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Exclusive: Fund looks to keep startups in hands of minority founders

Alan Neuhauser
Nov 8, 2022
Illustration of a hand in a business suit and a hand wearing a green fundraising bracelet shaking hands

Illustration: Sarah Grillo/Axios

Synton Capital Partners plans to raise as much as $500 million for a first fund that will invest in underrepresented founders and ensure they retain majority ownership of their own businesses, the company tells Axios exclusively.

Why it matters: Big corporations and government agencies regularly set aside a portion of a contract for a minority business enterprise, a status that can be easily lost.

Driving the news: Synton is seeking $250 million to $500 million. It plans to announce formal fundraising efforts by January, co-founder Ron DeLyons tells Axios.

Details: DeLyons is CEO of Creekwood Energy, an Ohio-based energy services provider.

  • His co-founder and fellow managing partner is Chris Morris, former COO of Bonaventure, a REIT based in northern Virginia.
  • "We are in discussions with a couple of Fortune 100 companies," DeLyons says.
  • The firm's ideal result would be an anchor investor committing $250 million to $500 million.

Zoom in: The fund will focus on mid-stage enterprise companies on track to make $10 million to $100 million in revenue within 18 to 24 months.

  • Focus sectors will be energy, health care, financial services, manufacturing and affordable housing.

Of note: The National Minority Supplier Development Council is a principal certification body for minority business enterprises, or MBEs.

  • It certifies based on racial and ethnic identities, specifically businesses at least 51% owned by those who are "at least 25% Asian-Indian, Asian-Pacific, Black, Hispanic or Native American," per its website.
  • There are also local, state and federal certifications. The U.S. Small Business Association's 8(a) program, for example, sets broader criteria to qualify as "socially and economically disadvantaged."

Between the lines: Founders regularly relinquish the majority of their company during fundraising.

  • "In our financial structure, we preserve the equity ownership of the MBE so that, post-money or post-investment from us, they still qualify as minority-owned," DeLyons said.
  • "The only efficient way and economic way to close the wealth gap is through ownership."

One key thing: "The question was posed to me: 'If Creekwood had access to $20 million to $25 million, structured in a way that it didn't negatively impact your ability to certify, how would it change your business model?'" DeLyons said. "It would have a dramatic change. That's where the idea was born."

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