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NAIC History

The National Association of Investment Companies was formed in 1970 as the American Association of MESBICS (Minority Enterprise Small Business Investment Companies) by way of then-President Richard M. Nixon’s Black Capitalism program (which sought to ease access to capital for minority-owned small businesses by way of private equity capital and loans).

Building A Community

As the 1970s wore on and the organization changed leadership, objectives and goals were formalized. With Pat Jacobs (President) and JoAnn Price (Deputy Director) at the helm, the American Association of MESBICS began a campaign of advocacy and support for its members with the Small Business Administration (which then issued SBIC licenses and regulated most of the investment companies). The leadership found beneficial ways for members to work together for the collective good. A stronger sense of community was built – one that fostered mutual support.

It was during this period (1972-1979) that legendary businessman Reginald F. Lewis served as general counsel to organization. As his law firm specialized in venture capital transactions for small- and medium-sized businesses, he helped a large number of SBICs acquire funding while also gaining the critical experience in structuring deals that would later define his business prowess. Years later, he would go on to become the first African American to build a billion dollar company – Beatrice Foods.

The association also dedicated its focus towards legislative issues, actively testifying on regulatory matters (particularly those related to the Federal Communications Commission) during the early days of cable television to ensure that there would be minority investment opportunities in cable and broadcasting. Another area of focus was to look at ways to build a larger pool of capital as needs continued to grow. Small Business Investment Companies then were typically owned by community-based organizations, investment companies, major corporations, individuals or group of individuals. In some cases, the management teams were able to arrange a deal where they would purchase the investment company from the major companies – a major development at that time.

In the 80s, the professionals that service the industry became a larger part of the association as accountants and attorneys became involved in the SBIC’s buyback of preferred stock held by the SBA. Prior to this, it was mandated that the Small Business Administration held a minority stake in the investment companies by way of preferred stock. The American Association of MESBICs lobbied successfully for legislation that would allow the firms to repurchase the stock while raising funds that were not SBA regulated. As a result, some funds began approaching pension funds and other institutional investors to raise larger pools of capital and in the 1990s, the industry took the next stage of growth.

In the 1990s, after many members pulled away from the SBA to become independent, private equity firms, the American Association of MESBICs (which during this decade was renamed the National Association of Investment Companies) focused on best practices for the next phase of growth for the industry – how to go out to the marketplace, and how to pitch prospective investors.

Forging New Connections

It was also a time of forging connections for the NAIC as the association formed partnerships with several other organizations. They included the Executive Leadership Council, the preeminent member organization for the development of global black leaders; the New America Alliance, a group of prominent Latino entrepreneurs; and the Marathon Club, whose mission is to accelerate the development of strategic relationships that will create access to capital, develop talent and create deals. With New America Alliance, many of its entrepreneurial members received capital from NAIC members in the 1970s and 1980s and the NAIC strengthened the network of dealmakers to build a formal ecosystem around diverse entrepreneurs.

And while the median fund size for present-day NAIC members has grown to over $450 million (a far cry from the early years where fund sizes were often not much larger than $150,000), capital flowing into the diverse space is not increasing at the rate of the industry as a whole. This is why the National Association of Investment Companies continues to focus largely on access to capital for its members, while also producing compelling research. As the 21st Century plods on, the NAIC looks to expand the marketplace’s knowledge of the organization, what it does, and strengthening its value proposition.