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This fall, Harvard Business School launched its first course in impact investing funds after a successful pilot project in spring 2021. The fund expands access to affordable and flexible financing for black-owned businesses, Browns and Immigrants in the greater Boston area who have historically faced barriers to capital, with the dual purpose of making profits and creating social change.
Massachusetts entrepreneurs of color have an unmet demand for capital in the order of $ 574 million per year, according to the Boston Foundation and Coalition for an Equitable Economy’s “The Color of the Capital Gap†report. Small businesses are a major growth lever for wealth creation and employment in Massachusetts and across the country. Yet many BIPOC-led and owned businesses currently face systemic barriers to raising capital, including difficulty accessing loans and lack of access to friends and family capital given the history of disparities. racialism in the United States.
To address this growing inequality, the fund aims to invest patient and flexible capital ($ 25,000 – $ 50,000) with the aim of developing small businesses managed and owned by BIPOC. In return, students receive a valuable hands-on learning experience that strengthens their investment experience and network.
Course design
The three of us (Tim Cho, Zach Komes and Devon Sanford) joined Professors Brian Trelstad and Henry McGee this summer to research BIPOC-led and owned companies seeking capital. We have worked with leading community organizations, including the Boston Impact Initiative, The Corporate Equity Fund, SHEET, The New England Co-operative Fund, and Common Capital, each of which offered unique insights and recommendations on growing businesses in the greater Boston area. We then compiled a supply pipeline, prioritizing companies that are active local employers, who could benefit significantly from a check of $ 25,000 to $ 50,000 and whose income, employment and wealth could. increase with investment.
To our delight, the inaugural course has been oversubscribed. Six companies and 25 second-year MBA students were selected to complete the course. The companies operate in a wide range of fields including food service, healthcare, manufacturing and composting.
The students were divided into groups of four to five and matched with a member of the faculty teaching group who will oversee the students’ efforts. During the semester, each group will perform financial, commercial and operational due diligence on potential investments. Due diligence is intended to be mutually beneficial: students will gain investment experience and entrepreneurs will receive market research and value-added financial models.
At the end of the semester, the teams will prepare an investment note with a financial model and an impact plan, and will present a recommendation to the Fund’s Investment Committee (IC). The IC is made up of HBS alumni and impact investors who bring extensive experience in investing and working with our target communities: Heidi Brooks (MBA 2003) is currently COO at the National Institute for Children’s Health Quality, Greg Shell (MBA 2001) is Managing Director of Bain Capital Double Impact Fund, Stephen Chan (MBA 2009) is Vice President of Strategy and Operations at the Boston Foundation, TJ Rose (MBA 2004) is a partner at ABRY and Gerardo Espinoza (MBA 1990) is the executive director of FEUILLE.
Scale the model
We are delighted that this course is the start of a long and productive partnership between the HBS Impact Investment Fund and the companies led and owned by BIPOC. With the growing interest from alumni to scale the fund and advance impact investing training at HBS, capital can continue to be deployed throughout the course from year to year. Additionally, the fund can serve as an example for other MBA programs that seek to educate their students on impact investing and build impactful relationships with local communities.
The HBS Impact Investment Fund course will be offered again in fall 2022; Scaling Minority Ventures will be offered again this spring.
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