The First Venture Capital Opportunity Zone Fund, with Brian Phillips

Brian Phillips

It’s been nearly six months since the IRS issued its second tranche of regulatory guidance on Qualified Opportunity Funds. How are business Opportunity Zone funds proceeding?

Brian Phillips is managing partner of The Pearl Fund, the first Opportunity Zone fund to focus exclusively on business, using a venture capital model.

Click the play button below to listen to my conversation with Brian.

Episode Highlights

  • Advantages and disadvantages to being a first mover in Opportunity Zone business investing.
  • Why business investing may be the best use case for Opportunity Zone investment, both in terms of investment return and economic impact.
  • Brian’s response to the August 31 New York Times article that was critical of the Opportunity Zone incentive.
  • The importance of diversification and balancing an investment portfolio between both business and real estate.
  • The coming Opportunity Zone business investment movement, or “second wave” of Opportunity Zone investing.
  • Best practices for structuring, capital raising, and timing Opportunity Zone multi-asset business funds.
  • The challenges that the Opportunity Zone tax incentive pose for venture capital investing.

Featured on This Episode

Industry Spotlight: The Pearl Fund

The Pearl Fund

Based in New York City and Scranton, PA, The Pearl Fund is the first Opportunity Zone fund focused on delivering venture capital to early-stage high-potential businesses primarily in the tech sector.

Learn more about The Pearl Fund

About the Opportunity Zones Podcast

Hosted by founder Jimmy Atkinson, the Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in opportunity zones.

Show Transcript

Jimmy: Welcome to the Opportunity Zones Podcast. I’m your host, Jimmy Atkinson. And on the show with me today is managing partner of the Pearl Fund, Brian Phillips. The Pearl Fund was one of the first Opportunity Zones Funds that focused exclusively on business using a venture capital model. Brian joins us from his office in New York City. Brian, welcome to the show.


Brian: Thanks, Jimmy. Thanks for having me on. I’m looking forward to it.

Jimmy: Good. I’m looking forward to speaking with you, too. I know I’ve tried to get you on for a few months here. I think the regs, the delay in getting the regs out from treasury kind of delayed you being able to launch your fund and talking to me about it, but now you’ve got a little bit of experience under your belt with getting this fund launched. So looking forward to our conversation today. Let’s talk about your fund because it’s a unique fund. It’s not pure vanilla real estate play like a lot of these first, you know, few dozen, or hundred or so OZ Funds are. Your fund has a venture capital angle to it. Can you tell us a little bit more about that and what specifically makes your Opportunity Zone fund unique?

Brian: Yeah, so the regulations clearly said, in October, when they first came out the proposed regulations, you could do real estate or you could do business. And when I saw that, I just realized immediately the great potential that’s there, and we focus exclusively on early stage, small businesses that have high potential at the Pearl Fund, and not real estate. And there’s probably, depending on whose list you look at today, maybe 200 funds that are out there, and there’s just 1 or 2 of us at this point, but we hope there’ll be many more in the future that focus on business.

Jimmy: Yeah, I think there’s a second wave of investment coming that I hope does focus a lot more on business.

Brian: Yes, I agree.

Jimmy: Talk to me more about the process that you had to go through in getting this fund launched because you had the idea for this fund well before the April 2019 regs came out that clarified a lot of these business issues. What was that, like, you know, waiting for those regs to come out? Talk to us about the delay that you encountered, just kind of waiting on the IRS, because the initial set of regulations cleared up a lot of issues for real estate. And so a lot of real estate funds got going and that was pretty simple for them. But being a business fund, like the Pearl Fund is, I would imagine that you had to kind of tap the brakes a little bit. Tell us what that was like and maybe take us through that history of playing that waiting game.

Brian: Yeah, sure. So the regs proposed, first ones came out in October, and by Thanksgiving, a couple weeks later, we opened the Pearl Fund and found council, you know, that said they knew what they were doing and we put together some set of investment documents and tried to rush in so we could take some capital in by the end of the year. And decided wisely to have those documents analyzed by somebody. And I chose Novogradac, because they seem to be one of the leaders in OZ and taxing it. And they looked at it and they called me and said, “Do not open the fund. These docs are not sufficient. It’s complex and there’s a lot of rules with business investing.” We basically had to throw those away and search for other legal counsel and completely start over. And so I wouldn’t wish that on anyone else, but it’s really important to get it right and get it done correctly. And being the first, there’s a lot of people we hope that will follow. And so we had to spend quite a bit of time really figuring out how to do that. And we found two big firms, Novogradac advised us, as well as Polsinelli who had admitted they had not done…they had done real estate deals but never done a multi-asset venture model. And each picked a partner, and the three of us learned, you know, over the winter and spring how to put one together and come out, and we then decided that April regs were shortly coming so we decided to just hold off, see what those were, and then we opened shortly after that.

Jimmy: Well, that’s good. That’s good. Yeah, you definitely have a first mover advantage. But I suppose there’s some disadvantages to being a trailblazer. It could be a bumpy road, getting this thing off the ground. But now that you’ve kind of blazed that trail, hopefully a lot of others do follow after you. Brian, I wanna talk about you, personally, for a minute here. Can you give us some of your personal background? Tell us the story of how you got to where you are today. And why did you get involved in Opportunity Zone investing?


Brian: Yeah, great question. My background is a serial technology entrepreneur over my career, been in the early team, founding team of two companies that went public, two were acquired by public companies and one I sold through a management buyout with a lot of international experience of building those companies. So when that was done, I said I need to really give back and, particularly in the developing world, I felt a real calling for that. And I said, “I could go to Peace Corps and dig ditches like anyone else. But what I’m really good at is starting companies.” There must be some nonprofit organizations that are involved in entrepreneurship in emerging markets around the country, around the world. And there are several, one is called Endeavor Global. So I advised and consulted with them for a little while, and then another called Techno Serve, and did worldwide entrepreneurship for that organization. And then Goldman Sachs asked me to come help them with their famous 10,000 women project.

And what’s interesting about that project is it’s based on a research that Goldman did, that the number one way to impact an emerging economy is through SME entrepreneurs, not micro entrepreneurs, but SME entrepreneurs. And the best of the best are women SME entrepreneurs in emerging markets. So they put me on a plane and I traveled all through Africa, India, China, Latin America, meeting SME entrepreneurs in their 10,000 women program, and I saw firsthand the impact that growing SME entrepreneurs has in a developing economy. So when the Opportunity Zone passed and I saw that you could do business and it’s investing in local business tracks and my background of being a serial tech entrepreneur, I said, “Wow, I have seen this work. I know how it works, I should do this.” And that’s how it all came about.

Jimmy: Good, Brian. Well, that’s good to get some of that insight from you on SME entrepreneurs, particularly women, SME entrepreneurs. That’s interesting. I wanna shift gears now. Talk about startup investing, what you’re doing with your fund. I’ve said many times on this podcast that I believe startup investing may be the best use case for Opportunity Zone investing. I assume you believe that to be the case as well. But why is that? Maybe you can expound on that a little bit.

Brian: Yeah, I certainly agree with you. I think that with business investing, you can have greater returns, and that’s greater financial returns and greater impact, return on the investment in terms of the impact that you have on the community. Because when you think about real estate, you know, real estate deals are good deals that they’re putting together, you might get a 2x return, have a big home run, you get a three or very unusual of four x. With startup investing, particularly what we’re looking at, we’re looking at minimum of a 10x return for these companies. And many have the potential to be much greater than that, 50 to 100x. So it has the potential for much, much greater returns than you can ever get financially with real estate, but also an impact. Because in construction, you have a lot of good jobs that happen, but many of them are temporary jobs. And once the buildings are done and built to the properties done, you may have a few jobs in terms of maintenance and whatnot, but that’s it. What we do is we look for small companies that are 2 or 3 people within a year, they should be 30 to 50, and in 2 or 3 years, the ones that make it are 200 to 300, maybe 500 people, those are long-term, well paying jobs that are definitely gonna have a much more significant return in terms of impact in those Opportunity Zones.

Jimmy: And from an investor’s perspective, that the big incentive for Opportunity Zone investing is that last one, the exclusion of capital gains liability on the back end within the Opportunity Zone investment. The deferral of the original capital gains is nice, the reduction in your capital gains liability by 10% or 15%, depending on your holding period is nice, but the big one is the exclusion on the back end and that’s where you want those big returns if you have, you know, a 1.5X or a 2X return on a real estate investment, that’s great. But you know, and you’re saving a little bit on taxes, but imagine that the capital gains tax savings you would have on an investment that goes 10X or even 100X in a business model.

Brian: Yeah.

Jimmy: Obviously, it’s riskier. Your real estate investment is not likely to go to zero but a business investment could. [inaudible 00:08:52]

Bran: Yeah, that’s a good point, and I tell investors, “Look you wanna diversify between both.” It’s not do one or the other. So with real estate Opportunity Zone investing you have a capital asset, you have a land, you have building, you have something there and it’s safe and it’s secure but it’s a lower return. Put some money there and put some money, save some money for an Opportunity Zone Venture Business Fund, that has much, much higher potential and has much higher return, but is higher risk, and just spread it depending on your risk profile, a percentage in one and a percentage in the other. But it’s not all one or the other. It makes a good sense to balance your investing portfolio between the two.

Jimmy: Absolutely. I think that’s wise advice. We touched upon this briefly a few minutes ago, how your fund and others like yours, you’re kind of blazing the trail for startup or for operating business investment within opportunity zones, aside from just plain Vanilla Real Estate deals that have seemed to be the first wave that was getting done. I kind of look at this as the second wave. Can you talk about that a little more, talk about the OZ business movement that you foresee coming, what’s that gonna look like? And maybe you can share some anecdotes of what you’ve seen so far.

Brian: Yeah, that’s a great question. We wrote an article late in the spring, talking about the three what investors need to know about the three waves of Opportunity Zone investing. It’s on Forbes. And we feel like first wave was real state because it was much easier to do, as we already talked about the regulations were clear and simple for real estate investing and it took a while to figure it out with business investing. So they had a head start, but it’s also not that different than what they’ve been doing with the enterprise zones and empowerment zones and these sorts of things. But business investing is different. So I feel like the second wave is business investing, that’s just getting started to the later tranche of regulations and more of us are getting up and going. And the third wave will be focusing on real estate and business working together because they really need to, as real estate expands, they need tenants that are gonna pay that rent. And Opportunity Zone businesses that grow and expand from 50 to 300 are gonna need good space to occupy that are still in the zone. So they’ll be pretty much tied in together.

So what we’re seeing right now is a lot of real estate, a lot of articles about it. But we’re just starting to see the infancy of business investing with Opportunity Zones. And being the first we have the fortunate position to have a lot of people calling us and saying, “I wanna do what you’re doing. I want to have a business fund in myself, I’m a serial entrepreneur, I live near an Opportunity Zone.” And so what we’ve committed to do at the Pearl Fund is, in addition to running our own fund here in the northeast part of the U.S., is help anyone who wants to build and Opportunity Zone business fund as much as possible to save the work and the time that we have to go through and everything from best practices to co-investing in each other’s funds, to even co-running funds together that are focused on business opportunities in their geography. And we find it to be very geography-centric. Somebody wants to invest in opportunity zone businesses and opportunity zones near where they live. And doing it way across the country in different locations doesn’t seem to be happening near as much people, it’s local based investing, wanting to have that impact and those sorts of returns in their own neighborhoods.

Jimmy: Well, I think that those are the types of funds that may have the best success because they’re able to have boots on the ground in those local communities and engage with local community leaders and other actors and the residents there. I like those smaller funds that have boots on the ground, maybe that’s just me.

Brian: No, I completely agree. And you know, it’s funny, that definition of a micro VC Fund is a fund under $100 million. So I see with real estate the really big guys have moved in the big funds. But what we don’t see on businesses, is the big venture capital funds moving in. If anything, a lot of venture capital is getting bigger and bigger and doing later stage investments and they’re sort of betting on the proven winners and raising enormous funds, which means they need to put a lot of capital to work. And this is scrappy is what I like to say. So these are all within the community, spending time in the community, spending time with these entrepreneurs, early stage helping them succeed, putting much smaller parts of capital into these and making sure it’s successful and maybe reinvesting again and continuing. And that’s not really something that the big VC funds are doing.

So I think you’re right, it’s gonna actually be a movement of people like us and people that we’ve been talking to who are serial successful entrepreneurs who really wanna have an impact and have a return and put a fund together in their area. And it’ll be a large movement of many of these smaller funds putting together in their local areas, as opposed to really big players coming in and investing big chunks of money.

Jimmy: Right, right. Let’s focus more on your fund, the Pearl Fund. Could you tell us what specifically is the Pearl Fund doing? Where are you investing? What types of businesses are you incubating?

Brian: Yeah, good question. We are focused…two locations near where I live. And that is in New York City and in the Scranton area. So we have offices in both locations. And we’re focusing on early stage high potential businesses, usually the first set of capital into those companies. So what’s interesting is we’re working in the Brooklyn Navy Yard, which is an opportunity zone right outside New York City and Brooklyn that’s been completely rehabbed, where they used to build World War 11 battleships and whatnot. And as a surging economy with 400 companies, they are now and it’s supposed to triple in a couple of years. So it’s really a good test case for lots of good deal flow, lots of early stage startups that are all already in opportunity zones in the Scranton area. There’s three different opportunity zones with local incubators and office space available with companies already in them. So we’re balancing and trying to build best practices between two extremes, almost one in the middle of the country and one outside a thriving city being New York City to really get best lessons and practices on how to both of these work and how do we have a successful fund that invests in these sorts of businesses. So we are right now in the middle of doing due diligence on a couple of companies and looking at doing our first set of investments before the end of the calendar year.

Jimmy: And what types of businesses… ? Are these tech startups? Or are they manufacturing, or what are we looking at here exactly?

Brian: Yeah, so we are focusing a lot on tech, but there’s some outliers out there. So the first thing we say is it’s important that we understand the business we think it has that 10 plus, plus, plus, x potential. We like the founding team, we understand the business and something that when we come in and work with them, we know what we’re doing. We’ve been involved in the space, our network, over 30 years of investors and consultants and advisors are a network that will help this company. So if it’s something we don’t really know or understand or a network isn’t really suited for, it doesn’t really make sense. It may be a great business and has potential, but it’s really not the right one for us that we really feel like we can have impact and make these businesses succeed.

Jimmy: Right. So you’re focusing on business types that kind of fall in your wheelhouse of understanding. I think that’s smart. If you don’t mind, I wanna talk numbers with you for a minute. I wanna know, what’s the target size of your fund? How much money have you raised so far? What have you deployed so far? And how many businesses would you like to be in your portfolio by the time the fund closes?

Brian: Yeah, so with an opportunity zone multi-asset business fund, it’s an interesting question, because even though you have a fund size, that you say, “This is our fund size,” it’s not really too relevant. What’s important is we raise money in tranches, and those tranches are sizes of a subset of what you say your fund size is, that you know that you can put that money to work within the deadlines that the odds regulations give you. So a typical fund, that’s a venture fund will have a certain number, they get commitments for that number, and then they pull down capital draws on that amount as they invest over a couple of years. You can’t really do that with an OZ fund. So to answer your question we have announced that our fund was 25 million, but we didn’t get going until almost June. So we’ve said this year, we’re gonna have a $10 million fund. And we’re raising it in a couple of tranches that we are sure we can put to work at each time. So we’re still on our first tranche and we’re about 50% there. It gives us the ability to probably make two investments for sure by this end of the year, and then some in the spring.

So it kind of you have to do it and chunk by chunk and there’s an advantage in opportunity zone business funds to actually do a new fund every year. So we’ll sort of see what happens at the end of the calendar year and just open a second fund. That way you keep all of your investors in the same 10-year tranche for exits, which is very, very important because, otherwise, you have to wait until the last person in the fund reaches their 10-year mark. So if you have a fund open for three years, first person who puts money in has to wait 13 years before they can get that tax advantage. So we think it’s advantageous for business funds to open one every calendar year is better so that you keep them in those tranches. So it’s doing sub-tranches, and one per particular year is really important.

Jimmy: Gotcha, that makes a lot of sense. So each fund would be a multi-asset fund, but may not invest in 25 or 30 businesses, that would take years to identify. Maybe just two or three, if I’m understanding you correctly. And then basically, that allows all the investors to exit at the same time after 10 years, is that right?

Brian: Yeah, yeah, but we like to do more than two or three, so you may do smaller investments than you intended, because it’s nice to have a diversification on a number of investments that you’ve got, as well. So it’s sort of balancing a number of things that you’ve got to do to make sure you really run a good fund. And it sort of depends on how much capital is in, how many good deals you have. But one of the things we’re doing is building this network of all the other business funds so that there’s an opportunity for us to know about each other’s deals and even be able to deploy capital in a co-investing scheme, and another fund somewhere else that makes sense for investing. So part of it is, as we build all these funds, you know, one fund and another can collaborate on certain deals that are real winners that are out of their portfolio and co-invest in them as well.

Jimmy: Okay, that’s interesting. Yeah. And I suppose that only helps you with being able to get that capital turned around within the 180-day timeline that you’re working under. Is that right?

Brian: Yeah, you don’t wanna get in a situation where you’ve got the capital in and you’ve got a deadline from us. And for people that don’t know you have to have 90% of it deployed, about every 6 to maximum 12 months on 1231 and 630. So if you get to that deadline, what you don’t wanna do is have too much capital on paid penalties. But you also even worse and say, “Oh my gosh, I’m gonna put this in the best investment,” that’s not a good investment. So by having a whole network of opportunity zone business funds and other people have vetted those deals and have winners so we can talk to each other, it gives a great opportunity to diversify our funds as well as prevent that risk from happening.

Jimmy: Yeah, if you don’t mind me asking you, who are some of the other players in this space that you have some of those partnerships with or those relationships with, some other types of funds like yours?

Brian: Yeah, so I just finished a road show and drove around the country 5,000 miles and I went from New York to New Orleans, and then Houston, and then up to Austin, and then out to Colorado, and Denver, and then over to DC and Baltimore. So all of those cities are people I’ve met with who are in the process of forming a fund at this point. We should have an announcement probably October, November of three or four of them opening. And there’s probably another dozen that we’re in discussions with around the country. So they’re all over, but they haven’t yet opened in there. They’re in the process of doing the legal docs and building the portals and whatnot at this point. So we’ll tell you soon.

Jimmy: Good, but we’ll be on the lookout for those announcements. And you’re helping them, right? You’re providing some resources and some support to getting those funds up and running. I believe you mentioned previously, is that correct?

Brian: Yeah. So we’re encouraging anybody, we’re happy to talk to them who’s doing a fund and help them out. But some in these particular cases, we’re actually going to co-run the fund together. So these will be like a family of Pearl Funds. But each one is in a different geography, and is run by a different general partner, managing partner, and oftentimes is focused in what their background and experiences in terms of the industry that they want to invest in. So everyone is completely different as actually quite exciting to see all the different opportunity zone business funds, all the different areas, it’s being applied not only geography wise, but also in a particular vertical that they’re focusing on my background being tech. Many of these are not tech funds, they’ll be focused on other industries.

Jimmy: Gotcha. Right. That make sense. We talked a little bit about the regs, how that delay, I don’t know if it’s a delay, really, but it was a lengthy period of time that you had to wait before you were able to get your fund going, really. But now we have the regs in place. And I think you’ve got a pretty good sense of how to operate and you’ve launched your fund in June. So you definitely have enough to go on now. So what challenges now are you seeing the opportunity zone incentive posing for venture capital investing?

Brian: Yeah, so I think that one is certainly the big players aren’t moving in, like we already talked about. So you don’t have the big funds with the experience you’re moving in, it’s a lot harder work. And you just can’t show up at a board meeting once a quarter. You know, there’s a lot of hands on and getting these companies up and going for one. Two is the process of managing a fund is more complex, as we talked about, you have… I like to describe these three blocks, you have the clock, you’ve got to manage of your investors, so they have capital gains. By the time that happens, they have 180 days to have to invest it in a qualified Opportunity Zone fund. If they don’t make that deadline, then they don’t get to take advantage of the program. So if your fund isn’t open and ready to take capital at that particular point, you will miss them. The fund has challenges that 90% of that capital then has to be deployed and qualified opportunity zone businesses, you know, by December 31st or June 30th of each year. You have 6 to 12 months to deploy it. So you’ve got to be looking at deploying the capital. And then the companies themselves, the businesses, they have the most flexibility. The April regs gave also them like real estate 31 months to be able to deploy the capital that’s invested in, as long as there’s a written plan about how that capital is gonna be used.

So as a fund manager in a business fund, you’ve got the challenges of managing all of those people’s clocks and doing all of those things simultaneously. And that’s a little different than what’s ever been out there before. It’s doable, and I encourage people to not be afraid of that. We figured it out, it’s possible, and we encourage others to put one together and get after it.

Jimmy: Right, right. Yeah, that makes sense. So there’s some tricks and some hoops to jump through for business investing in OZs, but it’s definitely doable. One question I have for you is, what if you have the problem of too much success too early on? What if you have a startup that takes off and decides that it exits after year five or six and you aren’t able to get to that 10 year holding period. What do you do?

Brian: Yeah, that’s probably the most common question people have with investing in businesses, opportunity zone investing in real estate. The building is not gonna to move out. But with businesses, you have that potential. So there’s a couple of things. One is, you have a number of investments, if something like that happens, we can’t control it, because we don’t have a controlling stake oftentimes in these companies. And if it happens, it’s a good thing, it means you’ve got an early winner, and the return is gonna be a really good return because they got an offer, they just can’t refuse. And so that’s good news and bad news. And I tell every investor, I say, “When you come in, it’s a potential thing that might happen. I’ll call you and say I have good news and bad news. The good news is you’ve got a really great return in a couple of years on one of the companies, all the others continue on the program. But this one goes out, you’ll get a distribution and now it’s a taxable event.”

They have the opportunity to roll it into another opportunity zone fund, if they want at that particular point, and start the process over. But the way the regs read today, their 10-year clock restarts. And so we hope that will change. There’s some efforts to change that as long as you roll it, it shouldn’t restart. But at this particular point for limited partners in a fund, they’ll get the distribution and then they can decide what they wanna do with it. But there’s another tax law, the Small Business stock law, the 1202 law, that if a company happens to be a C-Corp, and you’ve held it for 5 years or more, you can get up to 10X of your return tax free. So we use that as a backstop for companies that are going and hope that many of these are early stage they’ll make it at least to the five year period and if that’s the case, then up to 10 X of their return is tax free, and the balance they’ll pay long term capital gains on.

Jimmy: Gotcha, so kind of the same incentive really but after only five years so that’s good to keep in mind. And I guess if the company exits before their five-year mark, in a way it’s a good problem to have right? I mean, yes, you will pay capital gains but the returns should be pretty incredible if they’re exiting that soon. I would imagine, so that’s good that’s a question that I’m sure a lot of people have. But thanks for your insight there.

Brian: It’s a good way to deliver bad news.

Jimmy: Absolutely. You wanna start with the bad news, right? Say, “Well, we haven’t reached the holding period for your incentive. The good news is I’m gonna cut you a really big check.”

Brian: Yes. Yeah. And that’s a good way to do it.

Jimmy: Yeah, absolutely. What economic and social impact does a fund like yours the Pearl Fund or other VC OZ Funds. What types of economic and social impact do those funds have on the local communities where you’re investing?

Brian: Yeah, so we mentioned earlier on that each of these funds, my fund and others, are being run by people who live in the area that the fund is being generated going to invest. So one is they know the community, they work with the community, they know their target investment. And that’s a good thing. But the second biggest thing certainly is all focused on job creation. So we are focused on high potential, fast growing companies, as we mentioned. So there’s gonna be a lot of employment that happens from that, from, obviously, its best and easiest to get people who are local. But there also be people who don’t have that skill set will be brought in. So that’s bringing in people who are working every day in that community, and they’re gonna have needs of where are they gonna eat, where are they gonna shop, where are they gonna get their car fixed where, you know. So it also has potential that that income that these people have, and working every day in these opportunities zones, is going to also spur the economy that happens.

And back to the beginning of the podcast, we talked about the Goldman Sachs study about how to have economic impact and it’s growing SME entrepreneurs. When these companies grow, you see the real impact on the economy where they’re growing. And I think that’s exactly the same sort of thing we’re gonna see with fast growing companies, you know, in opportunity zones.

Jimmy: Good. So Brian, what one thing I want to talk to you about was that…and I’ve asked a few of my recent guests about that New York Times article that came out the end of August, if not every day, that the nation’s biggest newspaper writes a front page story above the fold on opportunity zones. So I know that created quite a stir in our industry here. What was your response to that article? What did you take away from it?

Brian: Yeah, it’s…I talked to the reporter, he interviewed me and I gave him a couple of good opportunity zone business prospects and investors in there and he chose or they chose not to record them. So we wrote a post that letter to the article and a post on medium that, you know, addresses that issue that we actually think that the article was spot on. There was nothing untrue about it, but it was only one side of the story. And part of that is because that’s what they do. And they discover these sorts of things and wanna talk about them and that’s good reporting. But the point is, there’s a whole new another side, which we’ve talked about in this interview is, you know, the business investing and the great impact it’s gonna have in the communities, a lot of good people who are doing really good things. It’s just also a bit later. And I think when we look in three months and six months in a year from now, we’re gonna see a lot more of this kind of high impact, high return investing in businesses and I hope that they decided to write about that side of the story.

Jimmy: Yeah, I hope you’re right. And I I agree with you. I thought there wasn’t anything inaccurate about the article, but they did only focus on one side. And, you know, to use somebody else’s analogy, I can’t remember who came up with this. It may have been John Laterra at EIG. I think he’s referred to this as this is the top of the first inning for the opportunity zone, incentive still, and it’s a little bit early to early to render a verdict on it. But I’m hopeful that over the next several months and years to come, I mean, this incentive is still around for several years that will see a lot more impactful investing going forward.

Brian: Yeah, I think you used the word waves, which we were happy about. And back to our previous conversation that it’s just the first wave. And real estate is cherry picking opportunities. They’re doing, you know, the best return, they can, but many of those have already been picked through at this particular point. And now the real work is beginning to really do things right. So I think that back to our waves conversations, this is just part of the first wave.

Jimmy: Yep, I agree. Well, Brian, thanks for taking the time today. I think we’re getting toward the end of our conversation here. This has been great, though. I appreciate the insight that you provided on VC, dropping that VC model into the OZ investing world. That’s a unique angle that you’ve taken on for sure. But before we go, can you tell us where can our listeners go to learn more about you and the Pearl Fund?

Brian: Yeah, so we certainly have a website. It’s And you can see us on Twitter, just search for The Pearl Fund on Twitter, where we kind of a lot of our updates and things have been going there. So those are the probably the best places to find out and learn more.

Jimmy: Great. Well, thank you for the time today. And for our listeners out there, I will have show notes for today’s episode on the Opportunity Zones database website. You can find those show notes at, and you’ll find links to all of the resources that Brian and I discussed on today’s show. I’ll have a link to that Goldman Sachs study that Brian referenced earlier, as well as his Forbes article on the three waves of Opportunity Zone investing. And of course, I’ll link to That’s the Pearl Fund website and their Twitter account as well. Brian, thanks for joining us today. This has been great.

Brian: Thanks, Jimmy. Appreciate it.

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