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Community
Development Venture Capital
(FRBSF Community Investments, PDF - 83KB)
Kerwin Tesdell, Community Development Venture Capital Alliance
Summary
CDVC organizations use the tools
of venture capital to conduct community and economic development activities
as defined in the CRA regulation. CDVC funds make equity and equity-like
investments in small businesses that hold the promise of rapid growth
and a “double bottom line” of not only financial returns
but also community and economic development benefits. CDVC funds come
in many different forms, including not-for-profit, for-profit and
quasi-public organizations. Their structures encompass for-profit
“C” corporations, limited partnerships, limited liability
companies, community development corporations (CDCs) and Small Business
Investment Companies (SBICs). CDVCs fund investments ranging from
the purchase of preferred and common stock to the provision of subordinated
debt with equity “kickers” such as warrants or royalties.
Investments in CDVCs should be carried as investments on the investing
institution’s balance sheet in accordance with Generally Accepted
Accounting Principles (GAAP). |
