Companies Creating Vertical Investing Opportunities, Others Investing in Communities
There is a new trend toward investing in American initiatives that aligns with the president’s focus on making the country great. Initiatives are cropping up to help create the potential for novel investment opportunities.
Some of these investments are being created by companies that themselves enjoy shareholder capital. For example, Starbucks is investing $100 million in a newly created fund designed to help companies that develop new technologies and products for the food and retail industry. The goal of the Valor Siren Ventures Fund is to support entrepreneurial businesses that could benefit Starbucks with commercial partnerships in the future.1
In 2016, Tyson Foods founded a similar fund, “Tyson Ventures,” with the goal of investing in businesses that focus on developing plant-based protein. Kraft Heinz and PepsiCo also have set up similar funds.2
Leave it to American ingenuity to find investment opportunities in businesses that aren’t publicly traded. In many cases, these opportunities are available to average investors willing to put a stake in the future of U.S. startups. The mutual fund structure of these initiatives offers the advantage of diversifying risk – and reward potential – as opposed to angel or venture capital investments in a single business. Bear in mind that these sorts of funds are still relatively high risk and should be vetted and carefully considered within the context of an individual investor’s portfolio. As always, if we can help you evaluate new opportunities, we’re here for you.
Large, traditional investment managers also are participating in niche company opportunities. Goldman Sachs recently announced it is investing $500 million into companies led, founded or owned by women. This is Goldman Sachs’ second initiative aimed at promoting female entrepreneurs, in addition to assisting clients interested in investing directly in private, late-stage companies and women-led investment funds. These efforts are designed to help level the playing field for women with big ideas who are often outside the traditional funding channels.3
In the exchange-traded fund world, one new product is angling to pay investors to participate in the fund. The Salt Low truBeta US Market ETF is billed as a low-volatility fund that charges investors 29 basis points per year to invest – but plans to pay investors 5 basis points for every $10,000 they invest (this feature is pending approval by the Securities and Exchange Commission).4
America Online co-founder Steve Case has raised $150 million so far to launch a “Rise of the Rest” fund. Its objective is to help capitalize entrepreneurs in non-coastal cities like Indianapolis, Detroit and Birmingham, Alabama, that are often overlooked by venture capitalists. Case himself is focusing particularly on technology entrepreneurs looking to revolutionize the farming industry. For example, developing robot tractors that can be operated remotely.5
Another grass-roots movement is at the city level, encouraging residents to invest in neighborhoods and small businesses. In Michigan, one community has established a fund that allows locals to pool small amounts of money and vote on how they want to invest it to improve their neighborhood – with the opportunity for investment returns. For example, buying abandoned houses, remodeling, and then renting or reselling them. In other initiatives, neighbors may pitch in to fund local businesses, such as new coffee shops or restaurants, which would then share the revenue with investors as the businesses grow.6
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1 Aishwarya Venugopal. Reuters. March 20, 2019. “Starbucks sets up $100 million fund to invest in food and retail startups.” https://www.reuters.com/article/us-starbucks-fund/starbucks-sets-up-100-million-fund-to-invest-in-food-and-retail-startups-idUSKCN1R11JU. Accessed March 25, 2019.
3 Rishika Dugyala. Reuters. June 19, 2018. “Goldman Sachs to invest $500 million in women-run companies.” https://www.reuters.com/article/us-goldman-sachs-women/goldman-sachs-to-invest-500-million-in-women-run-companies-idUSKBN1JF38W. Accessed March 25, 2019.
4 Lizzy Gurdus. CNBC. March 24, 2019. “An ETF that pays you to invest just hit the market.” https://www.cnbc.com/2019/03/24/an-etf-that-pays-you-to-invest-just-hit-the-market.html. Accessed March 25, 2019.
5 Sharyn Alfonsi. CBS News. March 17, 2019. “Venture Capitalist Spreading Funding to Middle America.” https://www.cbsnews.com/news/venture-capitalist-steve-case-spreading-funding-to-middle-america-with-rise-of-the-rest-60-minutes/. Accessed March 25, 2019.
6 Adele Peters. Fast Company. April 3, 2018. “This Startup Lets Neighbors Pool Their Money To Invest In Their Communities.” https://www.fastcompany.com/40553334/this-startup-lets-neighbors-pool-their-money-to-invest-in-their-communities. Accessed March 25, 2019.
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