Established in October 2019, the NAIC Growth Equity Funds Initiative is an important effort, supported by the Minority Business Development Agency (MBDA) of the U.S. Department of Commerce and the National Association of Investment Companies (NAIC), with the intent to aggregate $1 billion of growth equity capital to invest in ethnically diverse and women-owned business enterprises (DWBEs). With the generous support of a $1.4 million grant from the MBDA, the NAIC will lead and manage this initiative with the goal of financing DWBEs, while creating greater wealth in their communities.
As stated in the 2017 National Minority Supplier Development Council (NMSDC) annual report, ethnically diverse-owned and NMSDC certified businesses produced more than $400 billion in annual revenue and actively employed, either directly or indirectly, more than 2.5 million people. Yet, based on commonly available research, despite being a fast-growing and critical segment of the US economy, ethnically diverse and women entrepreneurs have long struggled with attracting growth capital, including those that are in attractive market segments. Through this is initiative, growth capital will be made available to these businesses, allowing them to scale while providing institutional investors with attractive risk-adjusted rates of return.
Through this initiative, the NAIC will provide information to Fortune 500 corporations, endowments, foundations and other institutional investors as potential investors in a series of fund of funds (FOFs) whose managers will allocate the capital to a series of growth equity funds, whose managers will subsequently invest directly in DWBEs. To receive capital, DWBEs must be able to demonstrate that they can leverage the capital investment to deliver agreed upon performance metrics.
The goal of this initiative is to build a robust, organized effort to aggregate $1 billion of growth equity capital to invest, over the next three to four years, in ethnically diverse and women entrepreneurs creating a path for investing growth equity in DWBEs into the future.