ImpactAlpha, February 27 – First Step Staffing has a disarmingly simple impact strategy for integrating homeless and previously incarcerated people into the workforce.
The nonprofit acquires all or part of much larger for-profit staffing companies with steady customers in need of reliable workers. First Step assimilates the existing staff and, through natural attrition, gradually adds employees from much more vulnerable – but eager to work – populations. To boost retention, First Step provides transportation and covers other expenses.
First Step had gotten its start in Atlanta and was ready to expand. Last year, a group of Philadelphia investors, led by Reinvestment Fund, put together a more than $5 million package of financing to bring First Step to their city.
Now, on any given day in Philadelphia, First Step sends out about 750 individuals to short-term jobs in logistics, food manufacturing, recycling, hospitality and other light industries. Just over half of the workers are formerly homeless. First Step took in $17 million in revenue In Philadelphia last year. (The company has expanded to Nashville and is exploring launches in Los Angeles, Chicago and Seattle.)
“This is population that can and will work,” First Step CEO Greg Block told ImpactAlpha. The strategy is also good business, especially in a tight labor market. By unlocking talent in a population largely overlooked, says Block, “We’re taking market share.”
The collaborative financing that brought First Step to Philadelphia will be on stage in May when Total Impact returns to Philly. It’s an example of the ethos of all capital on deck to make it happen that is coming to characterize Philly’s 21st century revival.
Like last year, the Total Impact conference will be hosted by the Good Capital Project, in partnership with ImpactPHL, a local alliance pushing to expand the role of impact investing. New partners include the investor network Toniic, Wharton Social Impact Initiative, and Intentional Endowments Network. ImpactAlpha is Total Impact’s media partner.
In advance of the gathering, ImpactAlpha is again exploring Philadelphia’s push to leverage the region’s assets to build a civic and business infrastructure that can boost livelihoods, revive neighborhoods and reverse inequality.
Think globally, start up locally. Venture investor Ben Franklin Tech Partners raised $15 million in a first close for the Global Opportunity Philadelphia Fund, or GO Philly, to fill the gap in early-stage capital for the region’s startups. The new fund will allow the state-funded nonprofit to attract private capital for ventures that create jobs and revenue in southeastern Pennsylvania.
“We can’t wait for capital going to New York, California and Boston to show up,” Ben Franklin’s Jason Bannon told ImpactAlpha. Provco Group, Fulton Bank and SRI Capital made commitments to the fund.
Ben Franklin is also home to ImpactPHL Ventures, which in 2016 attracted its own $15 million in commitments from Philadelphia angel investors, universities, pension funds and insurance companies to deploy into Philly’s mission-driven startups. Ben Franklin has helped the institutions deploy about $3 million of the total into 28 companies, including in education technology firms Yellowdig and CampusESP, and health tech venture InvisAlert Solutions. Ben Franklin co-invested $3 million of its own capital alongside ImpactPHL Ventures.
The Philadelphia arm of impact investing network Social Venture Circle, formed in the merger of Investors’ Circle and Social Venture Network, deployed $3 million in 2018 (up from an average of about $2 million a year). Among the 28 investments: a $525,000 loan to First Step Staffing. The group, led by Philadelphia investor John Moore, also exited Code Monkey Studios, a platform to teach children coding through games, via an acquisition by China’s TAL Education Group.
A storefront revival in North Philly. The city’s Kensington neighborhood is home to the East Coast’s largest markets for opioids. It’s also the site of one of the nation’s brashest experiments in inclusive development. Real estate developer Shift Capital, also backed by the Reinvestment Fund, has deployed $37 million (of the $40 million it has raised) into industrial, commercial and residential properties in Kensington. Instead of buying and flipping, Shift is buying and supporting occupants and driving community engagement. Shift plans to sell the portfolio into a permanent nonprofit-owned trust to preserve affordability.
In one experiment, Shift ran a storefront challenge to attract small businesses into retail properties it owns along Kensington Avenue’s commercial corridor. Shift offered free rent for a year, and brought in business support and renovation funds through partnerships with public and nonprofit agencies. The nine winners included specialty Vietnamese coffee roaster Cà Phê.
Getting the businesses off the ground has proved challenging (only one had opened its business by last summer). Shift is raising a program-related investment-funded Kensington Storefront Fund to provide additional support. “It’s really heavy lifting,” says Shift’s Brian Murray, who says businesses were attracted by the free rent and $10,000 in support but that most of the businesses need more like $40,000. Shift has put in up to $50,000 in some of the businesses.
In its J Central project, a mixed-use building on Kensington Ave., Shift will offer reduced rents in exchange for community service. Shift formed a joint venture with impact development firm S&R Holdings to purchase the building. IF Lab, a business accelerator for founders of color run by S&R, will occupy 3000 square feet on the building’s first floor. “We want to create access to resources that give them a welcoming space and the first step,” says S&R’s Meegan Denenberg, also a co-founder of Philadelphia branding agency Little Giant Creative.
Shift’s Murray has also launched Jumpstart Kensington to provide mentoring and financing to aspiring local developers. The program, modeled on developer Ken Weinstein’s Jumpstart Germantown program, aims to help residents become developers of their own neighborhood. “This is one of the most powerful wealth building programs for the real estate and community development space that I’ve seen,” Murray says.
Mobilizing capital across the spectrum. “One of the things about impact investing is that you are bringing together a spectrum of capital, tools and therefore professionals in those area,” says Moore, the chair of ImpactPHL. The group has profiled 16 local impact investors across the continuum from philanthropic to fully commercial returns.
Access to that kind of spectrum of capital was the key to the the First Step Staffing deal. A $4.85 million loan from Reinvestment Fund, along with Nonprofit Finance Fund, Local Initiatives Support Corporation and Philadelphia Industrial Development Corporation, enabled First Step on acquire On Time Staffing’s Philadelphia operations. Social Venture Circle lent an additional $525,000. Philanthropic funders Barra Foundation and the Fels Fund kicked in another $300,000 in grants.
“Everyone came together and decided they wanted to do this and made it happen,” says First Step’s Block. “This is a very different experience than we’ve had in other cities.”