SJF Ventures
SJF Ventures Anne Claire Broughton
CFED Business Roundtable
Durham, NC 919.530.1177 New York, NY 212.209.3063 www.sjfund.com
September 11, 2008
>
SJF: History of Innovation SJF Ventures (formerly Sustainable Jobs Fund) $45 MM capital under management Founded 1999; Durham, NC & NYC offices Investing in companies that have a positive impact on the world 20 portfolio companies SJF Advisory Services Nonprofit firm, founded 2001 Entrepreneurial assistance In-depth workforce & cleantech assistance Showcasing innovators Building the field
2
© 2008 SJF Ventures
SJF VENTURES: INVESTMENT STRATEGY Industry Focus: Clean Technologies, Tech-Enhanced Services, and Premium and Natural Consumer Products Investment Stage: Growth stage companies with revenues of $1MM to $20MM & at growth inflection point; traditional investor: hands-on for 5 years, then hope to exit with strong returns Investment Size: $1MM to $2MM from SJF in financing rounds of $500K to $10MM Strategy: Targeting companies whose cleantech and socially responsible innovations are providing a competitive advantage in large, high growth markets Geography: Invest nationwide with syndicate partners, lead transactions with firms headquartered in Eastern U.S. 3
© 2008 SJF Ventures
SJF ADVISORY SERVICES Providing entrepreneurial assistance to high-growth companies in distressed or underserved areas, from one-on-one assistance to Getting Ready for EquityTM training events
Showcasing innovative cleantech and other companies via events and other publicity to encourage the adoption of excellent cleantech and workforce practices widely in the economy Providing in-depth workforce and cleantech assistance to SJF Ventures portfolio companies to show that excellent workforce and cleantech strategies go hand-in-hand with strong financial results
4
© 2008 SJF Ventures
Building the field of sociallyresponsible venture capital via research reports, presentations, and participation in industry initiatives
SJF Advisory Services Board of Directors Elizabeth Butler, Community Economic Development Consultant Majora Carter, Founder, Sustainable South Bronx and President and CEO of Majora Carter Group Catherine Clark, Adjunct Asst. Professor and Director, Research Initiative on Social Entrepreneurship, Columbia Business School Deborah Gallagher, Assistant Professor, Duke University's Nicholas School of the Environment Van Jones, Founder and President, Green for All Franklin Madison, Technology Program Developer, Industrial and Technology Assistance Corporation (ITAC) David McGrady, Community Development Financial Institution (CDFI) Consultant Henry McKoy, Founder and CEO, Fourth Sector Bancorp Gregory Ratliff, Senior Program Officer, Bill & Melinda Gates Foundation Morgan Simon, Co-Founder and Executive Director of the Responsible Endowments Coalition
5
© 2008 SJF Ventures
SJF ADVISORY SERVICES: CURRENT INITIATIVE PARTNERS Bank of America: Getting Ready for Equity™ trainings in NYC, Miami, and Chicago in advance of Inner City Capital Connection events Economic Development Administration: Assisting businesses in LMI areas of the Northeast Mary Reynolds Babcock Foundation: Assisting businesses in LMI areas of the Southeast Appalachian Regional Commission: Assisting companies and providing Getting Ready for Equity™ trainings in Appalachia Deutsche Bank and Citigroup Foundation: Cleantech Innovators Initiative, assisting and showcasing companies whose growth is driven by environmental innovation F.B. Heron Foundation: Assisting companies, update of Beyond Paycheck to Paycheck report, Getting Ready for Equity™
6
© 2008 SJF Ventures
ENTREPRENEURIAL ASSISTANCE Targeting LMI and underserved areas in the Northeast, Southeast and Appalachia In 2007, SJF assisted 221 companies, 57 in-depth (several months’ engagement, site visits, coaching, showcasing at SJF events) Providing one-on-one technical assistance, including business plan feedback, financing strategy and referrals, strategic partner referrals, coaching, and workforce development assistance Getting Ready for EquityTM trainings: in 2008, one in NYC for ICIC’s Inner City Capital Connections event; two for ARC in Appalachia for cleantech companies; one in Orlando for B of A.
7
© 2008 SJF Ventures
SHOWCASING INNOVATORS Cleantech Companies in Mainstream Markets: Fourth Annual CEO Panel on Innovative Strategies held June 11, 2008 at Deutsche Bank on Wall Street ¾ 10 CEOs describe the innovative green strategies that have driven their companies’ growth by reducing costs, improving quality and delivering unique new services to customers; featured companies have raised $130 MM+ Winning Workforces: A CEO Panel on Engaging All Employees to Achieve Success held April 25, 2007 in Atlanta in partnership with Winning Workplaces ¾ 6 CEOs described the workforce strategies that help their companies thrive while creating great places to work
8
© 2008 SJF Ventures
BUILDING THE FIELD OF SOCIALLY RESPONSIBLE VENTURE CAPITAL Beyond Paycheck-to-Paycheck published by SJF in 2004, documented asset-building tools for entry-level employees in venture-backed co’s Industry Collaborations: •New Horizons in Workforce Development: Adding Value to Portfolio Companies by Meeting Human Capital Needs, published by CDVCA in 2003 •Measuring Impacts Toolkit published by CDVCA in 2005 Technical assistance to other funds in formation, students and professionals entering the field Engagement on panels, boards, steering committees, venture fair selection committees, venture capital competitions
9
© 2008 SJF Ventures
SJF I & II PORTFOLIO COMPANIES: 2,975 JOBS CREATED AND RETAINED
SJF I&II Job Retention and Creation 3500 3000 2500 2000
Jobs Created Jobs Retained
1500 1000 500 0 2000
10
2001
© 2008 SJF Ventures
2002
2003
2004
2005
2006
2007
2008
BEYOND PAYCHECK-TO-PAYCHECK INITIATIVE, 2002-2004 (initial name: Exits and Employees) Project Challenges How can mission-driven venture capital funds share benefits with employees of portfolio companies being sold? Do jobs actually cease in target geographies at CDVC fund exit? Identify and implement wealth-building tools and share best practices widely Methodology Conducted in-depth survey of 19 funds (16 CDVC funds and 3 more traditional equity investors) Created a guide for other funds of broad-based equity compensation – pros and cons, tax implications, impacts on non-management employees (recently updated in light of newer stock option regulations – see handout) Produced report and case studies Implemented broad-based stock options at 9 SJF portfolio companies 11
© 2008 SJF Ventures
BEYOND PAYCHECK-TO-PAYCHECK TOOLS RESEARCHED Broad-Based Stock Options Incentive Stock Options, Non-Qualified Stock Options, Phantom Stock, Restricted Stock Awards Individual Development Accounts (IDAs) Matched savings accounts for first time home ownership, college education, or small business start-up Often offered via a partner nonprofit; includes financial literacy training Employee Stock Ownership Plans (ESOPs) Defined contribution plan in which assets are invested in employer stock and vest gradually; could be used as fund exit (“ESOP LBOs”) Other tools 401(k) plans; other retirement plans Home ownership assistance Employee credit unions Broad-based profit sharing plans
12
© 2008 SJF Ventures
ASSET BUILDING TOOLS USED BY THE 20 FUNDS SURVEYED IN BEYOND PAYCHECK-TOPAYCHECK 86%
90%
86%
81%
80% 70% 60% 50% 40%
43% 33%
30%
19%
20%
14%
10%
10%
5%
0% IDAs
13
Home
Emp.
Broad-
Profit
Owner
Credit
Based
Sharing
Assist.
Unions
Options
© 2008 SJF Ventures
401(k)
ESOPs
Financial Literacy
Other
RESULTS TO DATE OF BEYOND PAYCHECK-TO-PAYCHECK REPORT SJF has helped implement broad-based stock options at nine portfolio companies with more in development. We exited or partially exited two of these via sale to a larger private equity fund – in one case options gained in value but were not yet liquid and in the other some employees received significant cash. SJF has identified IDA programs accessible to several portfolio companies and plans to do more SJF has assisted several portfolio companies with implementing retirement plans such as 401(k)s SJF has helped several non-portfolio companies investigate founder exit via sale to employees using employee stock ownership plans (ESOPs) SJF is assisting one portfolio companies in investigating the feasibility of implementing a broad-based profit sharing plan Adoption of broad-based stock options, IDAs, other asset sharing strategies by other CDVC funds
14
© 2008 SJF Ventures
SJF PORTFOLIO EXAMPLE Location:
Plattsburgh, NY
Business Description:
Home Bistro produces and markets a wide variety of high-quality, frozen prepared meals which are sold directly to customers via catalog and website
SJF Investment:
$1.08MM, beginning August 2003
Jobs Creation:
14 jobs at investment, 86 jobs today (78% entry-level)
Highlights:
15
© 2008 SJF Ventures
$1MM sales in 2002, $14MM 2007 Series B closed 10/05 at increased valuation, new investor, $600K mark-up for SJF Located in a NY State Empire Zone Entry-level job creation with good career paths Broad-based stock option & healthcare plans
SJF PORTFOLIO EXAMPLE
Locations:
Kennesaw, GA HQ; Providence RI
Business Description:
Ryla provides data collection and follow on sales call services for the commercial credit and financial services industries.
SJF Investment:
SJF invested several rounds beginning in 2002, partial exit 2007
Workforce Innovation:
Intention focus on comprehensive employee training and engagement; strong retention rates; focus on soft skills
Highlights:
16
© 2008 SJF Ventures
$18MM+ revenue SJF helped put in place broad-based stock options to nonmanagement and some restricted stock awards to lower management in 2003. Options increased in value at SJF partial exit in 2007 and some employees exercised options and cashed in stock. 20 jobs at SJF investment, 377 current jobs with strong benefits, broad-based stock-option plan Minority owned, recipient of many awards, WSJ coverage
SJF PORTFOLIO EXAMPLE
Locations:
White River Junction, VT HQ; Offices in OR, NY, MA, CO, MD & Canada
Business Description:
groSolar is a national integrator, installer, and distributor of solar photovoltaic and hot water systems.
SJF Investment:
SJF led $2.25MM A round with Calvert, Allco Financial in 10-06
Cleantech Innovation:
National brand, install and distribute multiple solar technologies, building national dealer network with marketing, supply chain logistics, training and technology advantages
Highlights:
17
© 2008 SJF Ventures
$50MM+ revenue, one of largest US solar integrators Closed most recent acquisition, Chesapeake Solar, leading solar company based in Mid-Atlantic, in July 2008 groSolar signed long term $175MM solar module supply agreement with Evergreen, providing a strategic advantage 33 jobs at inception, 59 current jobs with strong benefits, implementing broad-based stock-option plan
OTHER CASE STUDIES SJF: DDF Stock options that included some non-management as well as management. Options increased in value but did not become liquid at SJF exit in 2004 via sale to a larger private equity fund; company still growing. CEI: CV Finer Foods (World Harbor) CEI exited in 2000; some non-management employees had ownership shares. TRF: Alpine Medical TRF exited in 2002. 3% equity distributed to non-management ($1.25 MM to 125 employees). Line workers without stock received an additional portion of $300,000. White Wave/Dean Foods White Wave sold to Dean Foods in 2002 for $189 MM. Employees/Board received $17 MM. Meant to reward & encourage ees to stay: $15K for every yr of employment, 1/3 cash, 1/3 ordinary income taxes, 1/3 in escrow while still employed there. PCV: Timbuk2 Designs PCV exited in 2005; Employee Wealth Sharing payout negotiated at the time of PCV's investment resulted in significant cash bonus -- as much as 2X annual pay for some -- to Timbuk2's non-management employees. 18
© 2008 SJF Ventures
NEXT STEPS Beyond Paycheck-to-Paycheck Follow Up, 2008-2009 Are more CDVC and other funds using these asset building tools? If so, which tools? How has their use of these tools been affected by FASB rules? What is the general perception among non-management employees of these tools? Have non-management employees cashed out? If so, have they bought homes and increased their assets? What is the current status and long term outlook of asset building tools such as broad-based stock options, IDAs, ESOPs, profit-sharing, retirement? Are there other tools gaining in popularity? Develop tool kit for entrepreneurs on asset building and employee engagement strategies Case studies documenting that companies with great employee engagement and asset building perform better financially (Watson-Wyatt data, public companies such as Green Mountain Coffee and Whole Foods)
19
© 2008 SJF Ventures
SJF Ventures Anne Claire Broughton
THANK YOU!
Durham, NC 919.530.1177 New York, NY 212.209.3063 www.sjfund.com
>
CFED Business Roundtable
Durham, NC 919.530.1177 New York, NY 212.209.3063 www.sjfund.com
September 11, 2008
>
SJF: History of Innovation SJF Ventures (formerly Sustainable Jobs Fund) $45 MM capital under management Founded 1999; Durham, NC & NYC offices Investing in companies that have a positive impact on the world 20 portfolio companies SJF Advisory Services Nonprofit firm, founded 2001 Entrepreneurial assistance In-depth workforce & cleantech assistance Showcasing innovators Building the field
2
© 2008 SJF Ventures
SJF VENTURES: INVESTMENT STRATEGY Industry Focus: Clean Technologies, Tech-Enhanced Services, and Premium and Natural Consumer Products Investment Stage: Growth stage companies with revenues of $1MM to $20MM & at growth inflection point; traditional investor: hands-on for 5 years, then hope to exit with strong returns Investment Size: $1MM to $2MM from SJF in financing rounds of $500K to $10MM Strategy: Targeting companies whose cleantech and socially responsible innovations are providing a competitive advantage in large, high growth markets Geography: Invest nationwide with syndicate partners, lead transactions with firms headquartered in Eastern U.S. 3
© 2008 SJF Ventures
SJF ADVISORY SERVICES Providing entrepreneurial assistance to high-growth companies in distressed or underserved areas, from one-on-one assistance to Getting Ready for EquityTM training events
Showcasing innovative cleantech and other companies via events and other publicity to encourage the adoption of excellent cleantech and workforce practices widely in the economy Providing in-depth workforce and cleantech assistance to SJF Ventures portfolio companies to show that excellent workforce and cleantech strategies go hand-in-hand with strong financial results
4
© 2008 SJF Ventures
Building the field of sociallyresponsible venture capital via research reports, presentations, and participation in industry initiatives
SJF Advisory Services Board of Directors Elizabeth Butler, Community Economic Development Consultant Majora Carter, Founder, Sustainable South Bronx and President and CEO of Majora Carter Group Catherine Clark, Adjunct Asst. Professor and Director, Research Initiative on Social Entrepreneurship, Columbia Business School Deborah Gallagher, Assistant Professor, Duke University's Nicholas School of the Environment Van Jones, Founder and President, Green for All Franklin Madison, Technology Program Developer, Industrial and Technology Assistance Corporation (ITAC) David McGrady, Community Development Financial Institution (CDFI) Consultant Henry McKoy, Founder and CEO, Fourth Sector Bancorp Gregory Ratliff, Senior Program Officer, Bill & Melinda Gates Foundation Morgan Simon, Co-Founder and Executive Director of the Responsible Endowments Coalition
5
© 2008 SJF Ventures
SJF ADVISORY SERVICES: CURRENT INITIATIVE PARTNERS Bank of America: Getting Ready for Equity™ trainings in NYC, Miami, and Chicago in advance of Inner City Capital Connection events Economic Development Administration: Assisting businesses in LMI areas of the Northeast Mary Reynolds Babcock Foundation: Assisting businesses in LMI areas of the Southeast Appalachian Regional Commission: Assisting companies and providing Getting Ready for Equity™ trainings in Appalachia Deutsche Bank and Citigroup Foundation: Cleantech Innovators Initiative, assisting and showcasing companies whose growth is driven by environmental innovation F.B. Heron Foundation: Assisting companies, update of Beyond Paycheck to Paycheck report, Getting Ready for Equity™
6
© 2008 SJF Ventures
ENTREPRENEURIAL ASSISTANCE Targeting LMI and underserved areas in the Northeast, Southeast and Appalachia In 2007, SJF assisted 221 companies, 57 in-depth (several months’ engagement, site visits, coaching, showcasing at SJF events) Providing one-on-one technical assistance, including business plan feedback, financing strategy and referrals, strategic partner referrals, coaching, and workforce development assistance Getting Ready for EquityTM trainings: in 2008, one in NYC for ICIC’s Inner City Capital Connections event; two for ARC in Appalachia for cleantech companies; one in Orlando for B of A.
7
© 2008 SJF Ventures
SHOWCASING INNOVATORS Cleantech Companies in Mainstream Markets: Fourth Annual CEO Panel on Innovative Strategies held June 11, 2008 at Deutsche Bank on Wall Street ¾ 10 CEOs describe the innovative green strategies that have driven their companies’ growth by reducing costs, improving quality and delivering unique new services to customers; featured companies have raised $130 MM+ Winning Workforces: A CEO Panel on Engaging All Employees to Achieve Success held April 25, 2007 in Atlanta in partnership with Winning Workplaces ¾ 6 CEOs described the workforce strategies that help their companies thrive while creating great places to work
8
© 2008 SJF Ventures
BUILDING THE FIELD OF SOCIALLY RESPONSIBLE VENTURE CAPITAL Beyond Paycheck-to-Paycheck published by SJF in 2004, documented asset-building tools for entry-level employees in venture-backed co’s Industry Collaborations: •New Horizons in Workforce Development: Adding Value to Portfolio Companies by Meeting Human Capital Needs, published by CDVCA in 2003 •Measuring Impacts Toolkit published by CDVCA in 2005 Technical assistance to other funds in formation, students and professionals entering the field Engagement on panels, boards, steering committees, venture fair selection committees, venture capital competitions
9
© 2008 SJF Ventures
SJF I & II PORTFOLIO COMPANIES: 2,975 JOBS CREATED AND RETAINED
SJF I&II Job Retention and Creation 3500 3000 2500 2000
Jobs Created Jobs Retained
1500 1000 500 0 2000
10
2001
© 2008 SJF Ventures
2002
2003
2004
2005
2006
2007
2008
BEYOND PAYCHECK-TO-PAYCHECK INITIATIVE, 2002-2004 (initial name: Exits and Employees) Project Challenges How can mission-driven venture capital funds share benefits with employees of portfolio companies being sold? Do jobs actually cease in target geographies at CDVC fund exit? Identify and implement wealth-building tools and share best practices widely Methodology Conducted in-depth survey of 19 funds (16 CDVC funds and 3 more traditional equity investors) Created a guide for other funds of broad-based equity compensation – pros and cons, tax implications, impacts on non-management employees (recently updated in light of newer stock option regulations – see handout) Produced report and case studies Implemented broad-based stock options at 9 SJF portfolio companies 11
© 2008 SJF Ventures
BEYOND PAYCHECK-TO-PAYCHECK TOOLS RESEARCHED Broad-Based Stock Options Incentive Stock Options, Non-Qualified Stock Options, Phantom Stock, Restricted Stock Awards Individual Development Accounts (IDAs) Matched savings accounts for first time home ownership, college education, or small business start-up Often offered via a partner nonprofit; includes financial literacy training Employee Stock Ownership Plans (ESOPs) Defined contribution plan in which assets are invested in employer stock and vest gradually; could be used as fund exit (“ESOP LBOs”) Other tools 401(k) plans; other retirement plans Home ownership assistance Employee credit unions Broad-based profit sharing plans
12
© 2008 SJF Ventures
ASSET BUILDING TOOLS USED BY THE 20 FUNDS SURVEYED IN BEYOND PAYCHECK-TOPAYCHECK 86%
90%
86%
81%
80% 70% 60% 50% 40%
43% 33%
30%
19%
20%
14%
10%
10%
5%
0% IDAs
13
Home
Emp.
Broad-
Profit
Owner
Credit
Based
Sharing
Assist.
Unions
Options
© 2008 SJF Ventures
401(k)
ESOPs
Financial Literacy
Other
RESULTS TO DATE OF BEYOND PAYCHECK-TO-PAYCHECK REPORT SJF has helped implement broad-based stock options at nine portfolio companies with more in development. We exited or partially exited two of these via sale to a larger private equity fund – in one case options gained in value but were not yet liquid and in the other some employees received significant cash. SJF has identified IDA programs accessible to several portfolio companies and plans to do more SJF has assisted several portfolio companies with implementing retirement plans such as 401(k)s SJF has helped several non-portfolio companies investigate founder exit via sale to employees using employee stock ownership plans (ESOPs) SJF is assisting one portfolio companies in investigating the feasibility of implementing a broad-based profit sharing plan Adoption of broad-based stock options, IDAs, other asset sharing strategies by other CDVC funds
14
© 2008 SJF Ventures
SJF PORTFOLIO EXAMPLE Location:
Plattsburgh, NY
Business Description:
Home Bistro produces and markets a wide variety of high-quality, frozen prepared meals which are sold directly to customers via catalog and website
SJF Investment:
$1.08MM, beginning August 2003
Jobs Creation:
14 jobs at investment, 86 jobs today (78% entry-level)
Highlights:
15
© 2008 SJF Ventures
$1MM sales in 2002, $14MM 2007 Series B closed 10/05 at increased valuation, new investor, $600K mark-up for SJF Located in a NY State Empire Zone Entry-level job creation with good career paths Broad-based stock option & healthcare plans
SJF PORTFOLIO EXAMPLE
Locations:
Kennesaw, GA HQ; Providence RI
Business Description:
Ryla provides data collection and follow on sales call services for the commercial credit and financial services industries.
SJF Investment:
SJF invested several rounds beginning in 2002, partial exit 2007
Workforce Innovation:
Intention focus on comprehensive employee training and engagement; strong retention rates; focus on soft skills
Highlights:
16
© 2008 SJF Ventures
$18MM+ revenue SJF helped put in place broad-based stock options to nonmanagement and some restricted stock awards to lower management in 2003. Options increased in value at SJF partial exit in 2007 and some employees exercised options and cashed in stock. 20 jobs at SJF investment, 377 current jobs with strong benefits, broad-based stock-option plan Minority owned, recipient of many awards, WSJ coverage
SJF PORTFOLIO EXAMPLE
Locations:
White River Junction, VT HQ; Offices in OR, NY, MA, CO, MD & Canada
Business Description:
groSolar is a national integrator, installer, and distributor of solar photovoltaic and hot water systems.
SJF Investment:
SJF led $2.25MM A round with Calvert, Allco Financial in 10-06
Cleantech Innovation:
National brand, install and distribute multiple solar technologies, building national dealer network with marketing, supply chain logistics, training and technology advantages
Highlights:
17
© 2008 SJF Ventures
$50MM+ revenue, one of largest US solar integrators Closed most recent acquisition, Chesapeake Solar, leading solar company based in Mid-Atlantic, in July 2008 groSolar signed long term $175MM solar module supply agreement with Evergreen, providing a strategic advantage 33 jobs at inception, 59 current jobs with strong benefits, implementing broad-based stock-option plan
OTHER CASE STUDIES SJF: DDF Stock options that included some non-management as well as management. Options increased in value but did not become liquid at SJF exit in 2004 via sale to a larger private equity fund; company still growing. CEI: CV Finer Foods (World Harbor) CEI exited in 2000; some non-management employees had ownership shares. TRF: Alpine Medical TRF exited in 2002. 3% equity distributed to non-management ($1.25 MM to 125 employees). Line workers without stock received an additional portion of $300,000. White Wave/Dean Foods White Wave sold to Dean Foods in 2002 for $189 MM. Employees/Board received $17 MM. Meant to reward & encourage ees to stay: $15K for every yr of employment, 1/3 cash, 1/3 ordinary income taxes, 1/3 in escrow while still employed there. PCV: Timbuk2 Designs PCV exited in 2005; Employee Wealth Sharing payout negotiated at the time of PCV's investment resulted in significant cash bonus -- as much as 2X annual pay for some -- to Timbuk2's non-management employees. 18
© 2008 SJF Ventures
NEXT STEPS Beyond Paycheck-to-Paycheck Follow Up, 2008-2009 Are more CDVC and other funds using these asset building tools? If so, which tools? How has their use of these tools been affected by FASB rules? What is the general perception among non-management employees of these tools? Have non-management employees cashed out? If so, have they bought homes and increased their assets? What is the current status and long term outlook of asset building tools such as broad-based stock options, IDAs, ESOPs, profit-sharing, retirement? Are there other tools gaining in popularity? Develop tool kit for entrepreneurs on asset building and employee engagement strategies Case studies documenting that companies with great employee engagement and asset building perform better financially (Watson-Wyatt data, public companies such as Green Mountain Coffee and Whole Foods)
19
© 2008 SJF Ventures
SJF Ventures Anne Claire Broughton
THANK YOU!
Durham, NC 919.530.1177 New York, NY 212.209.3063 www.sjfund.com
>
