by Eileen Ung, Haas MBA 2021
Before my time at Haas, I was first exposed to employee ownership as an alternative “social responsibility” model, where power and wealth are distributed among workers, at the Los Angeles office of Local Initiatives Support Corporation (LISC-LA), a national community development finance institution (CDFI). This model was in stark contrast to the corporate models I was acquainted with having worked in large financial service institutions for over 5 years. LISC-LA had partnered with a Bay Area Based nonprofit, Project Equity, to pilot a unique small business preservation program in my hometown of Long Beach, California. The Los Angeles office of Local Initiatives Support Corporation (LISC), a national community development finance institution (CDFI), had partnered with a Bay Area Based nonprofit, Project Equity, to pilot a unique small business preservation program in my hometown of Long Beach, California. The program struck close to home as I grew up in the east-side of Long Beach, among Black, Brown, Southeast Asian communities whose economic livelihood was largely powered by Main Street. In Long Beach, a “silver tsunami” was threatening the long-term economic inclusion of these communities, as small business owners retired and lacked succession plans, often resulting in the closing of businesses and the loss of jobs. LISC-LA presented their early plans for the program during a session of the civic leadership program I was a part of, and I remember being impressed by the potential social impact — supporting up to 2500 of Long Beach’s businesses to transition into employee-owned enterprises, retaining and creating jobs for over 45,0000 workers, and generating over $12.3B in revenue.
Shortly after the onset of the dual heath and racial equity crisis, I started working with Project Equity the summer of 2020 to support their efforts to bring employee ownership into the mainstream. I was given an immense opportunity to help build out the organization’s preliminary strategy for engaging the private equity sector as prospective referral partners. From the get go, it was apparent that Project Equity was innovating in their own right, applying socially “neutral” financial tools towards a democratized wealth-building cause. While I was familiar with the leveraged buy-out model employed by many private equity firms, often with exploitative implications, I was surprised to learn that this was essentially the same model Project Equity used to help employees convert to an worker cooperative model, using debt and equity capital provided by their strategic partners, such as city government and CDFI’s like Shared Capital Cooperative. This was my first lesson in the type of “racial reimagining” that was required within the impact investing space, especially if we want to center BIPOC needs and experiences and build long-term economic resiliency within these communities. My project involved generating and testing hypotheses around the characteristics of private equity firms and their respective portfolio companies that would be most likely to engage with Project Equity, eventually creating a scorecard for prioritizing which firms to engage and generating a preliminary list of targets.
My second lesson of the summer was the result of trial-and-error given the opaque nature of the private equity sector, as I simultaneously dealt with too much information in certain areas, and too little information in others. More so than a static, long list of target firms and companies, I learned to prioritize the creation of a dynamic system for Project Equity to continue to test hypotheses and update their scorecard criteria and prospecting lists accordingly.
My third and final lesson of the summer — field-building is crucial and needs to be prioritized! While ecosystem building work may not readily translate to outcomes that traditional funders expect, it plays an outsized role in determining, testing and validating the pre-conditions for scaling financial innovation within Main Street, bringing together the necessary stakeholders to co-create equitable, systems-change oriented solutions. Since my time with Project Equity, I have delved into numerous projects supporting other organizations involved strengthening the community development finance ecosystem, and hope to bring my collective learnings to continue doing this work after graduation.
Beyond my specific project, my summer with Project Equity involved weekly sessions with leaders across the organization. From the client services team, I learned that roughly half of the companies that undergo feasibility assessments with Project Equity do not end up converting to employee ownership, which demonstrates the complexity of pre-conditions that need to be met for successful conversion. From co-founder and CEO Alison Ligane (Haas MBA c/o 2000), I learned about Project Equity’s strategic plan to significantly expand their nationwide footprint and pilot partnerships in regions like the Twin Cities, Detroit, Washington State, and Central Pennsylvania. Since the needs of each community are different, “scaling” Project Equity’s strategy was unique because its success was contingent on place-based partnerships with grassroots organizations on the ground. Lastly, learning about the marketing’s team’s efforts to push the narrative of employee ownership as a viable model for closing the racial wealth gap made apparent the importance of “crowding-in” champions from the public and private sectors to support the movement.
I came to Haas eager to explore impact investing as a future career path, which promised the notion of driving social impact in tandem with financially viable outcomes. While the mainstream interest in innovation and entrepreneurship on campus was not lost on me, I noticed (and understandably so, given Haas’ proximity to Silicon Valley), an overrepresentation of interest in tech-driven innovation, which corresponded to the high-risk, high-return profile that venture capital investors are equipped to support. As I learned about the various asset classes that could be applied to impact investing, I became increasingly aware of the lack of capital flow towards Main Street innovation and entrepreneurship. My work at Project Equity, supported by the Haas Social Impact Fund, helped me experience this particular segment as I learned about alternative financing structures that meet the needs of small businesses and keep Main Street continuing for the next generation.
