19 Apr Goodworks Evergreen
Interview of Dawn McGee, CEO, Goodworks Evergreen
I met Dawn McGee, an Advisor at the Just Economy Fellowship (formerly RSF Social Finance Integrated Capital Institute), in 2018 where she spoke about place-based investing for job creating and community well-being as the cornerstone of their investment portfolio. As she told me recently,
“In Montana, people have to travel hundreds 100s of miles to get anything. Having your rural hardware close is devastating. People stop me in the street and say, ‘Thank you so much for keeping the business open in our town.’
“Montana small hardware and lumber business owners have been unable to transition out when their owners want to sell. They are too large for local individual buyers and too small for anyone else to care about. Goodworks Evergreen can fill this gap with and help these businesses continue to play a critical economic role by creating jobs and well-being at the community level.”
Jen: How was the Goodworks Evergreen Fund created?
Dawn: The Goodworks Ventures investment team created the Goodworks Evergreen Fund (GWE) in 2018. After years of investing in the Montana startup community to create jobs, we read in the paper that a manufacturing enterprise in a small town closed upon the owner’s death, and ten jobs disappeared overnight. We did a mapping project of the state and realized that more than 126,000 jobs and 16,440 businesses were at-risk over the next two decades. Goodworks Evergreen was created to tackle this problem, and it purchased its first business in June of 2018 – a rural home center and lumberyard.
To date, GWE has purchased five rural businesses with 55 employees and transitioned those companies to next-generation leadership. GWE has reinvested in each of the businesses, raised prevailing wages, added health insurance and a 401k which was the first time many of these employees had access to these benefits and they were never available for before at the acquired companies, and GWE remains profitable.
Jen: How are your investment funds catalytic in a way that is different from other funds?
Dawn: Goodworks Evergreen is founded and operated as a perpetual fund. Initially, we are focusing on businesses within the manufacturing, distribution, and services-related industries. We buy businesses rooted in their community, keeping and enhancing both the jobs and the enterprises. This approach is markedly different from the usual business exit strategy of finding a strategic buyer, either a competitor or a financial firm planning to slash costs and quickly flip the company. Both of these options often involve lost jobs and stripped assets.
Jen: How do you describe the kind of non-financial returns the fund offers?
Dawn: Chronic underemployment is persistent across the US, particularly in rural areas, and wages are often insufficient to support workers. Through the implementation of a perpetual fund model, Goodworks Evergreen focuses on addressing inequality through wage increases and the long term overall well-being of its employees. To date, in every company we purchased, the employees were underpaid, and health insurance and retirement were not offered – which we remedied upon acquisition. When Goodworks Evergreen acquires a small rural business, we keep local dollars local, recirculating our investment in the community rather than shipping off dollars to Wall Street.
Jen: Can you describe how you use integrated capital to do your work?
Dawn: We have used $3.2 million to targeted place-based investments by buying businesses that generate $14.04 million in revenue and maintain more than 55 jobs. The initial capital was in the form of founder’s shares with redemption rights for GWE in the future, which allows us to transition our enterprise to next generation leadership. We are currently offering a Preferred Unit that acts like a long term old-school U.S. Treasury, which pays a 5% yield, and the investment is substantially asset-backed due to the businesses we buy. Further investment allows us to continue the expansion of our platform. Ultimately, we would like to see broad based community ownership of our bucket of business enterprises.
Jen: What is transformational about the businesses that you invest in?
Dawn: The businesses we have acquired are central to the communities in which they are located – without them, people would have to travel much greater distances to buy the products they need. Also, if these businesses failed to transition upon the proprietor’s retirement or death, jobs would evaporate from the local economy with a low likelihood of ever coming back. Losing jobs in a small rural community creates a downward spiral as there are fewer wages and less investment in the community.
Jen: How do you address racial justice, income inequality, and/or gender justice through your products and services?
Dawn: We raise wages and provide benefits upon acquisition of all of our companies. We are an equal opportunity employer and are always looking for ways to advance and retain the talents of our employees. As a place-based investor and a women-owned and -led firm, we seek to see women employed at all levels of the enterprise from management to front-line workers. By seeking high functioning businesses located in the timber and construction industries, we ensure job stability for women and men.
Jen: What does a foundation or investor need to understand in order to invest in transformational businesses?
Dawn: They need to understand how small business or other transformational business success contributes to the success of the entire community as well as the individuals employed by the business. When you have good jobs with good wages in a community, there is a notable decrease in childhood poverty, hunger, domestic violence, and addiction.
Jen: What do you tell people who think your fund is risky?
Dawn: Our business all have a long term history of success; most have been in place for more than 20+ years. They have been through multiple recessions and are heavily asset backed. While they may not have the potential upside that a technology or medical device company has, they generate a return year in and year out, and will continue to do so.
|Investment thesis / What is your rationale for your approach to investing?||Goodworks Evergreen buys successful Montana businesses that might otherwise fail to transition because of a lack of buyers or a succession plan. Once acquired, Goodworks Evergreen invests in its employees by providing increased wages, health insurance, and retirement.|
|# of Investments||5|
|Funds Raised||$3,210,000 Million|
What’s on Dawn’s Mind?
|Book||Shortest Way Home: One Mayor’s Challenge and a Model for America’s Future. Buttegieg|
|Song||Sam Maher, Fremantle|
|Podcast / Film||I really like Creative Elements podcast.|