Entrepreneurship | February 21, 2018

Bryce Butler: Quarterbacking capital into Louisville’s neighborhood economies

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New Revivalists is a series from ImpactAlpha and Village Capital profiling the people, places and policies reviving entrepreneurship — and the American Dream.

New Revivalist: Bryce Butler
Place: Louisville, Kentucky
Mission: Access Ventures is trying to build a more inclusive Louisville economy by helping the region’s small-business entrepreneurs get the right type of capital at the right time.
Follow: @brycebutler

Bryce Butler rattles off statistics about poverty and community finance like a Louisville sports fan going on about the Cardinals. Instead of bootlegs and draws, however, Butler’s playbook includes Kiva loans, strategic real estate, non-traditional debt funds and direct investments for neighborhood revival.

Butler, the founder of Louisville-based Access Ventures, is keenly aware of the 40-year low in entrepreneurship rates, the community-banking downturn since the recession, and what author Lisa Servon calls the unbanking of America. That unbanking, according to Butler, has left entire swaths of the population unable to access the financial system.

Enter Access Ventures, the nonprofit venture firm Butler founded five years ago. Access coordinates a basket of loans, equity investments, grants and technical support for entrepreneurs and organizations making the local economy work for more people. Access is playing the role of community “quarterback,” says Butler, an idea championed by social investor Kevin Jones.

Neighborhood Economics: Local funding for entrepreneurs without a rich uncle

“We need an organization or a person or an entity within these communities to sit above and say, ‘OK, what’s the end goal?,’ Butler told ImpactAlpha. The community quarterback’s job, he says, is to ask, “What’s keeping them from accessing the markets? And what solutions can we help bring to bear?”

ImpactAlpha: What drives your work with Access ventures in Louisville?

Bryce Butler: There’s a moral crisis in our economy. It’s killing our communities and it’s accelerating inequality, inequality to the point where I think we’re actually expressing genuine exclusion. Our whole thesis is how do we how do we build a more inclusive economy? How do we create access to the economy and agency within?

Lisa Servon’s ‘Unbanking of America’ is about the underbanked and unbanked. There are people that just cannot access the markets or don’t fully participate for whatever reason. The statistics back it up, from personal finance to business finance. Eighty percent of small businesses are denied a loan today. Community banking is down 50% since the recession. Entrepreneurship on decline.

ImpactAlpha: How did you step into all of that?

Butler: When I first started, believe it or not, it was around real estate. I was doing work for a family office and we were looking at what we could do domestically.

The thing that kept coming up was a large number of vacant and abandoned properties throughout our communities. There weren’t good resources to repurpose them. The average person living in poverty is paying over 50% of their disposable income to housing costs. Traditional investors can’t get the return (in redeveloping these house). So they just get completely overlooked.

I put together a non-traditional debt fund. My thesis was I could purchase and renovate eight single-family homes, and get just a nominal return to recover our costs. I targeted high-net-worth individuals, who have money just sitting in their bank accounts and earning effectively 0%. We partnered up with some halfway houses and homeless shelters put some guys to work in construction.

Then we said, ‘Community problems are pretty complex.’ It’s not just housing. People don’t have jobs, which is why they can’t afford housing. So we got into small business lending, partnered with Kiva, and found our way into what we’re doing now.

ImpactAlpha: You set out to build a more accessible economy. How do you build investment opportunities around solving that problem?

Butler: Real estate was really attractive. We quickly found ourselves diversifying beyond residential got into commercial. We did a lot of research around commercial corridors as agents for change. We built a co-working space. Real estate is an anchor. It can be anchor that stabilizes or an anchor that literally pulls you underneath the water. In the community we were working in there were over 300 vacant homes in a 15-block area.

ImpactAlpha: Has gentrification become an issue in your work?

Butler: I first ask people, what do you mean by gentrification and define that for me, because I think sometimes people don’t understand what the word is. What people usually mean is: are long-term residents no longer able to afford the community in which they live.

What that boils down to is more a pacing thing. Where you see gentrification happen a lot of times are places where there is high population growth and the property values skyrocket at such a pace that long-term residents can’t keep up and then are forced to move. We’re really sensitive on pace. When we started we said, “Let’s do 10 houses. When you have over 300, that’s a small dent, but then we can really assess and see: Are we seeing more investment? Are other people interested in coming and renovating the homes?

ImpactAlpha: How does your legal structure enable flexibility in the types of solutions you provide?

Butler: Access Ventures is a private operating foundation. At first it was just a real estate holding company, an LLC. When we started doing more activities, we flipped it. We wanted to invest, and as we see returns, we wanted to reinvest those returns into the community. It made sense to set it up as a nonprofit 501c3. As a private operating foundation, we essentially run our own programs; we’re not a grantmaker. That’s one of the distinctions. When we say we invest across a continuum, we’re focusing in on several different areas like capacity-building, access to capital, strategic real estate.

Some of our projects are program-related investments. Some of our projects are direct, non-concessionary investments. And then we have a public portfolio that is aligned with our values, managed through an ESG strategy.

ImpactAlpha: What’s one thing you’ve learned about moving money into solutions able to build a more inclusive, local economy.

Butler: Kevin Jones has been championing this notion of the community quarterback. It’s the role of an organization or a person that’s an intermediary that’s helping identify a collective impact, where they can aggregate a solution to provide more of a holistic approach. Community problems aren’t just education or finance or housing but it’s all of the above. They’re interrelated.

What you need is someone over and above that community system to help. Kevin called it a quarterback. Doug Balfour (of Geneva Global) called it a system entrepreneur. I think that’s a really important role. There’s this real need for community intermediaries.

Neighborhood Economics: Local funding for entrepreneurs without a rich uncle

ImpactAlpha: Are you playing the community quarterback role?

Butler: We’re trying to. I think it’s a really important role. In a lot of communities, they’ll bring in Kiva, and then somebody else might be doing something else. But where is the integration and coordination? I think the coordination is super-important in helping these communities.

ImpactAlpha: How does coordination works in practice?

Butler: We need an organization or a person or an entity within these communities to say, ‘OK, what’s the end goal? The end goal is to help these businesses access the markets. What’s keeping them from accessing the markets? And what solutions can we help bring to bear?’

We’re looking at things like wealth equity. That will replace things like friends and family. Then Kiva for the $10,000. We created a character-based, no-collateral loan fund in Louisville, called the Growth Loan. We’ve done 18 loans and loaned over a half-million dollars. Businesses can get low-cost working capital and all of them have been denied from a bank.

ImpactAlpha: Are local finance institutions overlooking these opportunities?

Butler: I’ll give an example, a great local success story. One of our investments raised $1 million. They intentionally wanted to raise a million dollars locally because they wanted to prove that in Louisville, Kentucky, where it’s absolutely difficult to raise venture capital, they could do it. And we were the lead investors. They started with a Kiva loan. They did one of our character-based growth loans and then they went on to raise a million dollars seed round and then a million dollars bridge loan.

Man, it was painstaking! I remember during the first meeting, when we were the lead investor because were the quote-unquote impact investor. Some of the traditional investors wouldn’t give him the time of day.

ImpactAlpha: How do you quantify your impact?

Butler: I’ve raised $35 million to help build this thesis and team. We’ve invested $2 million plus directly into commercial and residential real estate.

One of the ways we assess impact on the residential side is we’re always watching property values. We don’t want them to spike too fast. We subsidize a lot of the rent. We created 80 jobs over a four-year period on the construction side of the redevelopment. We have all of our direct investments GIIRS-rated. We felt that was important to get some data there.

Measuring impact is super-important and we’re always trying to figure that out. There’s a group called Thriving Cities that came out of University of Virginia. They have some quantifiable ways to measure community and neighborhood impact. I can look at crime rates and property values. I can look at a number of people that now are homeowners that were renters.

What Butler’s reading:

  • Unbanking of America, by Lisa Servon
  • Evicted, by Matthew Desmond
  • Blockchain Revolution, by Alex Tapscott and Don Tapscott

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