2013 ICCC Impact Report

1ICCC IMPACT REPORT 2013

COMMUNITY & CAPITALInvesting In America’s Urban Future

I fell in love with what social business is about and the idea that you can create benefit to the planet and people.

— Tom Szaky, CEo, TErraCyClE, 2009 ICCC ParTICIPanT

FROM TRASHTO TREASURE

According to United Nations estimates, more than two-thirds of the world’s population will inhabit cities by 2030. By roughly the same time, the 259 largest U.S. cities are expected to generate more than 10% of global GNP growth—more than cities in other developed countries combined.

“The degree of economic vigor that the United States derives from its cities is unmatched by any other region of the globe,” a McKinsey Global Institute report found, noting that U.S. cities with populations of 150,000 or more generated some 85% of the country’s GNP in 2010, compared to 78% for large cities in China.

For nearly 20 years, the Initiative for a Competitive Inner City (ICIC) has supported high-potential small businesses in some of the most economically distressed urban areas in America.

The organization works through Inner City Capital Connections (ICCC), a year-long national program that holds executive education seminars in a number of U.S. cities and connects urban-based, investment-ready companies with corporate leaders, capital providers, educators, advisors and peers to build capacity and access capital. The program culminates with its signature conference in New York. Criteria for participation are straight-forward: For-profit companies must be headquar-tered—or have at least 51% of their physical operations and 40% of their employees living— in an economically distressed urban area and have annual revenue of $2 million or more.

The ICCC program plays a major role in urban centers by educating inner city business owners on how to compete for capital and gain access to capital providers, as well as by guiding financial institutions to new investment opportunities in these areas. ICIC’s research has shown that capital access is a contributing factor to the success of inner city entrepreneurs.

Every November, some 200 of the most successful and fastest-growing inner city business owners, along with some of the nation’s top business execu-tives, are in New York for ICCC’s national confer-ence at Fortune Magazine.

For the business owners, an invitation to the Big Apple represents an opportunity to present their companies, products and services to an audience of potential lenders and investors. For the business leaders participating in the program—many of whom readily identify with these ambitious men and women working in some of the nation’s most distressed cities—it is a chance to support and become part of their dream. And for both, the conference affords an opportunity to work together toward common goals: creating new jobs, stimulat-ing economic growth and helping renew inner city communities across the country.

But the culmination of the program in New York will clearly be the presence of the intrepid entre-preneurs who earned their right to be here—the hard way and, in many instances, far from home.

Living the Urban American DreamThe future of the U.S. economy lies in America’s cities. It is here that small, inner city business owners—the embodiment of the American spirit of individualism, entrepreneurism and sheer pluck—are driving growth and jobs.

CONTENTS02 Living the Urban American Dream

03 Coming to America

04 Raising Capital and Financial Understanding

06 ICCC Infographic

08 Creating Jobs, Restoring Hope

09 The Big Apple and the Whole Enchilada

10 ICCC Participants, Products and Services

The degree of economic vigor that the United States derives from its cities is unmatched by any other region of the globe.

MCKINSEY GlOBAl

INSTITUTE REPORT

Backpack made from recycled Capri Sun® pouchesTerraCycle, 2009 ICCC Participant

3ICCC IMPACT REPORT 2013

Coming to AmericaWhen he was a boy living with his parents in Mexico, Jorge Fierro had three burning desires: to come to America, to learn English, and one day to start his own business.

His father owned a grocery store and grew grapes for local vintners. His mother ran a business of her own, canning beans. “I was always thinking about what business I could open,” he recalls.

After obtaining bachelor’s degrees in humanities and accounting and attending law school, Jorge realized that he didn’t want to become an attorney. Instead, he came to the U.S. and, for the first few months, worked odd jobs while learning English. “It gave me a lot of time to think about what I wanted to do to make a living,” he says, “about what I wanted to do with my life.”

The answer came to him one day when he walked into a supermarket in Salt lake City, where he and his wife were living, to buy a can of refried beans, a staple of Mexican cuisine. What he found on the store shelf turned out to be a rude but fortuitous awakening.

His mother had made a delicious creamy salsa from fresh ingredients, and Jorge decided to make his own version from locally-grown beans. He sold both the salsa and the beans at a weekly farmers’ market under the brand label Rico, which means “rich and tasty” in Spanish. Rico Salsa was a hit.

Gradually, the business grew from a single table, a cooler and 20 jars of salsa to rented kitchen space in a Salt lake City bakery, seven employees and 10 products on the shelves in eight supermar-kets. After being approved for several increasingly large loans, Jorge moved operations into a 12,000-square-foot facility in the Warehouse District of Salt lake City, a gritty inner city neighborhood close to his employees and also to many of his customers.

By 2010, Jorge’s products were on supermarket shelves throughout Utah, Idaho and into Wyoming. That same year, his company was named one of the 100 fastest-growing inner city businesses in the country. He began attending ICCC seminars in select cities around the country—where business owners network with investors, lenders and advisors, learn about the various forms of debt and equity available to them and get advice on how to best pitch and position their companies for future growth—and also ICCC’s annual conferences.

Now, as is true of many ICCC-supported entrepre-neurs, Jorge is positioned to attract capital provid-ers and significantly expand his brand.

Rico Brand, 2011 ICCC Participant

ICCC IMPACT REPORT 20134

Raising Capital and Financial UnderstandingAccess to capital is the driving force in bringing business owners, investors and lenders together and, in this respect, ICCC’s success over the years has been nothing short of spectacular.

Between 2005 and 2012, 572 unique business owners from 174 cities applied to the ICCC program. To date, program participants have been connected to over 150 capital providers and have raised in excess of $1 billion in debt and equity capital, with 81.6% of business owners securing the capital they needed within two years of participation.

In addition, during that same period, over 80% of companies surveyed reported making at least one investor contact at ICCC for a total of 2,427 connections, and over 56% reported at least one beneficial ICCC business referral or other contact—a total of 965 referrals—following the program.

Yet while many inner city businesses come to ICCC seminars and the annual conference seeking sources of capital, others find sufficient value in networking and financial education—thanks to the coaching and mentoring they receive from partici-pating professionals: cutting-edge practitioners, graduate business school professors and seasoned entrepreneurs who have a keen knowledge of the working business world. Seventy-four percent surveyed 2012 participants cited networking opportunities, and 48% cited learning about business models, as reasons for attending.

Amy Beth Treciokas opened Yoga Now near Chicago’s North Side in the summer of 2003 in an effort to bring traditional yoga, health and healing practices to the community there. Amy enjoyed early success in corporate America, but it didn’t give her the purpose and meaning she wanted from life. Participating in ICCC as a young business owner was “eye-opening,” she says today. “It laid out the words ‘venture capital’ and ‘angel’—this is what they are, this is what they expect, and this is how you use them.”

For Tom Szaky, the main benefit of his association with ICCC was the opportunity to meet other inner city entrepreneurs. “Most of them were a little larger than we were,” he says, “and it was great to get advice about the next steps we should take.”

Born in Hungary, Tom became enamored of capitalism and entrepreneurism while growing up in the then-Communist country. He started a design company at 14, before immigrating to the U.S. During his freshman year at Princeton, Tom founded TerraCycle, Inc., an inner city recycling firm that is one of the fastest-growing companies in the world. The company collects difficult-to-recycle, post-consumer waste and turns it into reusable, innovative, new materials and products.

Yoga Now, 2012 ICCC Participant

POST-ICCC DEbT RaISED by PaRTICIPaNTS

Total Debt Raised $753.8 million

Median Amount per Firm

$750,000

Average Amount per Firm

$4.2 million

Firms Funded 180

POST-ICCC EQUITy RaISED by PaRTICIPaNTS

Total Equity Raised $316.3 million

Median Amount per Firm

$550,000

Average Amount per Firm

$3.3 million

Firms Funded 72

5ICCC IMPACT REPORT 2013

At the same time, Tom was also attracted to a socially responsible company’s likely impact on a community—TerraCycle is headquartered in Trenton, New Jersey—and on the environment.

“I fell in love with what social business is about and the idea that you can create benefit to the planet and people,” he says. “In addition to being a social business, we’ve always prided ourselves on being an inner city business. ICIC is the only organization I know that’s only focused on the concept of inner city business and it’s something I wanted to be part of.”

In 2003, its first year in business, TerraCycle had one product and zero profits. By 2004, however, the fledgling recycling company had realized $70,000 in sales and the following year $500,000. After raising $20 million through business plan contests, equity and angel investors found online, between 2009 (after the company participated in ICCC) and 2010, TerraCycle had raised significant capital, realized annual sales of $13 million and was profitable.

Business acumen gained at the seminars and conferences pays off in less tangible ways as well. Prior to participating in ICCC, some 28% of compa-nies expressed readiness to secure private equity. That grew to 58% post-participation. As a result of feedback from lenders. investors, mentors and peers, 38% of participants adjusted their financing strategies and 40% reevaluated their sales and marketing strategies.

What’s more, the value of an ICCC financial education continues long after companies have realized their dreams. When Stephanie Hickman took over Trice Construction in 2006 after her father and uncles retired, the 46-year-old family-owned business had few prospects and virtually no revenues. In fact, it was about to fold. Stephanie, an attorney with 10 years experience as an executive in the energy and utilities industry, foresaw the amount of infrastructure that would develop in Chicago in the coming decade. By 2011, after participating in the year-long ICCC program, she had expanded Trice Construction’s workforce and built the business back up to $6.5 million in annual revenues.

“My reason for coming to ICCC was as a way to go to school,” Stephanie says of the program. “Personal development leads to improvement of the business. Someone asked me in June why I continue to come back to ICCC and I said, ‘My business changes year to year, and there’s always something different that resonates with me. I may have a different situation now than we had in 2011. I may understand a situation in a different way—those ‘A-ha!’ moments. Across the board, the opportunities are there to continue to learn and to continue to develop.”

Trice Construction, 2011 ICCC Participant

Upper left: TerraCycle, 2009 ICCC Participant

I fell in love with what social business is about and the idea that you can create benefit to the planet and people.

TOM SzAKY, CEO, TERRACYClE,

2009 ICCC PARTICIPANT

ICCC IMPACT REPORT 20136 ICCC IMPACT REPORT 20136

ICCC Participants: At the Seminar...

2005-2012 ICCC program results or 2013 survey results as applicable

PaRTICIPaNTS PROFILE bREaKDOWN

36%EMploy 25 or MorE pEoplE

22%rEvEnUES oF $5 MIllIon or MorE

76% plAn To hIrE In 2014

56% 10 yEArS or oldEr

76%MInorITy CEoS

31%FEMAlE CEoS

ICCC MaNagEMENT EDUCaTION HELPED 2012 PaRTICIPaNTS TO:

EnHAnCE BUSInESS PLAn

PoSITIon FoR CAPITAL

oBTAIn CAPITAL

TAkE oTHER ACTIon

EnHAnCE WoRkFoRCE

InCREASE REvEnUE

50%

41%

17%

14%

17%

20%

PaRTICIPaNTS by INDUSTRy

16%Business Services

9%Consumer Goods

& Services

3%Energy11%

IT & Telecommunications 5%

Finance, Insurance & Real Estate

9%Construction

10%Food &

Beverage

5%Health Care

11%Manufacturing

5%Media & Publishing

5%Transportation

& logistics

4%Wholesale

Trade

7%Other

47% RAISED CAPITAl WITH ICCC COACHING

24% WITHOUT ICCC COACHING

7ICCC IMPACT REPORT 2013

In America’s Inner Cities

And Creating Jobs…

4,977 JoBS CrEATEd

JObS3,083 direct

1,194 indirect

699 induced

private equity MEZZANINE

venture capital

debtINVESTORS150 ANGELS

Raising Capital…CAPITAL RAISED

$1.07 billionEQUITY $316.3 Million

DEBT $753.8 Million

SaLaRy RaNgE OF JObS CREaTED WITH POST-ICCC CaPITaL

Less than $15K

$15K- 19K

$20K- 29K

$30K- 39K

$40K- 49K

$50K- 59K

$60K- 69K

$70K- 79K

$80K- 89K

$90K- 99K

$100K- and above

4% 4%

19%

8% 8%

35%

27%

17%

0% 2%

13%

572 ICCC UnIQUE APPLICAnTS

174 cities 40

states

ICCC IMPACT REPORT 20138

Creating Jobs, Restoring HopeAs Americans surge back to the cities, ICCC-supported companies are there, supplying the urban communities in which they’re located with the fruits of their labors, new jobs and hope.

ICCC companies surveyed in 2013 are estimated to have created or helped create nearly 5,000 new jobs, hiring on average 40% of their workforce from within inner cities. ICIC is the only organiza-tion in the country that sparks growth of that kind in economically distressed urban areas.

In addition, a recent study estimates that for every 10 direct jobs generated by an ICCC business, an additional six indirect and induced jobs (the result of the multiplier effect of direct and indirect jobs) are created in the community.

In Trenton in less than a decade, TerraCycle has grown from a handful of Tom Szaky’s college friends to 125 employees today. Jorge Fierro’s Rico Brand, which began with just him and a partner, currently has 45 employees in its Warehouse District facility and another 30 working nearby at Frida Bistro.

In Detroit, Avalon International Breads has been part of the heart of the city since 1997. To many early skeptics, co-owner Ann Perrault admits, offering artisan goods baked with 100% organic flour in Detroit’s Cass Corridor “seemed an improbable venture.” Where naysayers saw distress, urban flight, crime and abandoned buildings, Ann saw “the seeds of a transformation, with food growing on vacant land, small businesses

filling unmet needs, artists thriving and neighbors coming together to rebuild, renew and re-spirit the city from the ground up.”

Although she had initially been attracted to the neighborhood’s cultural heritage and architecture, “most of all,” she says, “we loved the incredible souls of Detroiters.”

When the bottom fell out of the economy in 2007, Ann turned to ICCC for education, contacts and general support. “ICCC got us involved with their program for CEOs and taught me how you go about pitching and asking different investors for funding,” she told a local newspaper. “I agree with Michael Porter’s philosophy of growing inner city businesses to grow the city.”

In 2008, the company secured loans from five major financial entities. Earlier this year, Avalon moved to a 50,000-square-foot baking facility on Detroit’s East Side. Since then, the company has become the main baked goods supplier for a new Whole Foods store in midtown. To fill openings made possible by the expansion, the company is expected to add 100 new employees.

Avalon International Breads, Detroit 2010 ICCC Participant

ICCC got us involved with their program for CEos and taught me how you go about pitching and asking different investors for funding.

ANN PERRAUlT, CO-OWNER,

AVAlON INTERNATIONAl BREADS

9ICCC IMPACT REPORT 2013

The Big Apple and The Whole EnchiladaToday, rico Brand boasts 75 products in 85 supermarkets in Utah and sales in 2012 of $3 million.

In addition, three and a half years ago Jorge Fierro opened Frida Bistro (named after Mexican artist Frida Kahlo) in the Warehouse District. The community appears to appreciate his commitment. “As an immigrant living the American dream, the way I’m invested in this community is highly respected,” he says.

Although Jorge has attended numerous ICCC seminars and conferences, this year’s conference at Fortune Magazine is the first time he has felt ready to present his business—one of only three

selected—to an audience of potential investors, capital providers and peers.

“This program will allow me to hopefully expand the concept I introduced in Salt lake City into bigger cities and into a multi-million dollar business,” Jorge says.

“The company I created has a great chance of becoming a nationwide company,” he adds, “and I’m ready.”

This program will allow me to hopefully expand the concept I introduced in Salt lake City into bigger cities and into a multi-million dollar business.

JORGE FIERRO, PRESIDENT AND CEO,

RICO BRAND

ICCC 2010 Conference

ICCC IMPACT REPORT 201310

ICCC Participants Products & Services

Trashed film turned into a chandelier.

Terracycle,

2009 Iccc ParTIcIPanT

ICIC’S MISSION IS TO DRIVE ECONOMIC PROSPERITY IN AMERICA’S INNER

CITIES THROUGH PRIVATE SECTOR INVESTMENT TO CREATE JOBS, INCOME

AND WEALTH FOR LOCAL RESIDENTS. ICIC.ORG