Venture Spotlight: $3.2B Advantage Capital Looks To Invest Even Deeper, Especially In Black Communities

With $3.2 billion in assets under management, Advantage Capital is considered one of the most important impact investors in the country. The St. Louis- and New Orleans-based firm averages 100 deals a year. Its portfolio includes companies such as NevadaNanotech, which enables the sense of smell in devices, and Portland, Oregon-based Brew Dr. Kombucha.

The firm has been active for 30 years, with support from limited partners that include banks (they get CRA credits) and companies, with a double bottom line: investment returns and social impact, including environmental impact and good jobs. Though not a traditional venture capital firm, it invests at early stages and has a portfolio that includes tech and tech-enabled firms, along with funds that focus on solar and agribusiness.

When George Floyd was murdered in late May of 2020, the team wondered if they doing enough to support Black owned businesses, despite already investing in startups and other enterprises in underserved communities. “After the civil unrest – my partners were very quiet,” said chief impact officer Sandra Moore, the only black woman partner at Advantage Capital. “I didn’t realize they were waiting for me, the only woman and person of color, to weigh in,” she added.

“It took me a minute to think about what in the world are we going to do in this country,” recalled Moore, who did speak up. Two months after Floyd’s murder, Advantage Capital started working on a new fund, Empower the Change, to invest even deeper in underserved communities.

Name of Fund: Empower the Change

Location: St. Louis and New Orleans (where Advantage is headquartered).

Website: empowerthechange

Size: The goal is $200 million. It had its first close in March 2022. 

What it is: A fund dedicated to getting capital to minority-owned enterprises, Moore defines “minority” broadly, to include many different races. The fund specifically targets the wealth gap that tends to keep minority-owned businesses small or from succeeding at all. In the United States, due to hundreds of years of systemic racism, the average Black family has 10 times less wealth than the average white family.

“They’ve been in business, they’ve been successful,” Moore said,  describing the pipeline for Empower the Change. “They don’t have friends and family money; they’ve tapped out of all the collateral they can tap,” Moore added, “They can’t grow. They need equity and they can’t afford debt.”

Empower the Change is investing or considering investing in a paper manufacturing company in Louisiana, a video game designer in California, an aluminum casting company in Ohio and a cosmetics supply company in New York. Over its eight-year horizon, Empower the Change aims to invest in 50 to 60 companies, via debt and equity, though it never takes a majority position at a company. Among its tools are the ability to value collateral higher – at, say, a 20% premium – in its investment formulas and to extend the interest-only payment period on a loan.

LPs include: US Bank, Truist Bank, Society of Human Resources Management, Altria and Midwest Banccorp.

Track record: The parent, Advantage Capital, has been in the impact investing space for 30 years, and typically delivers “high single-digit” returns, Moore said. The question many funds and firms focused on small businesses and minority-owned enterprises face is whether the pipeline will be strong enough to find businesses that can succeed. Moore said Advantage Capital turns down businesses each year, which are now candidates for Empower the Change.

Quote: “There is nobody else in the country that knows how to do this better,” Moore said.

What Worries Her: Whether she can permanently change the trajectory. “What keeps me up at night is whether we are going to be able to elevate this at such a level that we can shift the trajectory for these businesses. Let’s figure out how to drive capital. Being an entrepreneur is hard enough without any artificial barriers.”