Local community venture capital group EmTek Fund has closed its phase two fund to new investors.
All of the five companies backed in the phase two round have now repaid their loans, with the proceeds returned to investors.
EmTek aims to provide capital to promising San Diego businesses too small for venture capital, but with strong potential to create quality jobs for residents of “underserved” communities and working people lacking advanced degrees.
Typically by leading or participating in a $100,000 to $1 million financing round, EmTek’s investment encourages mainstream equity investors and precedes conventional bank loans, the fund said. In addition to funding, EmTek offers comprehensive business development support, including credit underwriting, business plan evaluations, target area site search assistance and ongoing technical assistance, according to a press release.
All five companies have recently repaid their loans, allowing EmTek to distribute full return of capital to its investors on schedule, according to Mark Sullivan, EmTek’s fund manager.
“The phase-two fund’s performance proved that EmTek’s model works,” he said. “We helped small entrepreneurs build businesses in economically targeted communities of San Diego and created quality jobs for local workers while also providing a reasonable return to investors.”
Streamload, a downtown online file storage company which has grown from two to 20 employees in five years, was one of the five companies all of who are located in EmTek target communities backed by the phase-two fund.
“EmTek loaned us $250,000 alongside a $400,000 equity infusion from an angel investor,” said Steve Iverson, CEO of Streamload, “The VC who led our subsequent venture capital financings initially mentored me as an EmTek advisory board member; now he’s on Streamload's board, we’re bankable, and we’ve paid off EmTek’s loan.”
The EmTek Fund was established in 1995 with a $1 million federal defense conversion grant to the City of San Diego. With support from the County of San Diego and the North American Development Bank, EmTek’s phase-two fund raised an additional $1.5 million, primarily from a consortium of five banks that made equity-equivalent investments through a local nonprofit foundation in 2000, it said.
As of the 2005 reporting period, the five EmTek phase-two portfolio companies employed over 100 people with a combined annual payroll of almost $8 million. 40 percent of these jobs, which paid a median of $66,375 per year, went to targeted workers and/or residents of target communities.
According to the fund, EmTek identifies and develops entrepreneurial ventures on behalf of socially-conscious investors. It evaluates candidates according to strict financial feasibility and social impact criteria to help ensure a win-win-win situation: return for the investors, flexible long-term financing for the entrepreneur and quality jobs for economically-targeted individuals and communities. Investors have helped build businesses and create jobs benefiting San Diego’s underserved communities while meeting their normal risk and return objectives, according to EmTek.
“We take the long view to doing business here, so we actively support innovative initiatives that strengthen San Diego’s economic competitiveness by expanding access to growth capital among smaller and historically disadvantaged entrepreneurs and promoting increased business investment and quality job creation in the region’s underserved communities,” said Mark Lee, senior vice president of San Diego-based California Bank & Trust. “Our obligation to shareholders requires that we do this within prudent safety and soundness parameters, however, so we are doubly pleased with EmTek’s performance, and we have increased our capital commitment to $1 million.”