The Arctaris Cuyahoga Impact Program—a partnership among county leaders, the Cleveland Foundation and Boston-based Arctaris Impact Investors—has raised $10 million so far to grow businesses in low-to-moderate income communities.
Overall goals include attracting new companies, supporting existing entrepreneurs, and bridging the racial wealth gap via minority-business ownership.
Officials announced the program’s first investment on Wednesday, April 20—a Cuyahoga Heights-headquartered asphalt paving and repair company. The acquisition of Specialized Construction Incorporated (SCI) by president and CEO Brian Hall makes the company one of the only minority-managed businesses in its industry.
“This was a complex transaction, and the Arctaris Cuyahoga funding filled an important equity and debt gap that supported our senior lender, KeyBank, and allowed us to close the deal,” said SCI’s Hall during a news conference.
Paul HerdegCuyahoga County development director Paul Herdeg says the investment will keep more than 40 well-paying construction jobs in the area. Another 15 positions that pay above the industry average are expected to be created at the company within the next five years.
“(SCI) is an example of a minority-owned company that’s needed for the county, and the kind of business that we want to stay here,” says Herdeg.
For the larger effort, Cuyahoga County and Cleveland Foundation provided $1.5 million in catalytic “first-loss” capital, meaning the two entities will take initial losses in an investment, Herdeg notes. Catalytic funding secured an additional $8.5 million in external investment to bring the plan to its $10 million minimum.
Strategic partners plan to expand the Arctaris program from $10 million to at least $25 million through connections with other like-minded foundations and institutions. Although target industries such as manufacturing and healthcare can leverage regional strengths, the plan has room for any company located in underserved areas or “Opportunity Zones”—defined by the Internal Revenue Service as economically distressed communities where new investments may be eligible for preferential tax treatment.
Launched in early 2021, the program has eyes on additional deals, among them a marketing firm with no current local presence. Future investments will support diverse regional businesses like SCI, while building access to capital for companies looking to grow.
In the months and years ahead, an advisory committee developed by the impact fund will continue to assess, evaluate and approve investments based on their potential for community good.
“Every deal we do should have a social impact,” says Herdeg. “Whether that’s minority ownership or creating jobs for socially disadvantaged persons.”