The New York City Investment Fund is a private fund with a civic mission. The fund was the vision of Henry R. Kravis, founding partner of Kohlberg Kravis Roberts & Co., who serves as its Co-Chairman. His goal was to mobilize the city’s financial and business leaders to help build a stronger and more diversified local economy. To that end, the Fund has built a network of top experts from the investment and corporate communities who help identify and support New York City’s most promising entrepreneurs in both the for-profit and not-for-profit sectors.
The Fund was established in late 1996, under the auspices of the nonprofit The Partnership for New York City. It was initially capitalized by contributions of $1 million each from sixty-seven individual and corporate investors, who invested for the good of the city and without expectation of financial returns. This is an evergreen fund, in which realized gains are reinvested in other worthwhile projects.
The Fund has raised in excess of $100 million. Its investments typically range in size from $1 million to $3 million. The Fund provides equity or debt, structured to meet the needs of the project. It will invest at any stage of business development, but is seeking to exit in about five years. To date, the Fund has invested in over seventy projects. The Fund also established the Financial Recovery Fund (PDF 361K) and raised over $12 million (including a $1 million contribution from the Civic Capital Corporation) to provide recoverable grants to small businesses impacted by the events of September 11.
The key criterion for investment is that the venture is likely to generate benefits for New York City and its communities. Priorities include job creation, revitalization of distressed areas and innovative ideas or products that position New York at the cutting edge of growth sector industries.
The Fund invests in technology companies but only alongside an experienced lead venture capital investor. The Fund does not make grants, but will provide below market financing for not-for-profit projects that advance its mission. The Fund does not make long-term real estate investments nor does it invest in real estate for housing. It will provide short-term real estate financing for projects that have a significant impact in terms of permanent job creation, new business development or revitalization of a community.
The Fund is flexible in terms of how it structures its investments. It provides subordinated debt to leverage other private capital or to maintain maximum ownership for management of minority-owned companies. When investing in a venture capital deal, returns are expected to equal those of other at-risk parties.
The New York City Investment Fund Manager, Inc. invests in eligible projects or companies from three different funding sources that, together, comprise the capital of the Fund:
About one third of the Fund’s assets are owned by a limited liability company, with investors who have effectively made an interest free, unsecured loan to the Fund for a period of forty-five years.
Another third of the assets are held by the Civic Capital Corporation, a public charity established to administer tax exempt contributions that have been donated to the Fund. These investments are restricted to investment in eligible charitable activites such as economic development.
The balance of assets are held by the New York Small Business Venture Fund I, II and III, certified capital companies that were organized to participate in a State program that provides tax credits to insurance companies that invest in eligible activities. These funds are primarily for early stage venture capital investments.
Investment decisions are made by the Board of Directors which is co-chaired by Henry R. Kravis and Russell L. Carson.