Hollymead Capital Partners, LLC
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Hollymead Capital Partners, LLC exists solely to support the creation of sustainable enterprises in low and moderate income communities.
- Collaborate with organizations who want to initiate community-based social enterprises to address this need.
- Support your organization as you decide whether a social enterprise effort is appropriate.
- Implement the strategy in partnership with you from the initial period of enterprise management until the business is able to stand on its own, support its own management team and continue to grow and achieve success into the future.
- Develop, manage and successfully transfer ownership of community social enterprises.
- HmC is a network of experienced management and business professionals.
We believe that the future of our communities will depend on our ability to build and manage the assets and resources we have and use them to build sustainable community enterprises.
Across the United States we are seeing the need for constructive re-engagement of the community’s institutions to find ways to support and energize our local economies. No longer will it suffice to simply provide social services to the people who are on the outside of the mainstream economy. Increasingly, communities need to become engaged in the establishment of new job creating efforts to replace lost industries or businesses that have relocated out of the region or been lost through the turmoil of the recent recession.
These efforts can take the form of an enterprise which is created to provide benefits to the employees and the community. Such enterprises operate in full view of the marketplace, are sustainable through the sale of goods and services to the community and are able to grow into meaningful businesses that can create financial and social wealth for their employees, local suppliers and strategic partners. Such enterprises are part of a bottom-up solution to a regional economy.
Sponsors who understand this – social service agencies, local associations, community organizations - quickly recognize that the development of a social enterprise like the one described above requires significant attention and focus from the senior management and volunteer leadership of the sponsoring organization. While the sponsor may see the need and may even be able to provide resources in the form of start-up capital, markets or infrastructure the tasks involved in building a successful business under any circumstances are unique and consuming.
As a result, sponsors often find themselves overwhelmed with the limited resources they have. The enterprise creates tension within the organization. The challenges of building a business distract from the core mission of the sponsor. Resources that should be going to support core programs are being diverted to the enterprise and should the effort begin to falter, the sponsor may throw more resources into the breach and further compromises their own mission as well as the likelihood of success of the enterprise itself.We believe there is a better way!
We start with whether the sponsor should consider a social enterprise approach.
- Does this idea fit within your organization’s overall mission?
- Does your leadership see the value in implementing this idea?
- Is this a benefit to the community? Does it build on needs and opportunities that can be met with a business strategy in the surrounding region?
- Is the organization prepared to invest both time and dollars into such an idea?
If the answer to all these questions is yes, then the next hurdle is to test the idea against the realities of the market and the inter-connections that the prospective enterprise has with the regional economy. At this stage in the process, Hollymead can bring tools to build a case for the enterprise and test its feasibility and chances for success with peers and partners.
Hollymead Capital starts with two very important points of analysis – where does the idea fit within a particular regional Value Chain and what are the demand drivers that will enable the enterprise to achieve its revenue goals and become sustainable.
Businesses fit in a supply chain and in a regional economy enterprises that inter-act with each other recognizing their mutual dependency are in a value chain where the effect and benefit of the business can be magnified. For example, a regional food system. The local producers of food are dependent on others for a wide variety of supports – be it seed, hardware, market information, packaging, logistics, and seasonal labor. In turn, those producers provide product then to distribution channels where the products are processed, repackaged, marketed and consumed. An enterprise that seeks to do something in this system needs to understand where it will sit in this chain of inter-dependent processes. An enterprise that exists outside of that chain will not be able to benefit from the synergies of the other businesses in the system and will ultimately prove to be unsustainable because it will be left to compete with businesses in this space that are disconnected from the local system – primarily those businesses that are connected to large, non-regional businesses. Such businesses enjoy competitive advantages on price while being somewhat indifferent to margin at the local level.
All businesses require customers. Sounds silly but it gets overlooked when considering a social enterprise. Without a well-defined idea of who the end users are that will drive demand for the product or service the business will flounder. It is the opposite of that time-worn idea that if you “build it, they will come”. Charming as that was when it was about a baseball park in an Iowa cornfield, the reality is much different. Enterprises must be clear that before they make the first product or provide the first service, the end markets for the business are well understood and, in many cases, already in place. Sometimes the demand driver is embedded in public policy, such as a mandate for recycling or material reuse in the community. Sometimes it is derived from corporate purchasing policies by regionally centered companies such as grocery chains or regional food services. Other times it is deciding that a locally managed and produced product can substitute for one that is imported from outside the region at a higher cost than can be produced locally or on terms that are more favorable (managing just-in-time inventory for example). Regardless, the forces that will drive the demand for the business must be clear and compelling – enough so to make the case for sustainability going forward over several years.
Once we know the answers to these questions, the sponsor and Hollymead can move to complete a comprehensive feasibility study. Knowing where the enterprise fits within the value chain of a particular business system and knowing what will drive demand for the business leads to clearing the other lists of issues for the sponsor and prospective investors. A feasibility study will become the outline for a complete business plan and it will start to look at issues of market, product or service definition and design, operations, costs and potential revenues. The first cut at a complete financial pro forma is completed as well to discuss with the sponsor what the trajectory of the business can be and what a downside case as well as growth case would look like over a period of three to five years.
The sponsor and Hollymead have reached agreement that the enterprise is feasible and if properly capitalized, sustainable over time. The next sets of tasks are focused on forming the essential business partnership between the sponsor and Hollymead. As your business partner, we will take the lead in building the foundation for the enterprise, participating in the capitalization, negotiating the best financing arrangements, managing the Closing and directing the initial two to three years of the enterprise’s existence as it moves to sustainability and achieving it’s social objectives.
Business Plan – Hollymead will lead in the preparation of a detailed business plan for the enterprise. The business plan will answer the key business questions – what is the product or service, how does the enterprise go to market, what will it cost to produce or deliver this product to the market, what are the competitive advantages, how long before the business can turn a profit, what is the return on capital and what will be the ownership structure that is most beneficial to the enterprise’s objectives.
Shared Risk – Hollymead will share the capital risk with the Sponsor, outside investors and the employees by providing both subordinated debt and preferred equity in the enterprise. The amount Hollymead will invest will be based on the capital needs and opportunities for investment from our partners.
Appropriate Credit Structure – Hollymead will evaluate the credit needs of the enterprise and negotiate the most appropriate debt capital structure available. Such funding typically includes senior secured term debt, revolving lines of credit, capital leases and mortgages. Hollymead has an extensive network of sources for providing credit to social enterprises and will include this in the capital development plan.
Closing – Hollymead has established a network of capable and committed legal advisors who will participate in the Closing of all financings and assist in representing the enterprise in finalizing all contractual, credit agreements and shareholder agreements. Because Hollymead is an investor in the enterprise as well as the management team, we are focused on both quality and cost in this important phase of the enterprise.
Launch Phase – Hollymead focuses on the details in starting a new enterprise. All business plans are designed to accommodate the lead time required to get the business up and going. It is critical to not try to start a business that is inadequately capitalized to manage through this stage of the process. Building a detailed timeline with milestones, associated costs and room for delays and changes that occur in the initial stages, Hollymead is able to move an enterprise from concept to cash flow.
Business Management - Hollymead will bring an enterprise management team headed by one of our principals. This team is the key to the Hollymead advantage for the sponsor. Hollymead’s principals bring extensive professional networks and resources to identify and can recruit and retain highly qualified management which can support and lead the enterprise through formation and entry into the market. The team will also train management at the enterprise level as the business grows and can carry more and more of its own weight. The timeline for such an effort will vary by enterprise but generally, Hollymead should be able to wind down its oversight and management of the enterprise within twelve to twenty- four months of the business achieving profitability.
Exit Strategy – [To be developed]
The partners at HmC have ourselves been on the investment side of social and community enterprises now for well over twenty years. During this time, we have had to learn how to seek out enterprise opportunities, evaluate them, determine the appropriate capital structure and invest our own resources into them.
Today there is a growing number of regional investor circles who have traditionally looked at early stage ventures that promise high returns who are now starting to ask themselves about the role they could play in building enterprises that address social and community needs. HmC is uniquely suited to work with your fund and members to provide social enterprise investment advisory services.
Specifically, HmC can:
- Prepare your investment circle for sourcing and underwriting social investments.
- Developing a sourcing strategy which HmC would manage with regional resources to encourage and identify strong candidates for third party investments.
- Assist in the structuring of the capital investment and balancing the role of the private equity investor with other interested parties – public, private, non-profit.
- Organize an on-ground management support team to carry the enterprise forward to success.
- Participate with your circle on as a co-investor and also identify other investor interests outside your region who would add value to the effort.
- Maintain and manage the investment portfolio with your circle throughout the process.
HmC can provide a critical link between your investors and the social enterprise opportunities that are in your community.
Joe Bute, Principal and President. Joe has spent the past fifteen years as a managing director with two public investment companies. During that time, he invested over $250 million successfully in a wide range of enterprises across the United States. Prior to 1996 he held senior management positions in community non- profit organizations for twenty-five years, working in Chicago, the San Francisco Bay area and Pittsburgh. He led innovative program development efforts in social services, economic development and public advocacy. He holds an undergraduate degree in Public Management from the University of San Francisco.
Len Caric, Principal and Business Development Specialist. Len has started, owned and managed three companies over 25 years. Most recently Len was President of McKnight Cylinder in Ruffs Dale, PA which he acquired in 1998 and sold to AmeriGas in 2007. Len does acquisitions for AmeriGas across the country. He is also a videographer and film producer focusing on architectural subject matter. Len has been an adjunct instructor at Seton Hill University since 1999 teaching management and marketing classes. Len has a BA in Accounting from University of Notre Dame and a Master of Science in Industrial Administration (MBA) degree from Carnegie Mellon’s Tepper School of Business.
Greg Boulos, Principal and Ecological Strategist. Greg has spent the past five years in Pittsburgh working for environmental non-profits and as an Eco-Preneur. As an initiator of over 12 'green' companies, he has pioneered efforts in urban Homesteading, cleantech, biofuels, energy auditing, urban farming, alternative water systems, compost management, LED lighting systems, microeneterprise, and light manufacturing. During that time, he and his partners acquired Blackberry Meadows, an 85 acre organic farm, which has been producing nutritious food for a healthy community for the last 20 years. He is Mid-Atlantic regional governor for Slow Food USA and serves on the board of the Rotary Club of Pittsburgh. Greg holds a Masters of Science in Sustainable Systems from Slippery Rock University.
Andrew Ellsworth, Principal and Sustainable Systems Analyst. Andrew specializes in finding and cultivating market-based solutions to regional social and environmental sustainability issues. Through his firm InRegion Sustainability Consulting, Andrew’s work has been focused in the areas of local food systems, waste reduction, healthy and sustainable schools, and stormwater policy. Andrew has served on the Board of Directors for Construction Junction since 2007, an innovative social enterprise in Pittsburgh, and also served on the Goodwill Industries of Pittsburgh board. Andrew has a Bachelor of Architecture from Carnegie Mellon University.
Samuel Rose, Principal and Technologist. Sam designs and leverages Internet and network technologies to create and cultivate sustainable wealth-generating ecologies, addressing the challenges of global and local communities in the 21st century. Sam Rose founded a commons-based business model consultancy that builds theory and practice in the open, helping communities and social enterprises create and usefully deploy open source software, open licensed hardware, and open education resources. This business is now integrated into both Hollymead Capital Partners, and Holocene Systems, LLC. Past clients have included Howard Rheingold, MacArthur Foundation, MIT Press, Stanford University, USDA, David Korten and People Centered Development Forum, and the http://cooperationcommons.com and http://socialmediaclassroom.com community.
Rich Dieter,Principal, Community Asset Development. With over 30 years of experience working with a wide range of community-oriented nonprofits from Pittsburgh, Chicago & New England. Rich is currently the President of Crescendo Group Consultants, Inc., an organizational & public relations firm and is formerly the Executive Director of the Southwestern PA Community Development Corporation. He has a BA from Valparaiso University & a M.Div. from Lutheran School of Theology.