Investment Funds will Partner with Private Sector and Target Diverse Entrepreneurs at Early Financing Rounds
Today, New York City Economic Development Corporation (NYCEDC) announced the launch of two Requests for Proposal (RFPs) for the Emerging Developer Loan Fund II (EDLF II) and the NYC Catalyst Fund. These RFPs demonstrate NYCEDC’s increased use of financing to achieve its inclusive economic development objectives, as well as NYCEDC’s commitment to inclusive entrepreneurship by strengthening neighborhoods, leveraging third party capital, and focusing on partnership with the private sector. Each fund will focus on breaking down the barriers entrepreneurs face in gaining access to financing at a critical moment in an entrepreneur’s journey where access to capital remains a roadblock to success.
“These new NYCEDC funds are two more examples of the Adams Administration’s commitment to equity, access, and economic mobility,” said Deputy Mayor for Housing, Economic Development, and Workforce Maria Torres-Springer. “The City will leverage private dollars for maximum impact, working with segments of the business community that have historically had the hardest time accessing one of the most important inputs for a successful business: capital.”
“Providing capital resources to diverse entrepreneurs is a critical part of equitable economic development in New York City,” said NYCEDC President & CEO Andrew Kimball. “These two funds are key examples of NYCEDC utilizing financing to achieve our goal of creating a vibrant, inclusive, and globally competitive economy for all New Yorkers. NYCEDC looks forward to supporting even more entrepreneurs and growing businesses through these initiatives.”
“A vital part of an entrepreneur’s livelihood is access to capital funding, and I am proud of the initiative that NYCEDC has taken to see through their commitment of creating an equitable economy in New York City,” said Margaret Anadu, Chair, NYCEDC Board of Directors. “The NYC Catalyst Fund will play a key role in helping emerging entrepreneurs access capital while also reaffirming that New York City is the best play to live, work, play, and do business.”
“Mayor Adams’s creation of my role as Citywide Chief Business Diversity Officer is evidence that equity and diversity within our City’s expansive entrepreneur and emerging developer community still remains a challenge,” said Chief Business Diversity Officer Michael J. Garner.“These new loan funds will play a critical role in meaningfully addressing these challenges, with the private sector as key partners leveraging material resources where most needed. I look forward to supporting President Andrew Kimball and NYCEDC in this effort and stand as an able partner in eliminating the historic inequities in our great City’s business community.”
EDLF II will provide pre-development, acquisition, and construction loans to New York City-based emerging real estate developers who have limited access to capital. EDLF II proceeds can be used for New York City-based real estate projects including affordable income housing, mixed-use, industrial, and commercial projects. This program is larger in size and builds on a prior Emerging Developer Loan Fund launched by NYCEDC in 2016. That fund successfully issued $5.5 million in loans, and as a result, four projects were supported by the funding.
NYCEDC has released an RFP for a third-party fund administrator that will raise additional capital and operate the fund. NYCEDC will capitalize EDLF II with $5 million and is targeting a raise of an additional $25 million of private capital for a total fund size of $30 million. Upon completion of the initial fundraise, the fund administrator, in partnership with NYCEDC, will launch EDLF II.
EDLF II helps to address industry inequity as minority developers consistently face barriers to access capital. Out of approximately 112,000 real estate development companies in the United States, approximately 111,000 of them are white owned. Additionally, out of the 383 top revenue generating developers, only one is Latino-owned. This is attributed to the racial wealth gap in our country that leaves aspiring businesses without the necessary capital for them to successfully complete projects. EDLF II will help bridge these gaps by providing the necessary capital resources needed to elevate these businesses who have historically fallen behind in the industry.
The RFP for the NYC Catalyst Fund is soliciting responses from fund managers whose core financial and impact objectives align with NYCEDC’s priorities. The NYC Catalyst Fund will focus on impact investments and be capitalized with $40 million from NYCEDC. With the initial allocation, NYCEDC plans to invest in 10-15 private credit and private equity funds managed by external fund managers with investments ranging from $1 million to $7 million each. NYCEDC is interested in funds operating in the following impact areas: inclusive entrepreneurship, community development, and high-wage, high-growth sectors such as life sciences, technology, offshore wind, and the green economy/climate technology.
This Fund comes at a critical time of inequity within the industry. In 2022, Black and Latino founders received only 1 percent and 1.5 percent respectively of total US venture capital (VC) funding. Women-founded teams received 1.9 percent of VC funds and only 0.1 percent of VC funds went to Black and Latino women founders. The total funding received (across all stages of funding) for the highest-funded start-ups at the time of exit reveals that the average start-up of a White male founder received over $210 million in total funding, while the average start-up of an underrepresented founder received 43 percent of that—$91 million. The NYC Catalyst Fund will promote greater inclusivity in the industry while also providing significant economic development opportunities.
Once operational, the NYC Catalyst Fund is expected to generate regular distributions to NYCEDC that will fund core economic development programs.
New York City Economic Development Corporation is a mission-driven, nonprofit organization that works for a vibrant, inclusive, and globally competitive economy for all New Yorkers. We take a comprehensive approach, through four main strategies: strengthen confidence in NYC as a great place to do business; grow innovative sectors with a focus on equity; build neighborhoods as places to live, learn, work, and play; and deliver sustainable infrastructure for communities and the city’s future economy. To learn more about what we do, visit us on Facebook, Twitter, LinkedIn, and Instagram.