Investing In Neighbors

By Holly Beilin/Hypepotamus

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Every Monday and Wednesday night, a group of small-business owners and entrepreneurs meet at Morehouse College, one of Atlanta’s historically black colleges and university.

The companies’ businesses cover a wide ground. A recent meeting included a hopeful laundry-bar owner, a nonprofit founder addressing the needs of people getting out of prison, and a tech entrepreneur. Still, they come together to learn from guest speakers, address common problems they’re facing, and support each other as they navigate the challenges of being small-business owners.

What they have in common is that all of them live or locate their businesses within low- to moderate-income neighborhoods of the city, where upward mobility is challenging and access to capital even more so.

The classes are part of a program put on by Village Micro Fund, a grassroots microfinance organization that works with entrepreneurs in these underserved areas. Village Micro Fund steps in to provide knowledge, support, and in certain cases some of that initial money. They invest in the companies they work with, usually coming in as the first cash on their balance sheets. What’s more, the organization also serves as a crowdfunding platform, where friends, neighbors, and residents of these communities — people who will directly benefit from these company’s offerings — can also directly share in their success. Through the fund, communities can support their own — not only with their purchases, but also with their investments.

The organization is the labor of two Morehouse grads, Nathan Jones and Donte Miller. In their prior lives, the two weren’t handling micro-loans — both worked in New York at investment banking firm Goldman Sachs throughout college and upon graduation. Jones also worked at a private equity fund. 

They were working long hours and making plenty of money for themselves and their wealthy clients, but they left New York and returned to Atlanta with a mission in mind.

“I was really, really excited. I had learned what I needed to learn, and I had found a better use of my time and a far more exciting challenge to help solve,” says Jones. “Atlanta was the perfect place; I went to school here, and I think this city is in a better place relative to other cities to think through and help solve these issues, and everything aligned the right way.”

Jones says their first loan was the one he still gets the most excited about. It went to an entrepreneur named Keitra Bates, a woman from the Westview neighborhood in Atlanta’s West End. Bates was bothered by the lack of healthy food options locally, and had the vision to start an organic pizzeria, eventually a chain of stores that would source the produce and ingredients from the urban farmers in the neighborhood. 

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Jones and Miller invested about $3,000 themselves in Westview Pizza Cafe, and helped crowdsource additional capital from the neighborhood residents. In total, they presented Bates with about a $10,000 investment. They also helped her with her business plan and marketing to ensure the investors would get their money back.

Jones said she did it in 18 months — and her investors, her neighbors and friends, got a return of 6.5 percent on their investments.

“We were the first cash on her balance sheet, and we proved that not only are businesses in riskier neighborhoods investable, but they can also be funded by the people in their own neighborhoods,” says Jones. “Why was this such a success story? Well, the majority of black-owned businesses across the country, they don’t have access to capital. No traditional bank would lend to them — they haven’t been in business long enough and they’re in the wrong neighborhood.”

While working on the Cafe, Bates discovered a second, even more viable business model. She opened the back of the Cafe to local chefs who needed space to cook and sell their goods, almost like a co-working space for the neighborhood’s chefs. That idea has turned into Marddy’s — billed as “a place for home cooks to prepare and sell their offerings in a licensed facility,” now open in Ashview Heights, another West Atlanta neighborhood.

“She went and got a $250,000 loan from a large micro-lender, because she could already show them the payback on her balance sheet from us,” says Jones.

Bates, and the companies that have come through Village Micro Fund since then, show that this model of neighbors investing in neighbors is a viable path to the economic growth these neighborhoods need. 

“It’s in no one person’s or organization’s best interest to invest in low- to moderate-income neighborhoods, so banks, investors, even cities, don't really invest in them — it’s riskier and there are better uses of their resources as it sits now,” says Jones. “If those institutions continue to not do anything and those neighborhoods go without access to resources, without anything all the way down to public infrastructure and transit, it makes them even less attractive to new businesses coming in, to families moving, to everyone. So, we really started Village Micro Fund to help close the resource gap in these types of neighborhoods across the country, starting with those small businesses.”

Village Micro Fund is currently working with its third cohort of entrepreneurs, taking 15 individuals through three months of programming to shore up their business models, their elevator pitches, and their financials. In total, VMF has worked with 32 businesses in Atlanta, helping provide skills-based volunteers and teaching. More than half the businesses have been women-owned or -led, and 39 percent have created jobs above the minimum wage line.

The program is also now supported by a set of sponsors that can provide even more opportunity to the businesses. Entrepreneurs in the cohort have learned and connected with employees of Google, Twitter, Uber, and more; they’ve had access to financial and legal advice from Fifth Third Bank, PNC Bank, and Alston Bird, among others.

And it’s all making a measurable difference. Half of the companies have formed financial relationships with these partner organizations, and overall, the Village Micro Fund businesses see a 3.6X increase in invested capital through the model.

Though the team still primarily works in West Atlanta neighborhoods, they’re looking to expand. Jones says the model is applicable anywhere. They’re also raising their own fund of $250,000 to invest in the types of businesses they serve, which Jones aims to close in spring 2018.

“We’re replicating a model that can work anywhere, and we can capitalize on it,” says Jones. “I see that these businesses are investable, that I can help them and make money off of it. Well, if others aren’t going to, we certainly are.”

Holly Beilin is editor-in-chief of Hypepotamus, the South’s leading startup and technology publication.