What is Milestone and what do you do?
How does Milestone find its clients?
Why is Milestone fundraising now?
Why should I give to Milestone?
I already give to other non-profits helping minorities. Why should I give to Milestone too?
How fiscally responsible is Milestone?

Q: What is Milestone and what do you do?

A: Milestone Growth Fund is a non-profit, 501(c)(3) , community-based venture capital fund providing long-term financing to minority-owned companies. It fills the financial gap experienced by minority companies that are too risky to secure bank financing or too small for regular venture capital firms. Milestone is the only fund in Minnesota providing this type of financing. For 15 years we have successfully worked with business owners who are under-served by traditional financial service providers.

Milestone provides more than just financing – we partner with minority entrepreneurs by providing management and technical assistance, financial discipline, access to other sources of financing and contact with a network of professionals including lawyers, marketing consultants, bankers and others who have the experience to positively influence our portfolio companies’ chances for success.

As of May 2004, Milestone has invested more than $21 million in 63 companies and currently has $7 million invested in 26 companies. One hundred percent (100%) of all investments income/returns are reinvested to serve the Milestone mission, which is to facilitate and accelerate the formation of capital in minority-owned businesses.

Staying true to our mission, Milestone initiates an economic and social “ripple effect” that benefits the entire community. As minority-owned companies grow, their owners create jobs, pay taxes, and become an integral part of the community.

Some of the largest and most respected companies in the Twin Cities support Milestone’s mission including Wells Fargo, U.S. Bancorp, Xcel Energy, General Mills, Medtronic, 3M and others.

Q: How does Milestone find its clients?

A: Milestone reaches out to prospective minority business owners who belong to the African American, Asian, Hispanic, and Native American communities in a variety of ways.

First, we maintain a proprietary data base of more than 1,000 minority business owner names. This data base continues to grow as Milestone hears about, reads about, or visits with new minority business owners met in the community. Each minority business owner on our data base is contacted throughout the year to inquire about financing needs and Milestone’s capability.

We are well-connected and receive many business referrals. Throughout out our 15 years of service, we have met and developed relationships with many business professionals in the financial, legal, accounting, other venture capital firms, marketing, and public relations fields. In addition President and CEO Esperanza Guerrero-Anderson sits on a number of boards in the Twin Cities and is a frequent speaker at business and community functions. This broad and ongoing exposure to the business community ensures that Milestone receives referrals.

Milestone Investment Officers speak to minority business owners. Investment Officers Judy Romlin and Ron Nielsen are involved in the minority business community. We are frequent guest speakers on venture capital and small business development to business and minority groups throughout the Twin Cities. In addition, we often call on minority business owners to inquire about their financing needs.

Milestone has retained the pro-bono services of Professional Services Marketing, Inc. to create an overall framework for the continued growth of Milestone and to increase name recognition and awareness in the marketplace through strategic marketing planning which includes brand management, enhancing the website, refining marketing materials, developing consistent key messages, assisting with events, etc.

We have also retained the pro-bono services of LaBreche Murray public relations firm to execute a proactive, targeted media relations program, specifically within the Twin Cities, that results in positive, consistent media exposure to increase awareness of and interest in Milestone Growth Fund and its services.

Milestone receives referrals from current and past clients. We maintain contact with current and past clients through a quarterly newsletter, our annual reception, and ongoing site visits and board meetings (current clients). Past clients, upon realizing their “American dream,” generally support Milestone’s mission and become involved as members of our board of directors or through contributions. Because they know firsthand how Milestone assists minority entrepreneurs, many of our current and past clients refer other minority business owners to us.

Q: Why is Milestone fundraising now?

A: Milestone is fundraising now because the demand for funding from minority entrepreneurs is increasing significantly. In fact, the demand has outgrown Milestone’s financial and staff capacity. Funding requests have more than doubled since last year.

According to the U. S. Census, Minnesota’s minority population is growing faster than the state’s overall population—over the last decade the minority population increased by 53% compared to overall population growth of 11%—and is projected to continue growing at such a rate, more than doubling in population by 2030. To meet the demand for funding from minority-owned companies, Milestone must increase its financing capacity, hire more staff, and expand its network of resources.

Last year we provided oversight, management, and technical assistance to 26 existing portfolio companies with outstanding investments of over $7 million. We contacted over 1,000 minority entrepreneurs and responded to over 500 inquiries. We conducted due diligence on about 25 companies requesting a total of about $9 million in funding. Out of those 25 companies we just funded five! Almost two and half million dollars ($2.5 million) was invested in those five new companies and additional financing was provided to three existing portfolio companies.

With your one-time, tax-deductible contribution, Milestone will be able to keep up with the funding demand, avoid losing ground in our efforts, and help many more minority entrepreneurs. According to our financial projections $2.5 million in contributions will enable Milestone to fund 100 new minority companies and, after five years, have $14 million in outstanding investments in about 56 companies. This is a significant increase over what Milestone has been able to accomplish in the past. However, we are confident that a larger funding base will allow us to borrow more and invest more!

In addition to increasing our funding capacity, we will also add one new investment officer to our staff to meet the higher demand for financing and pay for the direct fundraising expenses associated with the campaign – we are able to hold fundraising expenses below 3% of the total amount raised thanks to our broad network of professionals available on a pro-bono basis.

We’ve seen the “ripple effect” that Milestone investments initiate in action. When minority entrepreneurs grow their businesses, they hire people, improve local economies and increase the local tax base. In FY 2003, Milestone’s portfolio clients reported in September 2003 over $195 million in gross revenues, $24 million in total payroll, 850 total employees, almost 200 new jobs, and $5.2 million in total taxes paid.

Such a “ripple effect” goes beyond economic measures. Milestone’s clients work on solving social problems and inspiring others to pursue the American dream—something that benefits not just minorities but the broader Twin Cities community.

Note: This is Milestone’s fourth fundraising campaign since the late 1980s when the seed money to capitalize Milestone was raised. Our fund development efforts began in late 2003 and will go through the end of December 2005.

Q: Why should I give to Milestone?

A: Milestone can and needs to do more to continue serving the growing minority business community. A new investment capacity of $2.5 million will allow us to meet the higher demand for funding from a growing minority population, create a more stable and sustainable Milestone business model, and make more equity investments to balance and complement our income based investments.

Perhaps the strongest response to why a contributor should give to Milestone comes from our existing contributors. Their reasons for supporting Milestone and its mission are:

• To create a more prosperous and inclusive society for all individuals, businesses, government, and non-profits, it is important to feed the hungry, educate children, and assist those less fortunate but we also need to nurture and support those initiatives that create economic prosperity for all. Our contributors believe that providing financing and technical assistance to minority entrepreneurs with the potential to succeed is essential to building such a society.
  
• Helping minorities grow their businesses will significantly impact our social and economic future—not only do minority business owners create jobs, pay taxes and give back to the community, they are also consumers of the products and services our contributors bring to the market.
  • The minority market is an underserved market, overlooked by traditional financing sources. Our contributors, especially those in the financial arena, are very aware that minority entrepreneurs don’t have access to capital. According to studies conducted by the Kauffman Foundation, the Federal Reserve Bank, and the Milken Institute:
  • minorities are denied credit more often and are usually charged higher interest rates than non-minorities,
  • Latino and African American owned businesses are rejected for bank loans twice as often as their white counterparts, and
  • half of all minority-owned businesses don’t bother applying for loans because they expect to be turned away.
  • minorities have limited access to equity capital. Only 3% of all SBIC financing and just 2% of all equity financing in this country goes to minority owned companies even though the minority population as of 2003 was 31% of the country’s population.
    
• Our contributors are committed to the same goal Milestone is—to end overt and subtle racial discrimination. Successful minority entrepreneurs serve as role models, bring inspiration to others to pursue the American dream, and in time they become business leaders whose voices enrich many non-profits, foundations and community initiatives. By financing minority-owned businesses, Milestone is able to initiate a long-term ripple effect that reaches far and wide within minority communities and the Twin Cities community. Repeatedly we see positive results that Milestone clients achieve through their thriving businesses. Our portfolio clients create jobs, pay taxes, and become business leaders—they join community boards, solve local problems, and even start their own social initiatives to help their communities.
  
• Milestone has collected hard data that support its social and economic impact. In FY2003 Milestone’s portfolio clients reported over $195 million in gross revenues, $24 million in total payroll, 850 total employees, almost 200 new jobs, and $5.2 million in total taxes paid. In fact, over the last ten years Milestone portfolio companies employed an average of 805 full-time employees and paid in excess of $37 million in total taxes!
  
• Milestone’s contributors are aware that the minority market is a growing market and they want to establish a presence in the market because their future customers and employees will more likely be minorities. Over the last decade the minority population in Minnesota increased by 53% compared to overall population growth of 11%. The minority population will more than double by 2030. In addition, the purchasing power of minorities is also growing. Right now the minority purchasing power is 20% of the U.S. total purchasing power or $1.3 trillion but it will grow two or three times faster than the rest of the population over 10 years. Helping this minority market prosper makes good business and social sense.

Q: I already give to other non-profits helping minorities. Why should I give to Milestone too?

A: Milestone is the only Minnesota-based investment fund providing long-term equity-type financing to minority-owned businesses. Many organizations help minority entrepreneurs develop business plans, sell to government or large corporations, and introduce them to local banks. But no other non-profit organization in Minnesota is providing the type of financing Milestone does. We fill a financial gap. We provide long-term, equity type financing to those minority owned companies perceived as too high risk by the banks or too small for the venture capital funds. Our financing allows the minority entrepreneur to secure additional financing from banks and other financing institutions because our investment is subordinated to this new financing. In fact as of December 2003 for every dollar Milestone invested, its clients attracted $12 in additional financing.

In addition to financing, Milestone provides management and technical assistance to portfolio clients including strategic planning, business development and helps in creating financial discipline. Milestone is also active in providing opportunities to clients, such as exposure to business contacts, networking opportunities, media coverage in local newspapers and magazines.

Clients may take advantage of business and social contacts to staff their boards of directors. Milestone assists clients in forming a board of directors or board of advisors. We work very closely with clients to identify their needs. We help them recruit qualified prospects. We attend their board meetings and in some instances serve on their boards. We assist them in taking board advice and direction as well as act as a sounding board for board related issues.

Milestone provides access to additional financing through its connections to a large national network of venture capital funds, SBICs, private investors and successful entrepreneurs whose financing and experience can add significant value to the minority entrepreneur’s business.

Plus, Milestone clients don’t need to use part of their proceeds to pay for services that can be provided pro-bono. And Milestone has developed an extensive network of pro-bono providers including pro-bono legal services provided by five of the largest law firms in the Twin Cities – a major savings for our clients. Other business services are secured for many of Milestone clients and are provided by the most respected firms in Minnesota. Our network of contacts and pro-bono providers positively influence our portfolio companies’ chances for success.

Q. How fiscally responsible is Milestone?

A: Milestone only asks for contributions when we absolutely need them. This current campaign is the fourth fundraising campaign for Milestone in 15 years! In addition, we are self-supporting and take the necessary steps to ensure our business activities are audited and examined every year.

Milestone Conducts Few Fundraising Campaigns
Milestone has conducted only THREE fundraising campaigns since inception. The initial campaign, conducted by MEDA to capitalize the fund was done in the late 1980s. Two more campaigns were conducted by Milestone in the 1990s.

Milestone only asks for contributions when we absolutely need them. Money raised over the years has been invested several times and it remains, as of today, still intact. Your contribution is reinvested over and over and continues to be deployed all the time! 100% of contributed capital is still serving the Milestone’s mission.

Milestone is Self-Supporting
We don’t ask for annual contributions to support our budget. Our investment strategy, approved by our board of directors, is focused on ensuring our investments generate enough yearly income not only to cover overhead but also to generate a profit to offset the losses we might experience. We are proud of our successes but for every success, we have experienced many losses – minority companies fulfilled by Milestone’s mission to be given an opportunity to pursue the American Dream. One hundred percent (100%) of all investment returns are reinvested in serving the Milestone mission.

Milestone Operations and Investment Activities are Audited and Examined Every Year
Milestone is audited by Lurie, Besikof, Lapidus & Co. and has received an unqualified opinion for every year it has been in business. In addition, Milestone is subject to an annual Examination conducted by the US Small Business Administration (SBA). We are proud that we have an outstanding record with the SBA and they have found our operations in compliance with the SBIC Rules and Regulations.

The SBA annually approves Milestone’s management expenses budget. For the last five years, Milestone has operated with the same $450,000 budget and the same staff size of 3.8 full time employees -- a major accomplishment when expenses increase every year. As a role model to our clients, Milestone has shown the financial discipline necessary to operate within a fixed budget.

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