Article written by Clearinghouse CDFI, Chief Operating Officer, Yves Mombeleur for U.S. Bancorp Impact Finance | Racial Equity Newsletter:
There are some tremendously talented folks out there who -if given the chance-would prosper but never get the opportunity to highlight their skills. I remember graduating from law and business school without a job in sight even though I was an excellent student. All the while, some of the students ranking far below me already had a job because they knew someone or knew someone who knew someone that provided the opportunity. Life is not only about intellect, but also about access.
At Clearinghouse CDFI we knew that we couldn’t solicit investments that would provide more access from our numerous banking partners without also funding them ourselves; that’s why we are an investor and a general partner of FVLCRUM funds. We enthusiastically jumped at the opportunity to lead this new model/partnership/strategy that placed investment capital directly in the hands of the businesses who are in most need of capital.
Clearinghouse CDFI has a tremendous track record performing, with a profit, in low-to-moderate income communities and communities of color. While we continue to be a top asset-based lender, we knew that middle market businesses were struggling with access to capital, and FVLCRUM was the answer.
Clearinghouse CDFI helped FVLCRUM get the designation as a public welfare fund that is Volcker exempt, which enables all banks to invest and garner consideration under the Community Reinvestment Act (CRA). CRA is designed to help banks find and make creative investments in low to moderate income communities within their respective assessment areas. FVLCRUM provides the banks the opportunity to make investments without running afoul of regulatory mandates under the safeness and soundness provision.
Supporting Companies Owned by People of Color
Founded in 2020, and based in the Washington D.C. metro area, FVLCRUM has been providing a capital markets approach to addressing the racial wealth gap. The company is a growth and operations-oriented investment firm that intentionally invests in lower-to-middle-market companies owned by people of color to generate sustainable opportunity for underserved communities while delivering top tier returns.
The initial thesis was that there has been a historic dislocation between the capital markets and minority owned businesses, which has resulted in a largely inefficient market where if a business has better access to information and network, said business could drive superior returns and impact simultaneously. As FVLCURM executes this thesis, we found that the market was even more inefficient than anticipated. There are so many qualified companies that are doing all that they should but simply cannot get access to capital. These companies are often offered debt because investments into low-to-moderate income communities and or investments into lower-middle market companies run by people of color have historically been perceived as “riskier”. FVLCRUM understands that as a systemically biased view and closing the access gap to equity growth capital can unlock tremendous value for these communities and companies.
FVLCRUM asserts that it is only through innovative solutions that align both impact and intentional growth management that our country will be able to address critical societal issues; and it has proven that forward-thinking companies can “do good and do well” at the same time.
For example, we took an IT company from a coveted Connecticut and K Street address in Washington D.C. across the Anacostia to the Southeast D.C area. The company, and subsequently many of its suppliers, took occupancy at a new building directly nearby bringing economic vitality to the neighborhood and partnering with local nonprofits to create job training programs within the company and a feeder for high quality jobs in the community.
Since prior to its inception, (FVLCRUM was created by two predecessor private equity firms) FVLCRUM’s team has executed over 41 transactions, created over 7,000 jobs with most of the jobs providing a living wage, generated over $60,000,000 in new net worth, and produced over 25x gross money on invested capital (17x modeled net MOIC) returns, making FVLCRUM a top 1% private equity performer.
Through FVLCRUM’s strategic partnerships with the Minority Wealth Commission, the strategy has been endorsed by many leading organizations, including the U.S. Black Chamber of Commerce, the U.S. Hispanic Chamber of Commerce, the Aspen Institute, and the National Urban League. In addition, in 2022 U.S. Bank Impact Finance invested $10 million in the FVLCRUM Fund to support businesses owned by people of color and help bridge the racial wealth gap.
The historic partnership between Clearinghouse CDFI and FVLCRUM is the first ever private equity/CDFI partnership. Clearinghouse CDFI addresses unmet credit needs throughout the US and Indian Country through direct lending, equity investments, and financial assistance. Since 1996, Clearinghouse CDFI has helped bridge the gap between conventional lending standards and the needs of low-income, distressed, and communities of color. Clearinghouse CDFI is also a Certified B Corp [a certification received from the nonprofit B Lab], choosing to align company operations and accountability to all stakeholders, including employees, communities, and the planet. Certified B Corps are companies who meet rigorous standards of social and environmental performance, transparency, and accountability, and use business as a force for good.
Clearinghouse CDFI has funded $2.2 billion in total loans for over 2,600 community projects over the past 27 years. These projects have created or retained more than 40,000 jobs and benefit over 3.9 million individuals. Clearinghouse CDFI loans have also created 12,000 affordable housing units since inception.
FVLCRUM-a minority owned and controlled private investment firm, that also holds the designation as a Public Welfare Fund, and Clearinghouse CDFI are fully committed to their shared mission of improving low to moderate income communities with direct investments. Our core belief: Talent is Created Equally… Opportunity is Not.