Founders First Capital Partners (FFCP) launched a program last week to help minority-led and underserved businesses access capital.
The firm’s Racial and Social Economic Equality Initiative will invest $100 million into underserved companies. The money is a credit facility provided by Community Investment Management, a debt provider led by managing partner Jacob Haar.
The initiative seeks to help diverse managers “not only just by providing capital, but helping them gain relationships with large organizations to grow their business,” FFCP CEO Kim Folsom told Buyouts. The program also will help businesses “transform and improve their revenue models. It’s really difficult for them to get substantial capital for job creation.”
The company is providing an average of $250,000 to around 500 businesses. Funding can go up to $1 million, according to Folsom. The $100 million will be invested over four years with a return cap rate of 1.5x and a royalty rate of 6.5 percent, according to Folsom.
Minority- and women-owned businesses launch at up to five times the rate of businesses started by young, white men, but revenues are noticeably behind, according to a press release from FFCP.
For example, minority-women-owned businesses averaged $67,800 in revenue in 2014. In 2019 the average dropped to $65,800, while non-minority-women-owned businesses averaged $218,800 in revenue last year, up from $198,500 in 2014, according to a report from American Express.
Founders First Capital mainly invests in service-based companies in areas such as IT, training and certification that usually work with larger businesses.
Formed in 2015 by Folsom, FFCP has worked with more than 300 diverse-led businesses, helping them grow revenues to more than $130 million. The firm also helped those companies increase period-over-period growth by more than 25 percent, brought in $20 million in third-party funding and supported the creation of between two to five jobs on average, Folsom said.
The company works with advisors from major institutions such as Wells Fargo, Bank of America Securities and Google, according to a document provided by Folsom.
One example is Founders First Capital Partners’ investment in Swann School of Protocol, an etiquette training business based in San Diego. Swann School founder and CEO Elaine Swann called the investment experience “absolutely phenomenal.”
“I had more growth in my business in the last two years being involved with Founders than I had the five to seven years before that,” Swann told Buyouts.
The company has 20 owned and operated businesses across the country, most of which are run by black women, according to Swann.
“Every major organization has key things that they have to do to operate and generally it’s done by small businesses,” Folsom said. “It’s just that [most] of the businesses they work with are not businesses led by people of color. We’re trying to grow that.”