While traditional investment strategies often focus on individual assets, “ecosystem investing,” or “correlated asset investing” considers the coordination of assets in a way that spurs growth of the entire community, which can lead to reduced risk and increased upside for investors.

Kelly Ann Winget and Rachel Vass of EPIC Economies join the show to discuss how their Opportunity Zone fund aims to produce strong financial returns with positive community outcomes.

Episode Highlights

• The benefits ecosystem investing, or investing across multiple correlated assets.
• The impact of additional tax incentives and government grants available to certain Opportunity Zone investments.
• The opportunities of investing in women-run funds and businesses.
• The importance of community engagement and taking a collaborative approach to development.
• Why everything is a marketing problem, and why carefully crafting the messaging around a development project is crucial to its success.

Guests: Kelly Winget & Rachel Vass, EPIC OZ Fund

• Kelly Winget on LinkedIn
• Rachel Vass on LinkedIn
• EPIC OZ Fund

About The Opportunity Zones Podcast

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

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Show Transcript

Jimmy: Welcome to the “Opportunity Zones Podcast.” I’m Jimmy Atkinson. Today, we’re revisiting a topic that we first covered last summer, ecosystem investing in Opportunity Zones. And I’m joined on the show today, once again, by Kelly Ann Winget and Rachel Vass of the EPIC OZ fund. Kelly joins us today from Dallas, Texas, and Rachel joins us from New York City. Ladies, great to see both of you. Welcome back to the show.

Kelly: Thank you. Good morning.

Rachel: Thanks, Jimmy. So good to be here. Thanks for having us back.

Jimmy: Yeah, great to have both of you back. I always enjoy the conversations we have. Last year, the two of you formed the EPIC OZ Fund. And as I stated at the time, when we did our last podcast interview, and I’ll state again now, EPIC is an acronym, and it stands for Energy Partnerships for Infrastructure and Community.

Well, first of all, let’s point out the obvious. It’s a women-owned Qualified Opportunity Fund. There aren’t a whole lot of those around. We’ll talk more about that in a few moments, but it’s also a diversified correlated asset fund, focused on what you term “ecosystem investing.” Now, my audience high-net-worth investors, Opportunity Zone investors, and advisors, they may already have some familiarity with EPIC, because, as I mentioned, you’ve been on the podcast previously, you’ve been involved in some of our events in the past, but for those who may be unaware, what is EPIC, exactly? What makes this fund unique, different from most other Opportunity Zone Funds?

Kelly: I think it has a lot to do with our background, and, you know, I come from private equity. Rachel, she can give us her background, coming from financial services into experiential marketing, into real estate, and combining all of these different skill sets into one really powerful investment vehicle. Hasn’t necessarily been done before. The assets in general have been pretty segregated, in every sense of the word. And I’ll let Rachel kind of talk about her background coming into EPIC, right now.

Rachel: Yeah, I think… So, what it was known as, and I think why Kelly and I really created this perfect joint venture with each other is, as I was working in the real estate development world, and really, I was brought into the real estate development world to bring the real estate alive with, you know, foot traffic, driving events and entertainment and experiential, which is a form of marketing that really creates sort of temporary environments for companies to exhibit themselves. And I sort of parlayed that into a real estate foot traffic-driving business. But what I realized is that real estate was really craving some type of, sort of, intersection with business, and that it was really failing, and falling short in places even like Soho, New York, which was the epicenter of retail in the country for many, many years. It was really failing to meet the new markets of businesses.

And so, I was finding myself having to bring a lot of businesses to the table, having to help those businesses form joint ventures, so that they could bring this real estate to life. And, you know, I was only on the experiential side, and then the real estate side. And I realized there was such a risk to real estate when you didn’t have control over what the programming was inside, and how that infrastructure met it. And that risk was making real estate an incredibly, you know, risky asset, and an incredibly volatile asset. And so, as you know, you would read in some of the KKR research, real estate is really what houses the economy, and nobody really focused on real estate and the economy, and how they met. So, what Kelly and I really sought out to do about a year ago, and what we’re sort of seeing proven in research today, is that assets depend on other assets to succeed. And to treat them as individual verticals, that are isolated from those other assets, is actually to expose yourself to a tremendous amount of risk, because you don’t have a lot of control over what happens. I mean, typically, in real estate, in order for it to appreciate in value, you’d have to look at it as something that, you know, you might build in an emerging market. Maybe you hope that it gentrifies, so your real estate goes up in value. And eventually, you know, what we realize is hope’s not a strategy, and gentrification is not a solution. So, Kelly and I decided to take that bull by the horns, and create a strategy and a solution that we had control over, and that we were really impacting ourselves, and that we felt was a mitigation of volatility and risk, and a new age to usher in for real estate, and private equity, and investing alike.

Jimmy: [inaudible 00:04:50] when you were on last summer, we termed this “venture real estate.” You’ve shifted focus a little bit. We’re calling it now “correlated asset investing,” or “ecosystem investing.” Can you give me a concrete example of what that means exactly, though?

Kelly: Again, it’s building every part of the asset, right? And I think that, you know, we go way back, so talking about the diversified strategy and private equity, and how, you know, originally, I always think that real estate is really boring, and it’s because of the lack of attachment that real estate has traditionally had to the rest of the economy it’s a part of. And so, it was a big part of why, Rachel and I’s why, of why we’re working together on this. And it was because I was doing this haphazardly in the private equity space, and she was doing it with purpose in the real estate space. So, together, we combine the strategy, to breathe life into the buildings. And so it’s not about just building a multifamily, a residential, or a mixed-use, or a commercial building, without the infrastructure and the businesses that operate around that, the true economic stimulus that happens in the, around the real estate. That’s why we’re focusing on this, and we don’t really know why it’s been kept separate from each other.

And so, the example is is that, when you build a building, you need to make sure that either the utilities that provide the services to that building, or the transportation, city infrastructure around it, can support the economic growth that that has in a new part of a community. And then if the community supports it, with not only the business, but also the community support of that business. And that’s how you’re going to create this success within an emerging community. Because, again, we’re focused on OZs, which, for the most part, are right outside of places that are going to be developed anyways, but we’re trying to be intentional in the spaces that we’re picking, because we don’t want to push people out. We want to create the opportunities within. And I think that, I don’t know if, we might have said this on our first interview with you, but it’s about, not making affordable housing, but making housing affordable in the communities that we’re building in. And that’s through opportunity.

Rachel: So, a good example of this, Jimmy, I just wanna add an anecdote, because I think it makes a lot of people uncomfortable, right. You’re looking at a lot of different types of pro formas and balance sheets and types of businesses, and people often ask, like, “How can you be an expert in all of these businesses?” And the answer is, “I’m not an expert in all of these businesses. I’m an expert in how they come together.” And an example of where this has been successful is, you know, StuyTown, in Manhattan. Originally, this was a sub-market luxury apartment building that they, you know, has passed hands to many real estate developers. They tried to revitalize it to be, as Kelly just alluded to, just another multifamily, sort of, apartment building, and I think what ended up happening is it failed for many years, because no one was really considering the ecosystem. And that’s really the problem right now in the banking system, and I will actually, I’m gonna get to that in a little bit, but the problem is we’re thinking of real estate as this asset that is nationally the same.

It’s a hyper-local market. In every instance, it’s a hyper-local market. That’s why I’m very concerned about the local banks, not, you know, going under, and us going back to a national bank culture, because, to apply a national blanket to a local market is going to create the next, you know, market crash in real estate, in my opinion. And in these hyper-local markets, you have to understand what it really feels like to be in that environment, in that ecosystem. So, to build…the reason StuyTown failed for so many years is because you were building 12 acres of apartments that were almost the price of most Manhattan apartments, or were the price of most Manhattan apartments, but you still had to walk 30 minutes to get a cup of coffee. Who’s gonna pay Manhattan prices, and still have to walk 30 minutes to get a cup of coffee? Whoever built that building initially, or revitalized it, I should say, not built, whoever revitalized that building was not considering the end user and the ecosystem they would have to live in.

So, what happened? Ultimately, it passed hands to a developer who realized that, in addition to living in this ecosystem, they needed retail that was within their reach. So, they ended up putting 12 acres of solar on the roof, to reduce the energy costs as an incentive, this sustainable building, and then they helped bring West Side successful restaurants and owner-operators, and built all this retail, that didn’t exist before, on the first floor of these buildings, on the East Side, in StuyTown, so that they had all these amazing coffee shops and restaurants. And now, it’s one of the number-one places young families wanna live, because, in addition to having access, walkable access to Manhattan, you have an entire city within a city, with your little local coffee shop, your basketball courts, your ice skating rink, your restaurant, and it’s one of the most desirable places to live. And it’s because somebody considered the entire ecosystem.

Jimmy: Ice skating rinks, my favorite part. I love ice skating.

Rachel: I know, yeah. [crosstalk 00:09:52] I discovered that three weeks ago.

Jimmy: I’m a hockey player.

Rachel: It’s so fun. Yes.

Jimmy: Yeah. Sounds great. Even if you’re not a real estate expert, you’ve never done a real estate deal, you don’t know much about real estate, chances are you still know the three most important rules of real estate, which are location, location, location. I’m sure you’ve heard that before.

Rachel: Yes.

Jimmy: I know that the last 12 months, last 12 to 18 months, probably, at least, with interest rates skyrocketing, markets a little bit skittish… Put the stock market aside. We’re hitting new highs there, but it seems like transaction volume’s been down across a lot of different sectors. Getting deals done has been tough, is what I’m getting at, but I know you’ve managed to do a few deals, at least, over the last 12 months. What kind of deals have you been able to get done over the last 12 months? And maybe you can talk about some of the challenges as well.

Kelly: I think that our ability to be collaborative with these business owners and property owners really helps us be able to negotiate win-win deals, with and without capital. So, with the little amount of capital that we’ve been able to, you know, deploy immediately, we’ve been able to secure some really preferential terms with the portfolio companies and the properties we intend to put into the fund. And, you know, I think that we experience a little bit of a different attitude because I think we approach our investment strategy differently with investors than I think some of our colleagues do in different industries, especially with the venture funds that are having a really hard time raising capital. But the reality is is that there’s a ton of cash sitting around. And I think that people are really afraid to make a decision, because there’s been a lot of insecurity in what the next phase is, and I think that investors are really looking for confident managers of their money, to, like, decide for them how money should be stewarded. And I think that, as emerging managers, you know, investors have an opportunity, not only are we women, but emerging, and both, is that investors have an opportunity here to you invest at the first level, and get 15 years of upside, in addition to our ability to bring in creative capital solutions that offset those high interest rates, or predatory investment vehicles that would otherwise invest in us, which is other people’s solutions for raising capital right now. I think that that’s really our differentiator, is targeting different solutions around our capital.

Rachel: And to add to that, Jimmy, the interest rate environment, I think that’s a really good point. That’s actually why you should invest in our fund. Right now, the interest rates are absurd. And, you know, if you’re building a commercial building, you can hardly get a loan, which I actually think is… I usually say, whatever the banks are doing too much of, that’s where the next crash is going to be, so “be careful around multifamily” is my one piece of advice to investors out there, because right now, you can secure a loan for multifamily without even having to lift a finger, which, to me, is really scary, and a problem. And we’ve never in the history of the world predicted a recession, so the fact that everyone’s predicting this commercial recession is laughable to me. It actually makes me feel far safer, and it’s what makes me wanna get the capital so quickly, because I’m like, “Wow, right now there’s a market correction. Let me get my cup out while everything’s really cheap and in a blood bath,” because clearly, we’re not going to predict a recession that isn’t, you know…that we can see. It’s usually the ones we can’t see, because the market corrects itself.

But in our instance, we have a lot of protection, and downside protection at that, because, right now, to build a luxury high rise or a commercial building in Manhattan, your interest rates are gonna be insane. But we’re doing public-private partnerships. That’s the P in EPIC. And public-private partnerships, I mean, 30% to 40% of our capital stack is free, or in tax incentives, or untaxed. So that actually brings our interest rate and our loans, you know, much lower. We don’t have to get that 60 to 7% loan on our stack. We can get 20% to 30%. And 30% of that might be free from a city or a state. And remember, when the economy is doing badly, the first thing that happens is the city and the state come in and inject capital to incentivize economic growth. So, if we’re doing, and when an economy is doing well, if your product is an economy, then, or an ecosystem, then you’re probably doing well. So, we have a little bit of that downside protection, and we also, right now, in this high interest rate environment, we get interesting, very unique and creative capital, that doesn’t have interest rate hurdles to overcome. So, to build a luxury and high rise in Manhattan, you’re probably not gonna overcome a 12% to 15% IRR, whereas with our buildings, we’re clearing 18%, no problem.

Jimmy: Kelly, you mentioned, a few minutes ago, cash. There’s a lot of cash out there. I think you’re absolutely right. There is a lot of cash out there, but boy, that cash, the value of that cash is going down every year if you don’t have it in an interest-bearing account, or if you’re not putting it to work for you, with interest rates and inflation as high as they have been in the past 18 months or so. The other thing I wanna point out is there’s a lot of capital gains sitting on the sideline as well, unrealized capital gains. When the Opportunity Zone program was first rolled out, in 2018, I think it was the Treasury Department, and/or it was the Economic Innovation Group, estimated that there were $6.1 trillion of capital gains sitting on the sidelines, on the balances of both corporations and individuals. That was the aggregate number. That was six years ago, right? So, what’s the stock market done over the last six years? Had a little dip during COVID, but we’re hitting new highs earlier this year. I expect that $6.1 trillion number has only gone up, up, and up since then. I don’t know what it might be at now, $7 trillion, $8 trillion.

Suffice it to say, there’s a lot of cash out there, and there’s a lot of pent-up unrealized capital gains out there, which can be realized and then put to work into Opportunity Zone Funds, like EPIC’s, potentially. Rachel, you were mentioning a minute ago that, you know, we were talking more about the concept of these other tax incentives that you’re able to go after. You know, I think what you’re offering investors, what you talked about offering investors, during our pre-call, before we hit the record button, was, you termed it “tax mitigation at every level.” So, let me ask you about that. What is the impact of that concept on the after-tax returns of a deal like yours. And we’re not, by the way, just to be clear, for my viewers and listeners out there, we’re not just talking about the Opportunity Zone incentives. Yes, this is an Opportunity Zone Fund. But Kelly and Rachel here, with this EPIC fund, are going after a lot more than just the Opportunity Zone tax incentive. So, talk about some of the other tax incentives and tax credits in addition to the Opportunity Zone incentive that you’re going after within this fund, and what impact do those other tax incentives have on the after-tax returns?

Rachel: Okay, I’m gonna start at the project level, then I’m gonna kick it over to Kelly, who’s the nerd at the fund level. So, at the project level, well, first I wanna say, if you don’t… Opportunity Zone Funds are going away in the next couple years. We will still have access to their benefits, since we started our fund now, until 2046. But if you don’t get in to an OZ Fund now, if you want to avoid paying capital gain taxes on your capital gain earnings, you’re gonna have to move to Puerto Rico. So, if you don’t wanna move to Puerto Rico, you’ve got about a year and a half to two years to get in. And then you’ve got about 20 years of opportunity of investing, which, we’re aiming to hold for 10, but we’ll see what happens, and how beneficial of a vehicle this turns out to be. We might have to extend for our investors. But what we’re doing at the project level is what I mentioned in the previous comment. We’re getting a ton of leverage on the asset itself. So, part of the reason the correlated assets are so important is that we’re basically borrowing tax incentives from one industry and applying them to another.

And Kelly’s gonna get into that a little further, but we’re leveraging things like the Manufacturing Act, and we’re leveraging things like, you know, sustainability tax credits. And at the project level, as I mentioned, because we’re injecting capital in historically disinvested economies, or disenfranchised economies, and they’re both, you know, they’re out there, those governments are highly incentivized to give us public capital, in a public-private partnership, which gives us a ton of safety, and way less of a hurdle to overcome. We have about 30% to 40% of each project is free, essentially, through tax incentives and grants. And then, beyond that, we are also getting from the OZ, and deferred and mitigated taxable income, sorry, capital gain tax, you’re getting two to three times the leverage on your capital, because if you can defer your taxes, say you have a $10 million capital gain, you’re earning 22%, targeted, as my lawyers will beg me to say, targeted, on $10 million. Not on the $6 million that you have after taxes. That is basically two times the leverage. And after three years, that only grows, because as it grows, you know, your ability to gain on what has grown untaxed, or deferred tax, grows. And in addition to that, we’re taking, you know, in honor of International Women’s Month and things like that, we’re taking incentives that are only given to minority and women-owned businesses, and we’re able to jump the line in a lot of these government, you know, programs, whether it comes to, like, manufacturing contracts and things like that. So, on top of that, I want Kelly to talk more about how we’re mitigating capital gains at the gate, and how we’re sort of borrowing, or robbing Peter to pay Paul, but very legally.

Jimmy: Just to step in, for a second, and then I do wanna turn to Kelly and understand what’s happening at the fund level, but I wanted to hone in on that point you were making, Rachel, because it’s really important. Like, you have a $10 million gain. You would, after taxes, normally only be able to put $6 million or so into whatever new investment, after taxes. With Opportunity Zone investing, you’re able to put the whole $10 million to work. And Albert Einstein is quoted as saying, I don’t think he actually said this quote, by the way, so don’t [crosstalk 00:20:44] to this, but everybody just attributes it to him for some reason. “Compound interest,” or “compound returns,” as I’m gonna paraphrase, “is the eighth wonder of the world.” Well, I like to say that if that’s the eighth wonder of the world, tax-free compound returns must be the ninth wonder. So, I just wanted to interject that. It’s super important, this OZ deal, and all the other stuff you’re doing. But go ahead. Kelly, get to what you’re doing at the fund level to help further juice after-tax returns.

Kelly: Sure. And I think you know this about me, but I’m a huge tax nerd, and, you know, I build tax strategy into every type of investing that I do personally and professionally. And it’s because, depending on where you live, now, if you’re in Texas, like us, you know, 20% on capital gain, okay. But when you’re in your places like New York, California, you’re at 35% 40%, sometimes 50% on the capital gain taxes. And that can really eat into your return, and I don’t think people think about it enough. Or maybe they do, and that’s why they sit in assets and never take their gain, because they don’t wanna pay taxes. But eventually, you’re gonna have to pay taxes. In your death, or not, they’re gonna take it from you. And I’m all about tax reduction and elimination, not deferral and toleration, right? That’s, like, what I wanna do.

And so, when we came together to put this structure together, we wanted to mitigate a lot of that risk coming in, right? We have about two and a half years to figure out what to do with your original 20% to 40% tax hit on your capital gain. And we can do that by being creative in industries like energy. Again, I come from oil and gas, and there’s a huge tax incentive in oil and gas, I think you guys talk about on your other podcast. But you can essentially completely reduce that original burden, coming into the fund. We offset it with, one, oil and gas tax incentives, then, because we’re in alternative energy spaces, the cash flow that gets kicked off of the income earned from oil and gas, from renewables, and these other manufacturing ventures, we’re going into, those tax incentives actually reduce our income tax earned in the fund.

So, the money that you’re earning out of the fund during your deferral period is tax-free. That savings in your taxes on your income is going to be able to then pay your deferred taxes on your original gain, that is also reduced. And so, that’s how we’re trying to really put power behind putting your capital gain investment in. Now, if you don’t have a capital gain, and you want to invest cash, you still get those same tax advantages, and you get to apply it to the rest of your income situation, whatever it might be. So, it can still be a really powerful tax investment, with or without capital gains. And I think that that’s what sets us apart from most OZ Funds, where they’re, one, investing in traditional real estate strategies, so their returns are gonna be pretty low. And then, two, they’re only focused on that eventual return, in 10 to 12 years, on their real estate, which might be a 1.8X, 2X return that you’re getting tax-free. When you have a capital gain tax-free exit, you wanna have the largest multiple on that exit, and that’s our focus. We want big home runs, secured by really safe real estate. You know, the worst we could do is 2X. Great. You 2X your money, tax free, just like everybody else. If we do what we say we’re gonna do, we 3X to 5X it, and everybody is really excited about working with us again.

Jimmy: The targeted worst you can do is 2X. Let’s [crosstalk 00:24:28]

Kelly: The targeted return we could do, worst we could do is 2X.

Rachel: But I think, like, I’m what I really appreciate about… Because most venture funds, you’re investing in air until they become reality, right? Real estate’s never gonna not be something. It’s there. It’s land. It exists, if you own it. And so it’s far more secure in some ways, but the upside is far lower than these potential companies that could become something and could become nothing. So that’s why we really, we pull them together, to create some safety in the majority of the baseline, but to expand the possibility of the upside out of the gate. And I think one of the biggest things that investors have anxiety around with an Opportunity Zone Fund is a 10-year hold. That’s a long time to have your money held, especially if you’re not gonna get that home-run, 1000X, whatever return.

So, what I think we do that’s differently, again, this is, you know, everyone likes to say you can’t be all things for all investors. That’s only true if you’re not investing in entire ecosystems. You can be all things to all…you can create a lot of potential for upside, while also securing it with asset-backed, you know, investments. And also, you can look at, you know, something that’s supposed to have a capital gain exit, and also make it a cash distributor. So, we’re also targeting, I’m sorry, lawyers, targeting 12%, cash on cash, starting year two, and we’re using things like the Manufacturing Act and a lot of different, sort of, Inflation Reduction Act sort of, policies to mitigate the income tax as well. So, even if you put, you know, $1 million in, and you’re like, “I really can’t think about not seeing $1 million in 10 years,” you’re still getting, you know, you’re still getting 12% of that, just as returns, not even from the, in cash on cash. And that’s something, you know, I can never guarantee anything, but that’s something that we’ve secured in our terms with our manufacturing investors, sorry, investments. We basically said, “Part of what we want from you, in addition to your tax credits, is 12% cash flow.” And since they’ve pre-secured these government contracts, the risk of that not happening is relatively low.

Jimmy: Let’s talk more about those government contracts in the context of women-owned. We mentioned at the top of the show that it’s a women-owned fund. If I understand correctly, a lot of the investments that the fund then deploys capital into are women-owned ventures. I’m a market rate investor, let’s say. Why do I care about women-owned? It sounds like just some equity play. And I use the term “equity” in terms of, like, the DEI form of the term, [crosstalk 00:27:12] equity, or social justice. I don’t care about any of that stuff. Why does it matter? Why does women-owned matter?

Kelly: I don’t think it necessarily… Like, we’re not purposely looking for that. It just happens to be that the people with the best solutions, and products and businesses right now, in our space, are run by women. And, like, one woman, you know. It’s not like there’s a whole lot of options out there. So, when you have not a whole lot of options, there’s also a lot of alpha in that, because they don’t have to necessarily compete on the same level as everybody else. And now, with the initiative, that’s the best part about public money, is that it has to really move around the community, and the government has a huge incentive to try to get more funds and financial support to women in diverse businesses, contractors, etc. And because we’re focused on infrastructure, manufacturing, and defense, like, these are all industries that probably only have one woman doing something in them. And so, they’re front-of-line to get access to any type of government contract. And that’s just part of the $2 trillion infrastructure bill that went out. And we’re gonna take advantage of that for as long as it’s around.

Rachel: Yeah, so, 26% of the government contracts awarded have to be towards women-owned companies in certain sectors. So, it’s actually a struggle for governments to find operating women-owned businesses that fit that bill, which makes the… I’ve said this before. I’m not sure if it was on your podcast, but I hope I’m not repeating myself. JP Morgan once said, “Go where the competition isn’t,” and that is where the competition isn’t. So, it’s not about, you know, equity, though I do care deeply about gender equity, but for me, this is opportunistic. And I can, you know, a couple reasons why is, number one, there’s no competition around these government contracts, and number two, as investors, we’re getting access to a lot of these early, sort of, discounted Series A rounds that are being held open for us, in a lot of ways, which is why we’re racing to get more investment in, because those prices are going up for other investors, like Fortress and Guggenheim and all those bigger banks, because they’re male-owned. And that male-owned, sort of, paradigm is going to dilute the women-owned small business interest. That puts that business vastly at risk for not winning and getting in the front of that line, that contract.

And so, they’re really holding out for women investors. So, it’s not just about investing in women-owned businesses. It’s also investing in women-owned funds, who get access to women-owned businesses who get to the front of that line. And frankly, from a statistics standpoint, women-run funds and women-owned businesses have been outperforming male-owned businesses. There’s a lot of research out there about that. I can’t really give you the reason why. Probably largely because there’s so few of them that in order for them to even succeed or make it right now, they have to be the best of the best. But the opportunistic component of this is, 80% of the consumer market is women. We know that. We’ve known that for 60 years. And 2% of investment capital goes to women-run businesses and women-run funds. And that, to me, is a huge missed opportunity.

Like, and it’s in little things you don’t even think about, Jimmy. Like, I had a women-run fund once, we had a whole breakfast talking about Tesla car doors. And she just was so angry, because we, I think about this all the time now. Tesla car doors, whoever designed that has never had a manicure. And every woman gets so angry when they open a Tesla car, because they chip a nail. And it just wasn’t designed, because the person who designed it didn’t have the experience of being a woman. And so, women often hate Teslas for this reason. And we love clean energy, you know, statistically, actually, at a higher rate. And so it’s a very interesting untapped market, and there’s a whole bunch of solutions. That same venture capitalist, they’re great. Their name’s Emmeline Ventures. I support them totally, and investment in them, but they are awesome. But one of them told me an anecdote about how there is a women health company that’s biologically proved that, with a solution to menopause. They took it to five male-run VCs. And each one of them, because they don’t understand this problem, said, “That’s too niche a market.” Now, I just want wanna highlight that for a second, because that is literally 50% of the population who gets that problem, and 100% of the population that cares about a solution to that problem, is my view. And it’s just because they didn’t have that lived experience to understand that that market existed, that they missed out on this amazing opportunity. And yet, somebody decided that there was a market for chewable Viagra, because swallowing pills is so hard, like, you know?

And I just, I think there’s just so much over-tapping of a very specific market. That’s why you’re seeing a diminishing return, and a plateau in venture. It’s not because innovation is dead, or there’s nothing left to innovate. It’s because we’ve been innovating for the same demographic for so long that there’s this whole other population that isn’t being served, that there’s an opportunity to get them as buyers. And they’ve also proved to be the bigger buyers in the market. So it’s astounding to me, for all these people who love numbers and statistics, that that hasn’t been discussed more. And then, on top of all of the amount of purchasers, two-thirds of the wealth from baby boomers, because men statistically don’t live as long as women, is getting transferred to women baby boomers, in the next 10 years. So they’re also going to be the investors. And it’s absolutely mind-blowing to me that we aren’t addressing more problems that focus on things that they understand and they know.

And that’s really also why I think this ecosystem investing thing is very, very important, because, at the end of the day, right now, we’ve hit a market, and we’re in a market, where we are focused on value extraction. Because that’s what capitalism is, right? Capitalism is, how can you get the most for as little as possible? And what that translates into is how can you get more value out of as few customers as possible? So, everyone’s targeting the same top wealthy, you know, whatever, 2%, which, right now, is male-dominated. But it won’t be forever. And furthermore, what really should be happening is, how can you get the most value for creating the most value for the most people? That should translate to the most money. And I think as more leverage is created within these concept around correlated assets and ecosystem investing, you’re going to see a lot more leverage and a lot more returns, and this sort of single-minded value extraction market where we’re sort of mired to today is gonna be rendered obsolete, because it is obsolete.

Jimmy: I love it. I knew you’d have a great answer to that question. So, yeah. [crosstalk 00:34:18] Come for the competitive advantage, and the ability to move to the front of the line for a lot of this government money, but stay for the gender equity, right? Because it matters, and I think you’ve just proven why over the past few minutes. Let’s change gears, for a moment. I mean, I’m sure we could talk about gender equity and women-owned stuff, and its place in the market for hours, but let’s move on to geographies, markets. Which locations do you like, specifically, for the EPIC OZ Fund I? Where are you developing? Where are you finding deals?

Kelly: We’re in a couple different states as far as the projects that we’ve already secured for the portfolio, and that includes Chicago, in Illinois. We have Detroit, Michigan. We have Pennsylvania, Philadelphia. We have Dallas, Texas, other parts of Texas as well. And the energy company that we’re focused on right now is based out of Tucson, Arizona, but is a…we can put the product anywhere, the solution, into any of our spaces, anywhere in the country. And we’re, while we have about $100 million of the $180 million fund in a pipeline, an existing pipeline, we’re leaving ourselves open to projects in different areas, based on the opportunities of things that are going on, and how we can tie them into the individual communities we’re already present in. And so, that’s really where we’re focused. And there’s an easy way to describe what we’re doing. It’s urban red lines and rural brownfields, and that’s kind of our dynamic. I’m in Texas. Rachel’s in New York. So we bring, kind of, two different personalities to the fund, as well as our geographical presence.

Rachel: We call it the “across-the-aisle investment strategy.” And the tagline we’re giving these days, and this is sort of what I think makes Kelly and I such great partners, I think we have a really divided country right now, and world, even, at that. And I think what we realized at some point when we were talking, because when I first met Kelly, I, you know, I was very concerned about the whole Texas oil and gas situation, because that’s not me. But she made a really good point. Kelly said to me, “Do you think we’re gonna get to a sustainable future more quickly by fighting the trillions of dollars, you know, and 180-year-old oil and gas industry, or by bringing them and their money with us?” And what I realized in that moment, my uncle once had a quote about successful marriages. He said, “Would you rather be right, Rachel, or would you rather be happy?” And I always think about that when I think about Kelly and I, because it’s really hard to get somebody to change your mind. It’s really hard to trust and respect somebody enough to get them to change your mind, or at least see things differently.

And Kelly and I, we have different points of view. Very different points of view. But we really trust and respect each other. And I think what that really got us is a different focus, on the why, instead of the how. And I think that’s where most investors are [inaudible 00:37:26] I think that’s why when people say we’re focused on too many different things in our portfolio, in, which I don’t think is even said anymore now that correlated assets is all the rage, but it used to be said. And the reason it was said was because I think those people were really focused on the how. And I don’t know if you ever saw that Simon Sinek TED talk where he says the companies that succeed start with why, not how. But it’s a great TED talk. And it’s true. And he compares Apple to IBM. And he talks about how Apple says, “We believe in doing things differently.” And that’s why you’ll buy anything that’s innovative from Apple. Whereas IBM, you’re not buying anything with computers, you know?

And so, I think that really translates into how we’re approaching funding strategy. We’re talking about the why, not the how. And I think we realized at some point, the why was, we want healthy, successful economies, and communities. The how might vary if it’s in a brownfield in Texas versus a red line in the south side of Chicago. So, that’s the part that we actually think shouldn’t be the focus. The why is the results that we’re looking for, the new world we’d like to see. And so, we’re kind of viewing this as a way to answer that age-old question of the people that used to frustrate me to no end, where they’re like, “I’m fiscally conservative and socially progressive,” and I used to believe that you couldn’t be both, that that was a cop-out. But the reality is, is you can. And you can be both, if you’re incredibly strategic with the why, instead of the how. And so, we really focus on using tax mitigation as a way to have value-infused impact. And that is the only correlating…collating the country with capital, sort of, strategy I’ve seen so far where you really can be fiscally conservative and socially progressive, if you’d like to be. You could be one or the other as well, and you’d still win in this.

Jimmy: Great. Before we hopped on the recording here, Kelly, you said a quote. I think you attributed it to Rachel. It was, “Everything is a marketing problem.” Is that right?

Kelly: Yeah.

Jimmy: Is that a Rachel-ism?

Kelly: Oh, yeah.

Jimmy: And what do you mean by that? And we’re kind of winding down here, so I think this might be the last, or second-to-last question I ask.

Rachel: Well, I quoted Kelly, so I’ll let Kelly explain my quote [inaudible 00:39:40]

Kelly: Well, you know, I know that Rachel touched on her background a little bit, but, you know, coming, her transition, moving from this experiential marketing, that was actually real estate, and then taking that strategy to the next level here with EPIC, fortunately, it really was… People are looking at problems with the completely wrong lens. And I think that the marketing issue is really getting and rallying communities around solutions. And so, that’s really the core of why everything is a marketing problem. If you can fix the messaging, and the story behind it, you can really rally support around the right solutions for things, and moving towards a more progressive, collaborative future in general.

Rachel: It’s all about the narrative. We, like, without mentioning specific moments of society, I think we can talk about every single thing that’s happening, whether it’s war, climate change, policy, or presidential candidates, the entire winning or losing of that sort of concept into execution has to do with the narrative, and how much people believe in it, which is why the why really matters. And even, you know, you can hide behind your numbers, but that’s still a narrative. And you’re still telling a story. And we sort of, actually, I think some people use narratives to push their ideas. We’re really finding our ideas from understanding narratives. So, we’re looking at communities. We’re seeing what they have. We’re seeing what they’re proud of. We’re seeing what they’re missing. And we’re really, we’re using marketing data, census data, historic context data, meeting minutes data from town hall meetings, all of these different things, not to prove that we will be right, but to understand what is missing and what they have. And that is where we build the hinge for the door. That’s the dovetail. That is where we correlate the assets. That’s the magic in what we’re doing. We’re figuring out what’s missing and what will connect the market to bring it to a growth spurt. And that’s really part of understanding the narrative.

And then, we have to get these communities that have been taken from, for hundreds of years, to trust and believe that we’re really doing what we’re saying we’re doing, which we are. And then, we have to go to the investor market and explain to them that this really is not a philanthropic play, but a value generator. And that’s a narrative, sort of, almost code-switching exercise, to get trust to be rebuilt with these two communities. And then they have to partner, and go into business together. And it’s all about how you shape that narrative so that everyone feels like they are getting listened to, and what they want out of it, and what they’re giving is something that they’re willing to give, and that is worth it. And that’s what makes every… We go twice as fast twice as far when we’re not looking behind us, you know, like, worried about trust and all of that stuff. So, narrative is really how we understand where we fit in to the value chain, and what our incentives are, and whether they’re being met.

Jimmy: Everything’s a marketing problem, but you may have a marketing solution, at least. Thank you both so much for coming on the show and sharing your insights today. Before we go, where can my audience of high-net-worth Opportunity Zone investors and advisors go to learn more about you and EPIC OZ Fund I?

Kelly: Epiceconomies.com. Because we’re building epic economies. So that’s the easiest way to remember that. It’s both Rachel and Kelly @ epiceconomies, or info@, if you wanna reach our IR team, but you can get through to us pretty easily through the website.

Jimmy: Fantastic. For my listeners and viewers out there today, I will, as always, have show notes available on the website, at opportunitydb.com/podcast, and there, I’ll have links to all of the resources that Kelly, Rachel, and I discussed on today’s show. And please be sure to subscribe to us on YouTube or your favorite podcast listening platform, to always get the latest episodes. Rachel Vass, Kelly Ann Winget, thank you again for being here today. Really appreciate your time.

Rachel: Thank you so much for having us, Jimmy.

Kelly: Thank you.