MetaFund, which opened for business in January 2000, is a community development, private equity, venture capital, evergreen fund.  MetaFund is also a certified Community Development Financial Institution (CDFI), a certified Community Development Entity (CDE), and an Oklahoma non-profit 501(c)(3) corporation.  Capitalized primarily by the Oklahoma banking industry, incubated by Oklahoma City University, and endorsed by the Oklahoma Bankers Association, MetaFund applies a unique approach to community development investing.

MetaFund is a double-bottom-line, social entrepreneurship investor, meaning that it seeks both a financial return and a Community Reinvestment Act-qualifying social return, defined as the creation of jobs or housing or other direct benefits for low-to-moderate-income people, ethnic minorities, and other at-risk demographies or distressed geographies, primarily in Oklahoma. 

MetaFund is governed by a board of directors that is primarily representative of the banks from which MetaFund received its start-up capital.  MetaFund also has an active Advisory Board, which meets jointly with MetaFund’s governing board, and whose members are broadly representative of MetaFund’s target demographic and geographic markets.

Most of MetaFund’s investments are equity (common stock, preferred stock, or LLC units), but debt with equity-like features (royalties, warrants, options, conversion features, etc.) has also been employed.  Whether it’s a start-up company, an expansion of an existing business, a company for sale, or one with operating losses or insufficient working capital, MetaFund might invest in it, with the possibility of building or expanding a viable, but unbankable business, turning around a troubled company, or helping a community recruit or keep a valued employer.  (See "Portfolio" for more information.)

MetaFund also can facilitate the federal New Markets Tax Credit and/or an Oklahoma small business venture capital tax credit for a bank and/or other lenders/investors.  MetaFund has facilitated more than thirty tax-credit-qualifying projects since 2003.  (See “MetaMarkets" for more information.)

Unlike traditional venture capital (early stage investors) and private equity (mature companies and mergers/acquisitions) funds, MetaFund is an evergreen fund, meaning that it has a perpetual life (assuming that it remains financially self-sustaining).  Also unlike traditional VC and PE funds, since MetaFund is an evergreen fund, it doesn’t have the typical pressure to exit an investment, so it potentially can be a long-term investor. 

MetaFund is also unusual, though not unique, in being a profit-generating non-profit (e.g., YMCAs and Goodwill Industries), by using profitable activities to promote and expand its charitable mission and maintain financial self-sustainability.  People often jump to the conclusion that MetaFund doesn’t need to get paid back, but they are quickly told, “We’re not a grant-maker – at least not intentionally.”

Making Unbankable Deals Bankable

Many of MetaFund’s referrals, usually loan turn-downs, come from the banking industry, and MetaFund’s pitch to bankers is the opportunity to make an unbankable deal bankable (and CRA-qualifying). 

A 2009 example involved an apartment rehabber who bought a distressed property and then asked his bank to lend him 100% of the rehab money with a 70% LTV ratio.  The bank declined – but referred the deal to MetaFund.  MetaFund agreed to become an equity partner, but then called the bank back with a second chance at the loan – this time with an LTV of 35% (thanks to MetaFund’s equity investment).  The bank accepted, funding what became a performing CRA-qualifying loan to a fully-leased affordable apartment complex with a drive-by appraisal-based 15% LTV.  MetaFund’s investment involved preferred LLC units, a gross revenues royalty, and an exit royalty, which pays a percentage of the sales or appraised value if the property is sold or refinanced. 

Saving Small Towns

MetaFund can help small towns start, recruit, or save a critical business for their communities.  The following two stories offer examples of how MetaFund could co-invest in community-led projects.  The first involves the rebirth of the Palace Theater in Oakley, KS, a story that made the ABC Evening News.  Several local businessmen bought the failed theater and then contracted with the local high school’s entrepreneurship class to run it. [See the video here: http://abcnews.go.com/video/playerIndex?id=9272732]  The second example is the story of how the citizens of Powell, WY, revitalized their town by replacing their failed Stage store with the community-owned Powell Merc.  [See the CNN story at http://money.cnn.com/2008/07/08/smallbusiness/community_store.fsb/index.htm]

These are both great stories about small communities overcoming adversity with social entrepreneurship, and the lesson is that almost any group or community could replicate them – and MetaFund could help them do so by co-investing in their projects.