SE @ Work

SJF Ventures: Social and Financial Returns
by Anne Claire Broughton, Executive Director, SJF Advisory Services and
Lissa Irons, Fuqua MBA 2005, SJF Intern

Simon Smock, an employee at Salvage Direct, started at entry level and over the past four years has steadily moved his way up to the position of team leader. Salvage Direct provides salvage vehicle management services and on-line auctions for the auto insurance industry. The company is located in the small town of Titusville, PA, where founder Bob Joyce grew up and later returned. The company has grown from 27 employees two years ago when SJF Ventures invested to 55 today. Simon and his fellow employees make a livable wage with good benefits, training, and advancement opportunities, and many hold company stock options and stand to gain alongside top management and investors if the company succeeds financially. “Salvage Direct is creating great technology and customer service career opportunities in a rural region where most old line oil and timber industries are laying off employees,” said Smock. “These jobs are particularly attractive because the company shares ownership and is open to ideas from employees at all levels.”

SJF Ventures, a $17 million community development venture capital (CDVC) fund with offices in Durham, NC and Philadelphia, has assisted Salvage Direct with strategic planning, hiring a chief operating officer, restructuring debt, and gaining recognition, including the Community Development Venture Capital Association (CDVCA) 2004 Excellence Award for a Portfolio Company. SJF Advisory Services, the venture fund’s allied nonprofit, has helped the company with its broad-based stock option plan, given it advice on setting up a 401(k), and helped it evaluate options for providing childcare assistance to employees.

SJF portfolio company Sun and Earth

CDVC funds such as SJF Ventures make up of one of the fastest growing sectors of community development finance. As of June 2004, more than 80 CDVC funds managing $548 million were functioning as economic development engines in urban and rural markets throughout the United States. These funds apply traditional venture capital principles, including intense financial and operational due diligence and collaborative management assistance, to investments intended to reap social and environmental as well as financial returns.

SJF is an example of the hybrid approach a number of CDVC funds are taking to accomplish community economic development. The economic development impacts of the venture fund’s investments are magnified through the nonprofit’s business and workforce development services offered to portfolio companies as well as to other early-stage companies. SJF Advisory Services’ four core program areas include entrepreneurial assistance for prospect companies, workforce development services such as employee recruitment and retention initiatives and help with benefits such as health insurance, independent research on asset-building tools for low-wealth employees, and best practices in environmental sustainability.

To date, SJF Ventures and SJF Advisory Services have successfully built the capacity of eighteen portfolio companies and numerous other small businesses to create high-quality jobs in low-wealth communities. SJF Ventures has invested $12.8 mm and its portfolio companies have provided about 1,600 jobs, including 800 new jobs created since SJF’s investment (about 75 percent of which are entry-level). Nearly all offer employer-paid health insurance and many offer employee training programs, 401K plans and profit sharing or employee stock options. In addition, SJF Advisory Services has provided entrepreneurial assistance to more than 500 non-portfolio companies in underserved rural or urban areas.

Based on the success of its first fund, SJF is now in the process of raising its second fund, SJF Ventures II. The fund’s sectoral focus will include high-growth companies in the business services, consumer products, and clean technologies industries, areas that have potential for high social and environmental impact and in which the fund managers have considerable expertise. For more information, please visit www.sjfund.com.

Interested in employee asset-building strategies? Download SJF Advisory Services’ “Beyond Paycheck to Paycheck” Report. To learn more about community development venture capital, consult the CDVCA website at www.cdvca.org.