Multifamily Investor Expo - Feb 15th
What will business investing in opportunity zones look like? Coworking hub and startup incubator Launch Pad may offer the best example I’ve seen so far.
The husband-wife team of CEO Chris Schultz and president Anne Driscoll are on a mission to create the world’s strongest community of entrepreneurial workers. They believe in a world where innovation happens anywhere, not just in major hubs.
Launch Pad’s foray into the nation’s momentum markets could be a blueprint for how venture investing in opportunity zones will ultimately work.
Click the play button below to listen to my conversation with Chris and Anne (and Baby Harper, too).
- Why Launch Pad focuses on momentum markets, and how their vision aligns with the Opportunity Zones program.
- The business case for investing in momentum markets like Nashville and Memphis as opposed to major hubs where venture capital tends to go, namely New York City and the Bay Area.
- What Anne and Chris are seeking in new locations.
- What Launch Pad is eager to see from the IRS in regards to business investing when the final regulations are published.
- How the Opportunity Zones program has become an accelerant for Launch Pad’s business.
- How Launch Pad engages with the local community to ensure they are a net positive.
- The full stack approach that Launch Pad offers to investors: 1) Launch Pad as an operating business; 2) the potential for real estate investment; and 3) venture fund investing.
- What community leaders can do to attract capital to their opportunity zones.
Featured on This Episode
- Launch Pad
- Chris Schultz on Twitter
- Anne Driscoll on Twitter
- Turning Opportunity Zones Into Real Opportunities With Launch Pad (Forbes)
- Survey says half of Bay Area residents want to leave California (Curbed)
- Accelerator for America
Industry Spotlight: Launch Pad
Founded by Chris Schultz in post-Katrina New Orleans in 2009, Launch Pad is a coworking hub and startup incubator that brings together “doers” in momentum markets around the country. The Launch Pad mission of benefiting community by providing entrepreneurial support is aligned with the goals of the Opportunity Zones initiative. They have plans to expand to an additional 25-30 new locations (most of which will likely be in opportunity zones) by the end of 2020.
Learn More About Launch Pad
About the Opportunity Zones Podcast
Hosted by OpportunityDb.com founder Jimmy Atkinson, the Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in opportunity zones.
Jimmy: Welcome to the Opportunity Zones Podcast. I’m your host, Jimmy Atkinson.
Since its founding in 2009, Launch Pad has helped support hundreds of companies which collectively have created 5,000 jobs and raised over $160 million in capital. From Launch Pad’s 22,000 square feet of office space, their entrepreneurs have graduated to fill over 600,000 square feet of office space. What Launch Pad is doing could be a blueprint for how entrepreneurial investment in opportunity zones will ultimately work.
My guests today are Launch Pad’s founders, CEO Chris Schultz and president Anne Driscoll. They join us today from their office in New Orleans. Chris and Anne, welcome to the show!
Anne: Thanks Jimmy.
Chris: Great to be with you today.
Jimmy: Absolutely. I’m glad to have you guys on. So, let’s just dive right in. Can you tell me about Launch Pad’s mission and what you view as Launch Pad’s role?
Chris: Yeah. Launch Pad is on a mission to create the world’s strongest community of entrepreneurs, creatives and professionals, people who are working entrepreneurially in a support system, to help all of us be more successful. And a big part of that is we believe in a world where innovation and creation of companies happens anywhere. And so we’re working towards enabling people in what we call momentum markets. And these are smaller cities around the country, primarily focused in the U.S. right now, to be able to build businesses and build careers where they live now.
Jimmy: That’s great. Yeah, I know a lot of entrepreneurial and freelance work has become location agnostic this last decade or so, and that’s led to a rise in telecommuting. And there’s a lot of benefit, obviously, to being able to work from anywhere, to able to work from home or a Starbucks, etc., and kinda set your own hours. But that’s led to a loss of community for some who work alone, right? And I think you guys are kind of helping to bring that back. The co-working spaces that Launch Pad sets up helps create collisions, and the residents or the tenants, I should say, start to benefit from a networking effect there. So, could you dive into that a little bit more, and tell me a little bit more about your business model and what you guys are up to lately?
Anne: Yeah, you bet. And as you’ve stated, you know, working from home is a wonderful flexibility that’s become almost ubiquitous today as sort of the future of work and the ability to work anywhere has happened. And to your point, it can actually be a fairly lonely job. So if you’re a remote worker and you’re in your home office, it’s difficult to sort of feel that engagement that you would normally get from your fellow employees or team members. More importantly, if you’re starting a business, and trying to do it on your own, it’s always just a huge barrier to get out there, to network, to develop customer relationships, to get help on some of the challenges, to find your first believers, to find investment. And so really, what we do, is we really serve those folks who have the ability to work where they wanna work, to wanna be entrepreneurial, and we create a hub.
And so from a business model perspective, we offer flexible co-working space options, world-class space where you can get the internet, offices, conference rooms, things like that. But we also layer on a really important aspect of community, education, and programming. And what we find is that each Launch Pad location is unique. We strive to make it feel really local and part of the community, working in collaboration with other organizations throughout that community that support entrepreneurs. So the accelerators that exist or the entrepreneurial centers that economic development provides, things like that, and act as that hub and support system. And it really has given us the opportunity to create a great business for ourselves, but also to spawn many more businesses within these cities.
Jimmy: And when I hear of a co-working space or the co-working space industry, my mind automatically goes to WeWork. They’re kind of the big player in the space right now. But obviously, I believe there are hundreds of other ones like Launch Pad, who are set up more locally and haven’t expanded the way that WeWork has. What distinguishes Launch Pad from WeWork or other co-working or incubator companies?
Anne: I think one thing to know, before WeWork there was Regis. And I think what we’re seeing is that we love the fact that WeWork is making the market really understand what co-working can really look like. There’s thousands of independent co-working spaces across the country today. You know, I think at the end of the day, what really distinguishes us is…what would distinguish us from WeWork as much as it would distinguish us from any independent co-working space offered, say by a developer, for example, is, one of the things about flexible work solutions is that it’s actually pretty difficult.
And so, you know, we can offer the Wi-Fi, we can offer the chairs, the desks, the beautiful location, the design of the moment, but what we really see is that the stickiness comes from being a part of our member’s lives and our members’ sort of focus, building a really direct and real connection with the members that exist at Launch Pad, and creating an opportunity and a platform for them to create those connections with each other, and also to use the Launch Pad platform as a way to help build their own business.
So, people may initially come and love the look of your space, but they really stay not for the coffee and the beer, but rather for the fact that it becomes an essential part of their success as an entrepreneur. And that’s why we see very few of our members moving on to other locations because they really benefit from that activated community, the support services that we wrap around, and a growing network of spaces that they can tap into as well.
Jimmy: Come for the beer. Stay for the community, right?
Anne: That’s right. So actually, come for the beer. Stay for the success.
Jimmy: Stay for the success. That could be your new slogan.
Jimmy: Well, I wanna back up for a minute though. Chris, you were the one who founded Launch Pad originally about 10 years ago, in New Orleans. What was the impetus for doing that, for founding Launch Pad, and where did that passion come from?
Chris: Yeah. So we started Launch Pad in a post-Katrina environment, in New Orleans, with an impetus to not just build back to the business community that we had. That was, you know, to be frank, kind of a complacent business community. It wasn’t focused around tech, it wasn’t focused around an entrepreneurship, and to build the business community that we wanted. So Launch Pad functioned is sort of a ecosystem catalyst by providing a platform and a place and a physical hub, where entrepreneurs could work. We had tremendous impact and we were fortunate to have a tremendous impact on the development of the New Orleans startup ecosystem over the first eight or nine years of our existence.
Entrepreneurs working at Launch Pad created over 5,000 jobs, raised $160 million in venture capital, and grew as they graduated out of Launch Pad into 600,000 square feet of real estate elsewhere in New Orleans. And so today, what we’ve really begun to sort of embark on is Launch Pad serving as a catalyst in entrepreneurial ecosystems around this country. You know, we all hear about the startup ecosystems in some of the hub markets, San Francisco, LA, New York. And our goal is to be able to help to catalyze and participate in the community of entrepreneurs in other cities around the country and really replicate that success that we’ve had in New Orleans in cities around the country.
Jimmy: And you start in New Orleans, and you founded the company about 10 years ago, 2009, I believe. But it’s only been in the last year or so that you’ve started expanding to other cities. And you’re in Newark and Memphis and Nashville, today. Can you talk to me about that inflection point that you reached and why you decided to expand to those new cities?
Chris: Yeah. So part of that, this is where we interweave the personal narrative into the story. Anne, whose my partner on this and also is my wife, has a lot of experience scaling businesses. And so she’s a 20-year Silicon Valley exec. I am kind of a zero to one guy, and I’ve had success starting businesses, but have not really scaled yet. And so we came to the conclusion that as we want to create a company that requires some travel, could we do that together? So Anne joined the company and instantly began thinking about scaling, bringing in, you know, a new sort of mindset into the company. And we’ve, you know, begun, over the last 12 months to expand to new locations. And we now have a fully-formed strategy around it as we expand to what we call momentum markets. And so these are cities that have a quality of life, cultural, historic aspects to it where there might be sort of a burgeoning community but is a smaller market that we can help to catalyze those ecosystems.
Anne: Yeah. And as much as I’d like it to be just that I showed up and all of a sudden we started to expand, we’ve been doing work with ecosystems around the world for the last few years. And one of the common threads there is just that successful ecosystems that create a lot of startup activity and, therefore, economic impact, actually come from the creation of hubs and the activation and catalyst of startup folks within those communities. And so it was just a really natural extension for us. We had built this great platform at Launch Pad. We have an amazing community, a successful business model, that it was the time for us to sort of take that ecosystem work and start to have an impact in a bigger way.
And so for me, I’ve been living in the Valley for a long time. I certainly subscribe to the notion that it would be difficult to build a great company outside of Silicon Valley. And, you know, for the most part, major investors there would say, “If you wanna build a great company, and you have a great idea, move here and build your team. This is where the talent pool is.” Well, that’s actually changed a lot in the last few years. And the technology enablement that’s happening right now means you can actually build a business anywhere and the rise of remote teams makes it even more possible.
So it was really kind of a nice, natural extension of the fact that we both, from a philosophical and a mission-driven perspective, wanted to give back and have an impact on the work that we did. And so finding markets where there are entrepreneurs already, they’ve got the agency, they’ve got the desire and starting to really build a network and amplification around that, we really are striving to replicate the impact that Chris was able to have in New Orleans over the last seven years or nine years, and replicate that impact across all the markets that we’re in. And so, that’s really the sort of mission and vision for ourselves as the kind of work that we wanna do as we do that together.
Jimmy: And that mission, that vision, aligns really nicely with the Opportunities Zones program, that you’ve… You have four current locations. And three of them are in Opportunity Zones. Correct me if I’m wrong. I believe your New Orleans, Newark, and Memphis locations are located within Opportunity Zones, and your one in Nashville is just a couple of blocks away from an Opportunity Zone. How did that come about for you? And when did you find out that you had three of your four locations in Opportunity Zones? Was that just good luck or…?
Anne: Yeah, to some extent it was. I think, first of all, with Nashville, we call it a Opportunity Zone adjacent, which has a lot of the same benefits that come from being in an actual Opportunity Zone. And as we looked at our four locations, I think it’s actually a product of us selecting markets and cities and then specific micro-locations that would also fit the philosophy of Opportunity Zones. We tend to look for places where our millennial population choose to work. They tend to be in the downtown core. They have a lot of great lifestyle factors within them. They are looking for places with historical elements and sort of some of that aspect of it.
Those are naturally the places that work for Opportunity Zones because the whole initiative is, “How do we spark and energize communities that have been somewhat left behind as we’ve seen this sort of…” What would we call it? The suburbanization, really, of work. And so, sort of the creation of these office parks. Now we actually wanna see people moving down into the CBDs in these areas. There’s great historical building stock. There’s a lot of walkability. There’s interesting established infrastructure in there, and they tend to lend themselves to Opportunity Zones.
Now, once we heard about the Opportunity Zone legislation, we did have this great moment where we… You know, it’s very nice to have such a validating factor to the strategy that we are pursuing. And I think we see it as not a shift of our strategy, but rather an accelerant to the existing strategy that we look for. And specifically, you know, as we look for what are the next set of locations and you know, we opened four last year or three last year, to become four, we’re looking…we have much bigger ambitions for this year and next. But with the Opportunity Zone legislation, there’s a lot of opportunity and people looking for great businesses that are actually operating in the zones. And we happen to be one of those businesses that operate in the zones. And so we’re really preparing our business, getting the team oriented, building the infrastructure so that we can scale quickly to take advantage of the Opportunity Zone legislation and the very time-sensitive nature of it.
Jimmy: So I wanna ask you about business investing in Opportunity Zones because the Opportunity Zones initiative is really a capital gains-based program. And typically, the types of investments with huge capital gains are going to be business investments, venture investments, and not real estate, which is where we’ve seen the vast majority of these Opportunity Zone funds set up so far. And that’s a result of the regulatory environment currently where we don’t have the final regs from the IRS, and there’s a lot of questions around business investing, obviously. But a question to you. Which types of businesses do you see succeeding or attracting capital as part of Opportunity Zone investment?
Anne: Well, I’ll take a comment on the point about the real estate and the seeking of more Opportunity Zone operating businesses, which is I think real estate investors, by and large, are very good at identifying, working with, and leveraging any tax credit that exists. That’s a very normal function within that industry. And I think for the venture side, what we see is that… And I come, and Chris as well, from the venture side, you know, looking for tax credits, not necessarily in the DNA. We’re looking for big, huge wins, 10X returns, not thinking about, you know, “How are we actually gonna optimize on the tax credit side?”
So, from a DNA perspective, I think there is a slower adoption to it, regardless of the regs being written. We have been thinking about that pipeline of businesses that we can bring in, in advance of the regulations being done because we realized that to create that valuable marketplace, we actually have to have been moving ahead of time to have a list of companies that investors could actually invest in. But I think it is a challenge until the regs are written. Maybe, Chris, can you share with us some of the ideal businesses that you think would be great fits for Opportunity Zone investing?
Chris: Yeah. I think that, you know, Anne covered the comment around that real estate investors don’t need any help. Real estate investors have their…are able to wrap their head around this program and are used to using tax credits to finance, you know, new projects. I think the interesting thing about the Opportunity Zone program is that it was written in a deliberately very sort of open-ended way. And our hope is that when the regs come out, it remains that way, particularly around business investment, because there’s an opportunity with this legislation to transform communities through the creation of homegrown job creation engines, right, homegrown, you know, small businesses and startups that create a lot of jobs.
An example of that is a company that started at Launch Pad, in New Orleans, called Lucid. It started about the same time Launch Pad started. And they were members at Launch Pad in 2010. In the last eight years, they’ve grown to over 300 employees. These are well-paying jobs. And this is sort of a homegrown company that is reflective of companies that can take on business capital through the Opportunity Zone program, provided that some of these regs land the right way, including…and this is getting into a little bit of the policy long talk. But I think your audience, you know, probably is aware of some of this and feels the same way. Provided some of the things like, you know, direct business investing where their revenue is recognized from, that it does not have to be recognized in the zone. These are things that will make the program really function for high-growth businesses and for the creation of these job creation engines in these communities.
Jimmy: Yeah, I think that’s really important to…that the income test requirement be a little bit more flexible for businesses because as businesses start to grow, their income streams start to expand outside of the opportunity zone. You don’t wanna hinder those potential investments.
Chris: That’s exactly right.
Chris: I agree with you there 100%. I know you guys must be very eager to receive more guidance from the IRS regulations that are due within the next couple of weeks here. I think we’ll probably get the second round. So, that’ll be interesting to keep an eye on.
Chris: Yeah, yeah.
Jimmy: What is the investment case for momentum markets? So I wanna talk to you about that because I know that’s your primary focus in setting up shop and in what you’re referring to as momentum markets. So even just forget Opportunity Zones for a moment. Why should I invest in places like Memphis and Nashville as opposed to the Bay Area or New York City?
Chris: So our thesis is around, you know, when you look at the concentration of jobs and the housing challenges that are happening in some of these hub markets… We sort of call San Francisco and New York a hub market. There was a survey that was done last year that over 50% of the people in the Bay Area, that live in the Bay Area right now, want to leave, right? So we would ask them, “All right. Well, where are you gonna move to?” And typically, cities like Austin, maybe Boulder, Colorado, Nashville, some of these cities would be on their list. And so, we think there’s a lot of opportunity and growth potential for this quality of life markets. You know, it might be moving home to where you grew up. It might be moving to where you have family. It might be moving to a place, simply put, that you can afford to buy a house, right, because you can’t buy a house anymore in the Bay Area for anything reasonable.
So, we think there’s a lot of opportunity in these markets, as some of these trends that I describe as inextricable trends, you know, kind of the inextricable match of technology, where we started the podcast talking about the ability to work everywhere, what the internet has enabled, the freelancer movement, we described this as people working entrepreneurially. So it’s not just starting a startup. It might be a small business. It might be a professional services firm. It might be somebody working remotely for a big company. All of these are people who are working entrepreneurially. And that means they’re choosing to have agency in their lives. They wanna choose where they wanna live first and then create a career or a business that supports that.
And a lot of these momentum markets are great markets for people to select, and where people are moving. So we look at things like millennial population growth. We look at things like a great alignment between government, university, economic developers, people who really have their acts together and the business community is sort of, you know, welcoming for this, you know, for this type of growth. And again, from the opportunity…circling back to kind of the Opportunity Zone legislation, one of the neat things about many of these mid-tier markets, you know, sort of smaller markets, is that a vast swath of the CBD or sort of the places that people wanna be is actually an Opportunity Zone. So as opposed to some of the major markets where the Opportunity Zone is tucked away in an industrial area or an area of town that they really kinda wanna redevelop, in a lot of these communities, very desirable real estate, very desirable sort of CBD area, is where the Opportunity Zone is. So we see a lot of upside there.
Jimmy: Well, let’s talk about that a little bit actually. You guys have big plans for future expansion. How many locations are you planning on opening by the end of next year, by the end of 2020?
Chris: Yeah. So we’re targeting 25 to 30 locations opening or in the process of opening, you know, by the end of next year.
Jimmy: And which cities will you be opening in? Is there a specific list already or are you receiving different bids or proposals from different communities or business owners? And, the all-important question, will they all be in Opportunity Zones?
Chris: Yeah, that’s a great question. So, we do have a list internally. We’re also being opportunistic. If you go to a page on our website called lp.co/expansion, we have a little bit of our expansion goals and plans. And that includes a map with some of the cities that we’re targeting. I wouldn’t say we’re exclusively targeting those cities. We’re very open-minded and we have a lot of inbound interests right now. “Forbes” just called us one of the best opportunity zone investments because we’re an operating company and we also have the ability to invest in the bricks and, you know, in the real estate. And we also have the opportunity to invest in companies working at Launch Pad, where, if they’re working at launch Pad, thereby, they’re in an Opportunity Zone.
So there’s a lot of different sort of Opportunity Zone plays around what we’re doing with Launch Pad. And we call that kind of a full stack model. So because of that, we are primarily looking at Opportunity Zone locations right now. We’re not exclusively focused on Opportunity Zone locations. But as Anne termed it, you know, we think of this as sort of an accelerant for our business, and it’s also an area where we feel like we can have a major impact.
So one of the things that I think is important to note is that we are really focused on supporting the growth of the entrepreneurs in the communities that already live in Opportunity Zones. And, you know, it is important to be cautious of, you know, mitigate against, you know, gentrification and forces that drive up, you know, housing prices and that type of thing. So we definitely wanna be focused on the people who live in Opportunity Zones and made them Opportunity Zones in the first place and helping to create economic opportunity for them and being a job creation engine for those folks.
Jimmy: Right. Very thorough answer there. A lot to unpack there. And I wanna ask you a few follow-up questions on some of the points you just touched on in a moment. But first, actually, I wanna go back to my question about the cities. I know you mentioned before finding Opportunity Zones that are located in central business districts or CBDs. What else are you looking for when you decide which cities to go into? What’s your process going to be like for selecting these cities?
Chris: Yeah. So in a lot of cases… I’ll tell you some of the things we’re looking for, and then I’ll talk about the process. So one of the big factors is population growth, and then, in particular, we look at millennial population growth, sort of if there’s a growing millennial population of people moving back. That’s a factor we look at. We also look at rates of business creation, existing rates of entrepreneurship and sort of small business creation. And we also look at sort of community assets, and so, universities, you know, historic assets, and cultural assets, the type of thing that, you know, people are interested in.
One of the things we talk about is, “Does it pass our three-day weekend test?” So, would you be interested in, you know, flying up to Nashville for the weekend, kinda hang out? “Yeah, probably. That sounds like fun.”‘ You know, those are cities that have interests, that, you know, kind of hit people’s radar when they’re thinking about moving places or they’re thinking about moving homes. So those are sort of, you know, some of the criteria. We’ve got, you know, a pretty detailed model, but those are sort of the high level of criteria that we look for in city selection.
Now, from a process perspective, we’ve got sort of two-fold. One is we are generating inbound interest. And so we have both developers as well as economic developers and mayors coming to us and kinda recruiting Launch Pad into their city because of the economic impact we can have. And that’s one kinda channel for us. And then the other is we’re being deliberate and intentional about going out and pursuing markets.
And so we’ve got markets that we’re targeting. We typically go into the mayor or Economic Development Office and try to build relationships with developers in those cities. One note about Launch Pad is that we are an operator of co-working spaces and we wanna be able to bring capital to developments, but we don’t wanna be developers ourselves. So we’re a great partner to local developers that are putting a project together. We’re not gonna develop projects ourselves.
Jimmy: Well, now you’ve got me eager to take a three-day weekend trip to Nashville. I’ve never been there before actually. So, that is on my radar as it turns out. Can you discuss the importance of engaging with the community, going in and speaking with the mayor’s office? How important is it to do that during the initial phase of investment before you start laying bricks, before you start incubating these startup programs?
Anne: Yeah, I think that is one of the most critical differentiators that we take on. As we look at markets, we really are looking for partners in any of the markets that we choose too because if we don’t have all of the ecosystem players, the government, the economic development groups, the entrepreneurial community, supportive of our market entry, then we come in as just, you know, a retail shop and our success is much more challenging. So what we see is that we wanna be a net positive to any of these communities. And the way to do that is to make sure that we go where we actually…people are looking to have us. So we’re often hearing from mayor’s office that they would love to have a Launch Pad in their city. This would solve a lot of their economic activation of the entrepreneurial community. It gives them additional tools and resources that they can offer.
And so, we will look for cities that are really looking to sort of spur that growth. Typically, because we take about a 15,000-20,000 square foot footprint, we’re not looking to dominate any given market. And that makes us kind of a really friendly player to come in to work well with all of the other players and do that. And so we’ll typically take that on a couple of months before we finalize the market. We’ll work with the economic development group. We’ll work with those local folks. Often, the mayor’s department will want us to come in. And we’ll also research the different developers, the different locations, and we’ll do scouting missions. Once we get some alignment there, the engagement with the community doesn’t stop.
And so, as we’re going through the development process, we engage with members of the community in terms of, you know, “What would be the right things to set up?” Pre-opening, we’re working with people to make sure that we help locate meetups, and we create programs and events and structures. And really every Launch Pad acts like the community hub, offering free meetup opportunities for anyone in the community, as long as it’s available to everyone in the community.
Jimmy: Good. Could you dive into your business model a little further, specifically as it pertains to Opportunity Zones? You mentioned earlier intending to possibly have a real estate component. But does that mean you’re gonna be substantially improving existing spaces under the provisions of the program or are you talking about ground-up construction and new co-working buildings or will your potential Opportunity Zone investments, typically, just be within the businesses that you’re incubating and investing in?
Anne: You know, as we think a little bit about the model and how we’ll enter any given market, we will take on different formats depending on the market and depending on what actually makes sense for our business and for the different partners within. And so one way we’ll do that is obviously, we do relationships with developers. We can become an anchor tenant into a development activity that’s existing.
But often times, we’re also looking at, you know, if we’re doing some placemaking, for example, in a town where we wanna kind of come together with some of the developers that are starting to build, live, work, retail and restaurant, and we might actually help be an investor in that project as a separate and activity thing, with the idea that having a Launch Pad in any one of these projects is a great activator for both the community, but also a great success driver for any of these developments. So, where it makes sense, we’ll bring in investors. We may participate in some of these projects because it is, you know, obviously very exciting, and then we get to participate in the upside of those development activities.
Jimmy: Absolutely. So, for potential investors, what is the opportunity here for them? Will they have the opportunity to invest in Launch Pad as an opportunity zone business, and invest in the real estate, and invest in the companies that develop at the Launch Pad locations? What types of qualified opportunity funds will you be offering or possibly multiple project-driven funds or location-specific funds or maybe you haven’t figured this out yet, but just talk me through it a little bit, what your…
Anne: No. And I think that’s one of the most exciting parts of this whole initiative is that this really is a full stack approach, which is we will have investors in Launch Pad. We just raised our first round of financing. We did a seed round with the idea for us to get enough capitals that we could start to accelerate some of the projects, but also start to set the elements that we would need for the next round of capital rates that we’ll do into the management company. So that would be the first area on Launch Pad as an operating business.
Those investors who invest in launch Pad as an operating business will also have the great opportunity if we do decide to do actual real estate projects and real estate investing, we will give them first rights to participate in any of those real estate projects. And on the third way of, side of things, we will have a venture fund. And we’ll operate the venture fund separate from the operating business and not… And we really look at it as, you know, a cradle to scale strategy. And the venture fund looks at businesses that may be working at Launch Pad that are ready to graduate or are sort of building up a level of maturity and filling a gap that really is lacking across the U.S. in some of these momentum markets, between that seed stage and Series A.
And so we really would be looking for exciting opportunities there and the ability for us to invest in companies, not just at Launch Pad, but also within those zones. And so we’ll have an Opportunity Zone dedicated fund that will look to invest, like a venture investor, on a nation-wide scale in these markets and in supporting the growth of businesses that operate within the zones.
Jimmy: Well, that’s great. And congratulations on closing that seed round funding. Could you tell me a little bit more about your Opportunity Zone fund? And I understand maybe you don’t have all the details worked out yet. But do you have a target for the amount you wanna raise?
Anne: Yes, we do. And it’ll be dependent, obviously, with an Opportunity Zone fund, especially, on the venture side, the structuring does get a little bit more complicated. So we’re sort of looking at an initial placement around $20 million to start the process. And so that will be sort of the first fund with the idea that because of the investment timelines and sort of constraints there that would allow us, and then we could start to deploy that capital ,and then begin doing the follow on funds.
One of the pieces that we’re doing is in the process right now of sort of waiting on the regulations really to get the final structuring in place. And so obviously, the venture fund takes a little bit more time, and we are really dependent on those regulations for us to make those moves. But, in the meantime, we are actively soliciting and looking at great companies and trying to find, build a pipeline of companies that would be potentials for us to consider once we have that venture fund in place.
Jimmy: Very good. For our community leaders out there who may be listening, people from the mayor’s office or maybe the mayor himself, or economic development teams, what can local community leaders do to attract capital to their Opportunity Zones? What they can do to get in front of the right people?
Chris: That’s a great question. So there is a group, an accelerator program, called Accelerator for America, that is helping cities prepare a prospectus. And so that helps them prepare kind of a structured prospectus with various, you know, parts of their zone and what they might be prime for in terms of investment. So that’s one of the places I would point people to. And that’s acceleratorforamerica.org. There’s also a group that we work with that’s developing something called the OZ Guide.
You know, so the first thing I would say is kinda put yourself out there in the Opportunity Zone community. You’re probably hearing things. I’d ask you the same question. But I just heard a remark the other day at one of the Opportunity Zone conferences, that there are 20 Opportunity Zone funds that have raised more than a billion dollars each or are targeting a billion dollars each. And their biggest challenge is deal flow, is lack of projects to invest in.
And so, I think there’s a tremendous opportunity to have a first mover advantage and to put yourself out there as a city. And mayors who are wrapping their heads around this have a competitive advantage. And two mayors that I think are out there that are doing this is Mayor Tubbs of Stockton, California, is doing really well. Mayor Greg Fisher of Louisville is doing really well at talking about their Opportunity Zones and talking about these programs and recruiting investors in. So I think being out there and being kind of front and center as this wave of opportunity, so to speak, is happening is really crucial.
Jimmy: Right. Yeah, Stockton and Louisville are two of the cities I’ve heard referenced before. And Erie, Pennsylvania, is the third that comes to mind, that gets referenced a lot in terms of building a city prospectus for potential investors and… Yeah, I think it’s all about… I think you’re right. The problem isn’t raising the capital. It’s more getting the deal flow and finding those shovel-ready projects. And whatever community leaders can do to, you know, eliminate a lot of the red tape with getting planted and getting all of the paperwork done to get these projects off the ground within their Opportunity Zones, I think that would help significantly as well.
Well, we’re getting toward the end of our discussion here. And I wanna let you guys go soon so you can tend to Harper. But I had a retrospective question for you, Chris, and I’d love for Anne to answer it as well. What is the most memorable investment that you have ever made? Are there any that come to mind? Any that stick out?
Chris: Well, that’s a great question. I think, well, one, for any entrepreneurs listening, investing in myself, investing in ourselves. You know, being an entrepreneur and believing in yourself and taking a swing at that is certainly the most meaningful thing that I’ve ever done and had the privilege to do and be able to build businesses. And it’s an ongoing process, so you’re always trying to get to the next level. But I think reflecting on that is certainly an important thing.
In terms of investing in somebody else’s business, the company that I referenced earlier, Lucid, which was a New Orleans based company, that, you know, was the first check in, the first investor, they started at Launch Pad. That’s how I got to know the founder. And now they have over 300 employees and are doing really well. They just raised a $60 million around a capital. That’s probably the most notable company that I’ve invested in and I had a lot of fun working with them. Anne?
Anne: I’d say Launch Pad. I think we’ve been investing the last year. It’s probably the most on the rope side bend since leaving Silicon Valley big jobs. And it’s really meaningful and exciting work. And we are planning to do it for the long haul. So that’s the most meaningful for me.
Jimmy: Well, that’s great. I love the work that Launch Pad is doing. I love your story. Could you tell our listeners where they could go to learn more about both of you and about Launch Pad?
Chris: Sure. Launch Pad is lp.co. For any of your listeners interested in a Launch Pad in their city where they live or a project that they’re working on, we have an expansion page that’s lp.co/expansion. We’re on Twitter, @launchpad, is our handle on Twitter. I’m on Twitter @cschultz, C-S-C-H-U-L-T-Z. And Anne is on Twitter @annedriscoll, @A-N-N-E, D-R-I-S-C-O-L-L.
Jimmy: Excellent. And for my listeners out there, I’ll have links to all of the resources that Chris and Anne and I discussed on the podcast episode today. I’ll have links to Accelerator for America, the “Forbes” article that was referenced, and to the Launch Pad links and their social networking sites as well. Social networking profiles as well.
You can check out the show notes at the Opportunity Zones database website, at opportunitydb.com/podcast. Well, Chris and Anne, thank you for joining me today on the show. Like I said, I Iove the Launch Pad story. And I wish you guys nothing but the best going forward, and I hope to talk with you both soon.
Anne: Thanks, Jimmy.
Chris: Thanks so much for having us on. This was a lot of fun.
Jimmy: Awesome. Alright. Thanks, guys.