#1Puerto Rico Fund for Growth, LP Kerwin Tesdell President, Community Development Venture Capital Alliance CDFI Institute March 14, 2019 CDVCA COMMUNITY DEVELOPMENT VENTURE CAPITAL ALLIANCE Private Equity for the Public Good 1#2• . • Background $45 million fund of funds with up to 15% available to invest directly Help build out the Puerto Rican business finance ecosystem 100% operating businesses: VC, PE, Mezz Debt, Flexible Debt • Closed Oct. 2016; Hurricane Maria Sept. 2017 • 100% Puerto Rican money • • • 100% market rate money Separate fund structure removes risk from CDVCA's balance sheet Use as "linchpin for broader economic development effort" Technical assistance to fund managers • Peer Group • Puerto Rican Venture Association Extraordinary data gathering opportunity CDVCA COMMUNITY DEVELOPMENT VENTURE CAPITAL ALLIANCE Private Equity for the Public Good 2#3The Puerto Rico Fund for Growth Limited Partners Corporación del Fondo del Seguro del Estado (CFSE/State Insurance Fund) La Administracion de Compensaciones por Accidentes de Automoviles (ACAA/Auto Insurance Fund) Investment $$ Returns Investment $$ in Investment $$ Returns CDVCA (Not-for-profit 501(c)(3)) CDVCA Puerto Rico GP, LLC (management company) Management Fee & Carried Interest Puerto Rico Fund for Growth, L.P. $45 million Growth Stage Agribusiness VC Fund Early Stage VC Fund (Tech enabled Goods & Services) CDVCA COMMUNITY DEVELOPMENT VENTURE CAPITAL ALLIANCE Private Equity for the Public Good Cash Flow & Equipment Private Equity Leasing Lender Fund Mezz Debt and Equity SBIC More Funds Direct Business Investments#4• Growth-Stage Agribusiness VC Investing in sustainable food and agriculture businesses to substitute imports 85% of food consumed in Puerto Rico was imported, even before the hurricane Led by 3 young, sharp Puerto Ricans • Extensive TA for businesses Sample investment Local producer of "leafy greens" (lettuce, kales peppers, herbs) for Puerto Rico's finest restaurants Preferred stock equity investment made the fund the largest outside shareholder CDVCA COMMUNITY DEVELOPMENT VENTURE CAPITAL ALLIANCE Private Equity for the Public Good 4#5• Early-Stage VC Fund Tech-enabled goods and services businesses . Competitive advantage Parallel 18: world class business incubator • Top ranked engineering school at University of Puerto Rico, Mayagüez Managed by Puerto Rico's most experienced private equity firm • Sample investment Smartbot tool to reduce administrative overhead for Puerto Rico's hospitals and medical offices • Revenues have increased 70% per month Expansion opportunities into Spanish-speaking market in States and Latin America CDVCA COMMUNITY DEVELOPMENT VENTURE CAPITAL ALLIANCE Private Equity for the Public Good 5#6Cash Flow & Equipment Leasing Lender 14-year track record in Puerto Rico of extraordinary financial returns, continuing after the hurricane Originates loans, seasons them, then sells them at a premium to Puerto Rican banks and credit unions (cooperativas), plus investment funds on the mainland. • Investment Structure: CDVCA invested in subordinated B Shares alongside well-known CDFI capital provider • A Shares offer downside protection, while B shares offer upside return at greater risk • Example loan • Hospital in need of funds to purchase power generating equipment after hurricane CDVCA COMMUNITY DEVELOPMENT VENTURE CAPITAL ALLIANCE Private Equity for the Public Good 6#7CDVCA COMMUNITY DEVELOPMENT VENTURE CAPITAL ALLIANCE Lessons Learned There is opportunity in Puerto Rico! • Indigenous business development will lead Puerto Rico out of its financial problems • Importance of working with existing institutions, on the ground in Puerto Rico . Give them power and decision-making authority • They are the CDFIs of tomorrow • Importance of financially sustainable institutions Give risk capital to Puerto Rican fund managers, so they can take risks on Puerto Rican entrepreneurs Private Equity for the Public Good 7#8/inclusiv./ Puerto Rico CDFI Initiative March 18, 2019#9/ inclusiv / We believe that true financial inclusion and empowerment is a fundamental right. We dedicate ourselves to closing the gaps and removing barriers in financial opportunities for distressed and underserved communities by providing capital, making connections and building capacity, developing innovative products and services for CDCUS and working to transform local progress into lasting change at the national level. • Inclusiv national network: 266 credit unions committed to financial inclusion and community development. Inclusiv Capital: As a national CDFI intermediary, Inclusiv makes investments to expand the impact of CDFI credit unions: secondary capital; deposits; purchase of non-conforming mortgages Inclusiv is the CDFI and financial inclusion authority for credit union industry authority. CDFI Roundtable at GAC / inclusiv / 9#10Inclusiv Credit Union Network $94 billion combined assets. Serving 8+ million people in 48 states, DC and PR Canada Hudson Bay AB BC SK MB D MT MN ID WY NV ted St UT ON QC NB PE ME NS Mexico Gulf of Mexico Cuba Pu Co /inclusiv / 10 Guatemala Caribbean Sea NL#11Puerto Rico#12Financial Cooperativas: All eligible CDFIS AGUACILLA TOA VEGA ISABELA BAJA A ARECIDO MANATI VEGA ALTA GAMUY MOCA AGUADA BAN SEBASTIAN ANASCO CIALES MOROVIS LATES BITUMDO LAS MARIAS MAYAGUEZ OROCOMIS JAYLIVA MARICAL ADJUNTAS Coop 123 Financial cooperatives. ** $9.6 Billion in combined assets 1.1 million members RINGON HORMIGUEROS SAN BERMAN VAUGO SABANA GRANDT CADO RCJC LAJAS GUANICA /inclusiv / 12 AYANALLA COROZAL TOA ALTA NARANTO CATANO AGUAS BUENAS COMERIC ChaLIAS CIORA AIBONITO VILLAURA DOAMO CATEY PONDE JANA DIAZ SANTA ISADEL SALINAS GUAYAMA GURADO SAN LORENZO PATILLAS LOIZA RIO GRANCE LOUILLO LAS PIEDRAS VABUCCA MAUNAGO #AGUADO HUMAGAD FAJARDO CEIBA#13Puerto Rico CDFI Initiative#14/ inclusiv./ Our Commitment: To build the capacity of the network of community owned financial cooperatives to rebuild more inclusive, resilient and equitable local economies. адо Capacity Building - On the ground training sessions, online webinars, resources and tools. Partnerships - With the Federal Reserve Bank of New York, FDIC, USDA, CDFI Fund and other government agencies. Connection - To resources, experts, government agencies, funders, philanthropic organizations and mainland CDFI credit unions and the CDFI industry at large. /inclusiv /14#15/ inclusiv / Our goal: To provide the resources, tools and expertise for the transformation and mass adoption of the CDFI business model in Puerto Rico. Build institutional capacity by providing guidance for the submission of FATA grants during the 2019 funding round and beyond Expand the CDFI sector by helping certify at as many financial cooperatives as possible Increase high-impact lending by creating a Loan Loss Reserve Fund to scale up community financing: micro/small business lending, resiliency/green energy financing, and affordable housing /inclusiv /15#16Puerto Rico CDFI Initiative January 29, 2019 President Bill Clinton convened the Clinton Global Initiative (CGI) Action Network on Post Disaster Recovery in San Juan, Puerto Rico. Inclusiv is proud to be recognized by the Clinton Global Initiative for its ongoing work in Puerto Rico to increase capacity of financial coops to play a more effective role in a more resilient and inclusive rebuilding process. CLINTON GLOBAL INITIATIVE POST-DISASTER RECOVERY CLINTON FOUNDATION CLINTON FOUNDATION CLINTON FOUNDATION /inclusiv./16 CLINTON FOUNDATION CLINTON CLINTONFOUNDATION.ORG FOUNDATION CLINTONFOUNDATION.ORG INTONFOUNDATION.ORG CLI FOU CLINTONFL CLINTON RG FOUNDATION CL CLINTON FOUNDATION LINTONFOUNDATION.ORG CLINTON FOUNDATION CLINTONFOUNDATION.ORG CLINTON TONFOUNDATION.ORG CLINTON FOUNDATION NFOUNDATION.ORG CLINTON FOUNDATION CLINT CLINTO#17CDFI Convening for Financial Cooperatives Earlier this year, Inclusiv hosted the 2019 CDFI Convening for Financial Cooperatives in San Juan, Puerto Rico, which counted with the participation of The intensive two-day event focused on CDFI certification, grant application processes, disaster preparedness, and community revitalization/rebuilding strategies: green energy lending, resilience financing, micro and small business lending ASOCIACIÓN DE EJECUTIVOS DE COOPERATIVAS DE PUERTO RICO AL RESERVE FEDERAL RES 191 INCORPORATED MAY 18 1914 /inclusiv / 17#18inclusiv CDFI Convening for Financial Cooperatives $ 55 Financial cooperatives 141 Financial cooperative leaders * 30 Community Development experts 29 Cooperativas participated in the Technical Assistance workshop /inclusiv./18#19Removing Barriers On March 1, 2019, the Corporation for the Supervision and Insurance of Financial Cooperatives (COSSEC), Puerto Rico's regulator for financial cooperatives, signed a Memorandum of Understanding with the Community Development Financial Institutions Fund (CDFI Fund) The agreement establishes a legal framework that will allow for the exchange of financial information between the agencies, streamlining the due diligence process for the disbursement of technical and financial assistance grant funding. *COSSEC MENT of the TREASURY U.S. DE PARTS IIIIII CDFI FUND munire Development Financial Taatimation [ \ / inclusiv. / 19#20Emerging CDFI Sector: Financial Cooperatives 20#21coop Cooperativa Sagrada Familia A • Founded in 1959 by catholic members of the community • First CDFI credit union in Puerto Rico • 178 million in assets ● Serving over 32,500 members of the community Site visit to Cooperativa Sagrada Familia in Corozal, Puerto Rico /inclusiv / 21 SAGRADA FAMILIA COOPERATIVA#22SAGRADA FAMILIA COOPERATIVA Community Building in Action Micro/Small Business Lending . . Small Business Incubator (Over 72 participants) Health Fairs • Artisan workshops Environmental Work Beach cleanups • Vive la Montaña Alliance /inclusiv / 22 T#23SAGRADA FAMILIA COOPERATIVA Community Building in Action META AGRADA FAMI /inclusiv / 23 Youth Empowerment and leadership building ● Institutional Youth Committee • IDA Student grants Program Fund: matched savings one to one match • Youth Marathon - Pediatric cancer#24ထာ Cooperativa Jesús Obrero • Founded in 1959 . $80 million in assets Serving over 10,500 members of the community • At the forefront of solar and resiliency financing. /inclusiv / 24 Jesús Obrero Cooperativa#25Jesús Obrero SOLAR Building Resiliency Solar Financing Program • Started in 2011 with the collaboration of an electrician from the community Pioneered the first solar loan product using government incentives • The "green loan" allow members to install their personal or solar energy systems in phases, allowing for a cost efficient transition to the new technology UNIVERSAL RENTADOR /inclusiv./25#26Jesús Obrero SOLAR Building Resiliency Solar Financing Program "Resiliency Combo" Financing for solar panels, batteries, and equipment to replace gas and diesel generators. Started in 2011 with the collaboration of an electrician from the community. Participated in the financing of the first community owned energy microgrid in Puerto Rico. /inclusiv / 26#27Inclusiv Network Puerto Rico#28/ inclusiv / III 命 $ 32 Financial cooperatives $4.4 Billion in combined assets 199 503 Thousand members CERTIFIED S Department The Treasur 1 CDFI Designated 4 Technical Assistance recipients $482 Thousand in TA Grants $482. 5 Local and mainland partnerships /inclusiv / 28#29Thank you! Cathie Mahon President & CEO [email protected] 212.809.1850 /inclusiv./ 39 Broadway, Suite 2140 New York, NY 10006-3003 www.inclusiv.org /inclusiv./29