New venture fund to create jobs, provide a return to do more good

Local foundations raise $15 million to invest in growth companies in city

July 16, 2002|By Kate Shatzkin | Kate Shatzkin,SUN STAFF

A group of local foundations has raised $15 million to create a venture fund that hopes to marry social goals with financial success - creating more than 1,000 jobs for low- and middle-income people while providing a return that will allow the charities to do still more good.

The Baltimore Venture Fund, to be announced at a news conference this morning, plans to invest in eight to 10 established but growth-oriented companies in and around Baltimore over the next four years. The project was spearheaded by the Open Society Institute-Baltimore - a local foundation funded by New York-based billionaire George Soros - and the Annie E. Casey Foundation, each of which contributed $5 million.

The fund represents a trend in the foundation world. With their large endowments and charitable purposes, philanthropists can afford to take some risks that their for-profit counterparts might avoid. The foundations are trying to bend market forces to help impoverished families and neighborhoods.

"If you are sort of out of the network, it can be very hard to get this kind of money from banks or traditional venture capitalists," said Diana Morris, president of OSI-Baltimore.

Morris said the foundation's interest in the fund arose several years ago when Soros visited Baltimore. During a tour of the area, he and members of his national foundation's board noticed that some parts of the region were flourishing while others seemed forgotten, she said. Local officials on the tour explained that companies had a hard time getting the capital to invest in troubled areas.

For the Annie E. Casey Foundation - a national foundation based in Baltimore that focuses on improving life for disadvantaged children - the fund represents a chance to make a big hometown commitment.

"The real hope is that we demonstrate that by putting these two pieces together ... you can sort of lead the way," said Doug Nelson, the foundation's president.

Nelson said he hopes that the fund will consider investments in companies that might locate in the biotech park planned for East Baltimore, for example.

Other participants include the France-Merrick Foundation, the Morris Goldseker Foundation, the Zanvyl and Isabelle Krieger Fund, the Baltimore Community Foundation, the Aaron and Lillie Straus Foundation, the Alvin and Fanny B. Thalheimer Foundation and the Hoffberger foundations.

The Baltimore fund will be part of a larger, $50 million fund run by the venture capital arm of a Philadelphia nonprofit, called the Reinvestment Fund. In addition to Maryland, the fund invests in companies in Pennsylvania, New Jersey, Delaware and Washington.

A previous fund started by the Reinvestment Fund, or TRF, has created 1,500 jobs in the Philadelphia area - 1,000 for people of low to moderate incomes - and returned 10 percent to 12 percent to investors so far, said Jeremy Nowak, TRF president and chief executive officer.

TRF plans to open a Baltimore office to manage the $15 million in local investments - and to establish training programs to make sure that low-income workers have the skills that the chosen companies need, Nowak said.

The local fund's return will depend on the overall success of the $50 million invested throughout the region by TRF.

Deputy Mayor Laurie Schwartz praised the fund, saying it would dovetail nicely with city efforts to shore up growing businesses. "To me, the greatest value of this fund is that it will invest in high-growth sector companies that provide jobs with career paths to low-income workers in the city," she said.

This is not the first nonprofit to invest in city businesses.

The Abell Foundation, which is not involved in the Baltimore Venture Fund, began its own $30 million fund in 1998 to invest in local start-up companies.

Abell also invests in other businesses that are either growing in Baltimore or in danger of leaving. In 1998, it bought a struggling glass manufacturer on the banks of the Patapsco in order to save the 320 jobs and pensions for retirees. It has also invested in a Guilford Pharmaceuticals Inc. subsidiary formed to develop a drug to block the craving for cocaine - a project that appeals to the foundation's interest in fighting drug addiction.

Abell's president, Robert C. Embry, said he was excited about the new venture fund. "It's part of a lot more that needs to be done of this nature," he said.

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