVCA in 2005 Technical assistance to other funds in formation, students and professionals entering the field Engagement on panels, boards, steering committees, venture fair selection committees, venture capital competitions SJF Ventures

10 SJF I & II PORTFOLIO COMPANIES: 2,975 JOBS CREATED AND RETAINED SJF I&II Job Retention and Creation Jobs Created Jobs Retained SJF Ventures

11 BEYOND PAYCHECK-TO-PAYCHECK INITIATIVE, (initial name: Exits and Employees) Project Challenges How can mission-driven venture capital funds share benefits with employees of portfolio companies being sold? Do jobs actually cease in target geographies at CDVC fund exit? Identify and implement wealth-building tools and share best practices widely Methodology Conducted in-depth survey of 19 funds (16 CDVC funds and 3 more traditional equity investors) Created a guide for other funds of broad-based equity compensation pros and cons, tax implications, impacts on non-management employees (recently updated in light of newer stock option regulations see handout) Produced report and case studies Implemented broad-based stock options at 9 SJF portfolio companies SJF Ventures

12 BEYOND PAYCHECK-TO-PAYCHECK TOOLS RESEARCHED Broad-Based Stock Options Incentive Stock Options, Non-Qualified Stock Options, Phantom Stock, Restricted Stock Awards Individual Development Accounts (IDAs) Matched savings accounts for first time home ownership, college education, or small business start-up Often offered via a partner nonprofit; includes financial literacy training Employee Stock Ownership Plans (ESOPs) Defined contribution plan in which assets are invested in employer stock and vest gradually; could be used as fund exit ( ESOP LBOs ) Other tools 401(k) plans; other retirement plans Home ownership assistance Employee credit unions Broad-based profit sharing plans SJF Ventures

13 ASSET BUILDING TOOLS USED BY THE 20 FUNDS SURVEYED IN BEYOND PAYCHECK-TO- PAYCHECK 90% 80% 86% 86% 81% 70% 60% 50% 43% 40% 33% 30% 20% 10% 19% 14% 10% 5% 0% IDAs Home Emp. Broad- Profit 401(k) ESOPs Financial Other Owner Credit Based Sharing Literacy Assist. Unions Options SJF Ventures

14 RESULTS TO DATE OF BEYOND PAYCHECK-TO-PAYCHECK REPORT SJF has helped implement broad-based stock options at nine portfolio companies with more in development. We exited or partially exited two of these via sale to a larger private equity fund in one case options gained in value but were not yet liquid and in the other some employees received significant cash. SJF has identified IDA programs accessible to several portfolio companies and plans to do more SJF has assisted several portfolio companies with implementing retirement plans such as 401(k)s SJF has helped several non-portfolio companies investigate founder exit via sale to employees using employee stock ownership plans (ESOPs) SJF is assisting one portfolio companies in investigating the feasibility of implementing a broad-based profit sharing plan Adoption of broad-based stock options, IDAs, other asset sharing strategies by other CDVC funds SJF Ventures

15 SJF PORTFOLIO EXAMPLE Location: Business Description: Plattsburgh, NY Home Bistro produces and markets a wide variety of high-quality, frozen prepared meals which are sold directly to customers via catalog and website SJF Investment: $1.08MM, beginning August 2003 Jobs Creation: 14 jobs at investment, 86 jobs today (78% entry-level) Highlights: $1MM sales in 2002, $14MM 2007 Series B closed 10/05 at increased valuation, new investor, $600K mark-up for SJF Located in a NY State Empire Zone Entry-level job creation with good career paths Broad-based stock option & healthcare plans SJF Ventures

16 SJF PORTFOLIO EXAMPLE Locations: Kennesaw, GA HQ; Providence RI Business Description: Ryla provides data collection and follow on sales call services for the commercial credit and financial services industries. SJF Investment: SJF invested several rounds beginning in 2002, partial exit 2007 Workforce Innovation: Highlights: Intention focus on comprehensive employee training and engagement; strong retention rates; focus on soft skills $18MM+ revenue SJF helped put in place broad-based stock options to nonmanagement and some restricted stock awards to lower management in Options increased in value at SJF partial exit in 2007 and some employees exercised options and cashed in stock. 20 jobs at SJF investment, 377 current jobs with strong benefits, broad-based stock-option plan Minority owned, recipient of many awards, WSJ coverage SJF Ventures

17 SJF PORTFOLIO EXAMPLE Locations: Business Description: White River Junction, VT HQ; Offices in OR, NY, MA, CO, MD & Canada grosolar is a national integrator, installer, and distributor of solar photovoltaic and hot water systems. SJF Investment: SJF led $2.25MM A round with Calvert, Allco Financial in Cleantech Innovation: Highlights: National brand, install and distribute multiple solar technologies, building national dealer network with marketing, supply chain logistics, training and technology advantages $50MM+ revenue, one of largest US solar integrators Closed most recent acquisition, Chesapeake Solar, leading solar company based in Mid-Atlantic, in July 2008 grosolar signed long term $175MM solar module supply agreement with Evergreen, providing a strategic advantage 33 jobs at inception, 59 current jobs with strong benefits, implementing broad-based stock-option plan SJF Ventures

18 OTHERCASE STUDIES SJF: DDF Stock options that included some non-management as well as management. Options increased in value but did not become liquid at SJF exit in 2004 via sale to a larger private equity fund; company still growing. CEI: CV Finer Foods (World Harbor) CEI exited in 2000; some non-management employees had ownership shares. TRF: Alpine Medical TRF exited in % equity distributed to non-management ($1.25 MM to 125 employees). Line workers without stock received an additional portion of $300,000. White Wave/Dean Foods White Wave sold to Dean Foods in 2002 for $189 MM. Employees/Board received $17 MM. Meant to reward & encourage ees to stay: $15K for every yr of employment, 1/3 cash, 1/3 ordinary income taxes, 1/3 in escrow while still employed there. PCV: Timbuk2 Designs PCV exited in 2005; Employee Wealth Sharing payout negotiated at the time of PCV's investment resulted in significant cash bonus -- as much as 2X annual pay for some -- to Timbuk2's non-management employees SJF Ventures

19 NEXT STEPS Beyond Paycheck-to-Paycheck Follow Up, Are more CDVC and other funds using these asset building tools? If so, which tools? How has their use of these tools been affected by FASB rules? What is the general perception among non-management employees of these tools? Have non-management employees cashed out? If so, have they bought homes and increased their assets? What is the current status and long term outlook of asset building tools such as broad-based stock options, IDAs, ESOPs, profit-sharing, retirement? Are there other tools gaining in popularity? Develop tool kit for entrepreneurs on asset building and employee engagement strategies Case studies documenting that companies with great employee engagement and asset building perform better financially (Watson-Wyatt data, public companies such as Green Mountain Coffee and Whole Foods) SJF Ventures

20 SJF Ventures THANK YOU! Anne Claire Broughton Durham, NC New York, NY >