Dealflow | January 16, 2024

A to Z Impact backs Project Equity’s Employee Ownership Catalyst Fund

Roodgally Senatus
ImpactAlpha Editor

Roodgally Senatus

ImpactAlpha, January 16 — Oakland-based nonprofit Project Equity launched the Employee Ownership Catalyst Fund in 2021 to raise $20 million for retiring small and mid-sized business owners seeking to sell to their employees.

The evergreen fund, co-managed with Mission Driven Finance, has built a portfolio of employee-owned businesses via structures like employee stock ownership plans, employee ownership trusts, and worker cooperatives.

“We’ve financed six transactions to date, with a strong pipeline coming behind,” Project Equity’s Alison Lingane told ImpactAlpha (listen to “How Project Equity is surfing the ‘silver tsunami’ to help turn employees into owners”).

A to Z Impact, an impact-first family office, has provided the Project Equity fund with $400,000 in debt capital.

Impact-first capital

The investment from A to Z Impact offers Project Equity more flexibility to provide low-cost financing, such as low-interest revenue-based financing, to business owners for employee ownership-conversion deals. That will lead “to more wealth creation for the employee owners,” A to Z Impact’s Alex Evangelides wrote on Medium.

The majority of the worker-owned companies in the Employee Ownership Catalyst Fund’s portfolio are low-income workers. Half of them are women and people of color.

Working capital

Among Project Equity’s portfolio companies is The Local Butcher Shop in Berkeley, Calif., whose original owners secured low-cost financing from the fund in October 2021 to convert the shop to a worker-owned co-op. The Employee Ownership Catalyst Fund recently extended a forgivable working capital loan to The Local Butcher Shop’s worker-owners.

Other backers in the fund include Living Cities and foundations, high-net-worth individuals and a donor-advised fund.