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Cincinnati Minority Business Accelerator Fund I Case Study

Overview

Overview The Cincinnati Minority Business Accelerator‘s inaugural investment fund, “MBA Fund 1” was launched in 2022 and is planned to soon be certified as a CDVC fund. Because of this forthcoming certification, MBA Fund 1 has been able to raise nearly $50M from regional and national banks due to their motivations to satisfy Community Reinvestment […]

Overview

The Cincinnati Minority Business Accelerator‘s inaugural investment fund, “MBA Fund 1” was launched in 2022 and is planned to soon be certified as a CDVC fund. Because of this forthcoming certification, MBA Fund 1 has been able to raise nearly $50M from regional and national banks due to their motivations to satisfy Community Reinvestment Act requirements. MBA Fund 1’s unique approach to investing in and creating Black-owned businesses in Cincinnati means that the fund will deploy the majority of its capital to underserved entrepreneurs, making it a safe fund-level investment from a CRA standpoint.

The process of certifying as a CDVC is not entirely straightforward, which has led the MBA Fund 1 team to devise a careful strategy for approaching the process. The CDFI Fund will not certify an entity without any existing investments, so the MBA Fund must accept some investments, hold a “first close” for their fundraising, and make at least one investment in a CDFI-eligible business before submitting their application to the Treasury. Then, once the entity is certified as a CDFI, the remainder of the fund investors who required certification before investing will complete their investments, and the fund will close with a hopeful $100M of capital to invest in the community.

Investment Strategy

MBA Fund 1 will invest over a 10 year period in private businesses — at least 75% of which will be in and around the Cincinnati area. The fund will make use of an innovative, multimodal investment approach, offering the following capital products:

  • Traditional equity investments 
  • Revenue-based investments 
  • Traditional term loans
  • Ownership acquisition financing & private equity investments 

Fund Structure

  • Management Company: The Cincinnati Minority Business Accelerator, a subsidiary of the Cincinnati Area Chamber of Commerce 
  • Fund: MBA Fund 1, LLC
  • GP: MBA Fund 1 Management, LLC

Fund Terms

  • Fund Size: $100M
  • GP Commitment: TBD
  • Investment Period: 5 years
  • Fund Life: 10 years
  • Management Fee: 2% of committed capital
  • Carried Interest: 20%
  • Preferred Return: 8%
  • Key Person: Darrin Redus