28 Jun Boston Impact Initiative Fund II (BII Fund II)
Boston Impact Initiative Fund II (BII Fund II)
Interview with Betty Francisco; CEO of Boston Impact Initiative Fund II (BII Fund II)
Jen: How was the Boston Impact Initiative Fund II Created?
Betty: BII (founded by Deborah Frieze) launched BII Fund II to continue addressing the racial wealth divide in Massachusetts and the Northeast. Black and Latino entrepreneurs in Massachusetts have an annual unmet capital demand of $574 million, 25% of which is equity capital. Impact funds that center entrepreneurs of color are emerging, but there is still far more demand for equity capital for moderate growth businesses. Traditional venture capital accounts for 93% of early-stage equity investment, yet only 2.4% of venture capital goes to Black and Latino founders. BII Fund II seeks to fill this capital gap for patient, non-extractive equity. Further, BII Fund II will invest in community-owned or controlled real estate projects to combat accelerating displacement in communities of color.
Jen: How are your investment funds catalytic in a way that is different from other funds?
Betty: BII is unique in that it has a second integrated capital fund with a focus on equity capital that doubles down on our racial justice mission. Fund II leverages the pioneering work of BII as a solidarity finance movement-builder. For example:
- As trust-based investors, we seek to remove the systemic barriers to capital access for entrepreneurs of color, such as requiring credit scores and personal guarantees. When BII Fund II invests equity capital, we are structuring exits at a capped multiple so those who create the value in the enterprise can benefit the most.
- We evaluate investments based on four impact criteria – economic justice, climate resilience, community power and voice and enterprise health. We collaborate with our entrepreneurs to create living wage jobs, offer pathways to worker ownership, recruit diverse/local employees, procure from diverse/local vendors and mitigate environmental impact. In partnership with the entrepreneur, BII may use impact covenants to create incentives for companies to meet these non-financial targets.
- In our fund structure, integrated capital means blending capital sources so that all kinds of investors—accredited, non-accredited (community), institutional and philanthropic—can participate in economic justice.
- BII Fund II prioritizes investments in co-ops, employee owned businesses and community controlled real estate. Cooperative ownership models distribute decision-making and wealth building across an organization, breaking capitalism’s traditional owner and labor model.
- Entrepreneurs receiving investment from BII Fund II are leaders in their sector and have a vision for how to change the status quo in ways that support communities of color.
Jen: How do you describe the kind of non-financial returns the fund offers?
Betty: BII conducts an annual impact assessment of its funds to measure how our investments are directly contributing to increasing community wealth and power. These measures include ownership diversity, employee diversity, living wages paid to employees, and additional capital raised. Our assessment allows each organization to share how BII has supported the growth of their mission. ChopValue Boston might report on how many chopsticks it has diverted from landfills; Care Academy will report on how many caregivers received certifications through their platform. Everything BII Fund II learns about investment structures, relationship-based due diligence, and entrepreneur support is shared with the field through our fund manager education program. We’ve worked with 40 fund managers across 18 integrated capital funds to date.
Jen: Can you describe how you use integrated capital to do your work?
Betty: The heart of BII’s approach is integrated capital—deploying financial, knowledge, social and political capital to entrepreneurs and communities of color. We believe this approach catalyzes racial and economic justice. In our investing strategy, integrated capital means blending investment types—grants, debt, equity—to provide fair and friendly capital that meets entrepreneurs and their enterprises where they are. To strengthen the impact of our portfolio companies, we work with community partners and business support organizations to provide entrepreneurs with hands-on technical assistance, business coaching, accounting, legal and human resources services, connections and educational programming. We also help connect our pipeline and portfolio companies with other sources of capital, from grants to impact investors who are mission-aligned.
Clients Dancing at Nuevo Dia Adult Day at Health Center. Photo Credit: Karla Morales Photography
Jen: How do you address racial justice, income inequality, and/or gender justice through your products and services?
Betty: BII Fund II’s focus is on promoting the flow of patient, fair and friendly capital to enterprises owned by entrepreneurs of color and community-owned or controlled real estate as a tool for closing the racial wealth divide. To do this, BII Fund II invests in social enterprises owned by entrepreneurs of color who are providing systemic solutions that build power for communities of color, democratizing ownership and decision-making in the workplace, and growing climate resilience. BII’s intersectional approach also emphasizes investing in women owned businesses and enterprises advancing climate resilience in communities of color. We screen out fossil fuels, we invest in environmentally regenerative businesses, and support our portfolio companies in their efforts to decrease their carbon footprint and become ecological leaders in their sector.
Jen: Can you share with us an example of an investment?
Betty: The East Boston Neighborhood Trust investment is a great example of our model at work. East Boston CDC uncovered a great opportunity to combat gentrification in East Boston, MA by acquiring a portfolio of 114 market-rate apartments that became available for sale. The $47 million acquisition cost required filling an $8 million capital gap. BII worked with East Boston CDC to design a financial model and structure that increased the number of affordable units and enhanced community governance and control by placing ownership of the properties into a trust governed by residents and grassroots housing organizations. BII held investor gatherings, crowding in friendly investment from foundations, impact investors and local banks. We also helped East Boston CDC advocate with the City of Boston for more grant funds to enhance the project.
Jen: What do you tell people who think your fund is risky?
Betty: With the racial wealth gap widening and communities of color (Black, Latino, Asian and Indigenous) becoming the new majority of our country–our workforce, our electorate, and our economy by 2045, we must invest in the people, places, and enterprises that embody our shared future. It is an enormous risk to our economic and social fabric to continue stripping communities of color of economic opportunity. It is risky NOT to invest in our emerging new majority and in the solutions they are putting forth to help solve some of the most pressing needs in communities of color. We know we are successful when economic and racial justice become integral to any place-based investment strategy.
Investment Thesis/What is your rationale for your approach to investing?
BII Fund II seeks to build financial, social and political power for communities of color in pursuit of a sustainable, inclusive, and equitable economy. We invest integrated capital – primarily patient, non-extractive equity capital – in social enterprises and community-controlled real estate to increase wealth and asset-building opportunities for communities of color.
Geography: BII Fund II invests primarily in economically-disadvantaged areas in Massachusetts and other New England states, including Rhode Island, Vermont, New Hampshire, Connecticut, Maine, and Upstate New York. We prioritize areas that have: high growth in diverse populations, accelerated displacement of people of color and BIPOC-owned businesses, a growing racial wealth gap, and a commitment to the clean energy (Just) transition.
Year Founded: BII Fund II was launched in October 2022. It’s preceded by Boston Impact Initiative Fund (BII Fund I), a 501(c)(3) charitable loan fund launched in 2017 focused on investing in regenerative enterprises owned by entrepreneurs of color or serving communities of color in Eastern MA. BII Fund I invested $6.9 million in 50 enterprises, and repaid over $3.2 million to investors. The pilot fund – Boston Impact Initiative LLC (BII LLC) deployed $3M across 30 investments in Greater Boston from 2013-2017 to test the thesis that it was possible to create a place-based fund deploying integrated capital to close the racial wealth divide.
# of Investments: 13 in Fund II and 93 across all BII funds
# of Investors: 225 (donors, funders, supporters, investors) across all BII Funds
Funds Raised: $4,500,000 since Fund II launch
What’s on Betty’s Mind?
Book: Poverty, by America. By Matthew Desmond
Song: Bad Bunny – El Apagón – Aquí Vive Gente
Podcast: Latino USA Podcast