Wal-Mart Opens Funding Doors to Hispanic Entrepreneurs
By Allison Anderson
Minorities account for 30 percent of the U.S. population—but less than 2 percent of all venture and private equity funds are invested in minority companies, according to the National Association of Investment Companies. The latter figure could see an increase, thanks to Wal-Mart Stores, Inc.
In fact, minority companies are already seeing the fruit of the retailing giant’s benevolence. The largest black-owned food-processing company in the United States, Sim éus Food International, Inc., is poised to gain up to $25 million in private equity funding, beginning with a $5 million boost from Wal-Mart. Why is that good news for Hispanic entrepreneurs? Because what’s good for one minority group is often good for — and there is more money where that came from, much more.
“Acquiring capital is a driving concern for fast-growing minority businesses,” says Harriet R. Michel, president of the National Minority Supplier Development Council. “Outstanding companies like Siméus Foods can especially benefit from private equity funds targeted to minority firms. Wal-Mart's commitment of capital signals its intent to help diverse suppliers build capacity to better serve global customers.”
Wal-Mart pledged last fall to invest $25 million over a five-year period in women and minority-owned businesses. Dallas-based Aldus Equity, a boutique alternative investment management and advisory firm specializing in private equity, is managing the fund. Aldus is currently seeking additional investors to augment the awards to successful applicants.
The fund will likely help finance five to nine companies. Of course, there are requirements. The candidates must either operate companies or be in the process of acquiring companies that distribute or have the capacity to distribute products and services to major retailers. Wal-Mart does not mandate the companies it funds be capable of providing products and services to its retail empire.
The first recipient, Haiti native Dumarsais “Dumas” Siméus, bought his business outside Fort Worth, Texas in 1996. The frozen-food producer employs more than 400 workers and operates plants in both Texas and North Carolina. Siméus customers include restaurant chains such as Quiznos, Burger King, Denny’s and Olive Garden.
Wal-Mart is not just being generous. The company stands to benefit from providing investment capital to minority-owned businesses, says Wal-Mart spokeswoman Linda Blakely, even if a supplier’s product never winds up on their store shelves.
So what’s in it for Wal-Mart? “We benefit when the supplier base is diverse because our customers are diverse. They tap into the best products for those customers,” Blakely says. “And their employees are our customers,” Blakely adds. She pointed out that prosperous companies help create strong communities where shoppers have money to spend. That goes directly to Wal-Mart’s bottom line.
Hispanic companies are trying to get in on the funding. In fact, the response to Wal-Mart’s investment offer has been tremendous and has included companies headed by Hispanics, according to Blakely. She declined to discuss any details about specific Hispanic companies. “We believe the response is as strong as it is because there are so few sources out there for investment capital,” Blakely notes. “The fund is addressing a pressing need.”
Growing companies seeking capital for acquisitions, joint ventures or other expansion are potentially eligible for benefits. Aldus Equity is managing all aspects of the investment application and review process. More information about fund eligibility is available from the National Minority Supplier Development Council, The Women’s Business Enterprise National Council or by e-mailing Aldus at coinvestmentfund@aldusequity.com.
“Aldus maintains a strong commitment to investing in minority markets and is proud to have the opportunity to invest in a select group of companies that demonstrate the potential of becoming major suppliers,” says Aldus partner Marcellus Taylor, who leads the firm’s co-investing program. “The funds, provided by Wal-Mart as well as other investors, will serve as an invaluable resource to talented minority and women entrepreneurs seeking to expand their businesses,” Taylor adds.
Is Your Business Ready for Private Equity?
Ten questions you should ask to help determine whether your business is ready for private equity.
1. Does my product or service uniquely meet a significant need within the marketplace?
2. Does my Company compete within a large and growing market?
3. Does my Company possess a sustainable advantage over its competitors?
4. Does my product or service have the potential of being a market leader?
5. Do I have a business plan that has been updated, contains key industry analysis and strategic planning?
6. Do I have a clear sales and marketing strategy for the business?
7. Does my senior management team possess the requisite industry and operating experience to execute the Company's business plan?
8. Do I know how much money I need and what I plan to accomplish with it?
9. Am I willing to work cooperatively with investors to determine the valuation of the business?
10. Can I provide my investors with a return on their investment?
If you answered yes to 9 or 10 of the questions you are ready; a good way to start is to contact an NAIC member that focuses on investments within your industry. If you need assistance locating them, please contact the NAIC office via phone at (202) 289-4336 or email at inquiries@naicvc.com.
You may still have work to do if you only answered yes to 7 or 8 questions. Retooling your business plan and/or refining your business objectives are could help you get where you want.
If you answered yes to less than 7 questions, equity financing may not be for you at this time. However, there are a variety of ways to secure financing for your business.
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