Gemini Investors creates thousands of jobs by investing in small businesses
Posted April 21, 2016
Gemini Investors is a small business investment company (SBIC) that puts equity and mezzanine capital into small to mid-size companies. Through their unique model, they have helped create over 10,000 jobs in the United States. Gemini Investors, along with other SBICs, display a successful model for investment that benefits small businesses, investors, banks and communities at large. This model deserves the praise and consideration of current and future investors as a solution to create better investment outcomes for all stakeholders involved.
Recent years have shown Gemini Investors’ approach to be an example of a successful investment strategy for the future. In 2009, The United States Small Business Administration honored Gemini Investors as the inaugural winner of the Small Business Investment Company of the Year Award. The president of Gemini Investors, Jim Goodman, estimates that over 10,000 jobs have been created through their investments. They have invested over $650 million in over 125 companies throughout the United States. Gemini is one of the leading companies contributing to job growth through investment by using the SBIC model.
A small business investment company has to follow several rules in order to maximize successful outcomes for as many stakeholder groups as possible. For example, one attribute of the SBIC system entails the investing company selecting medium size businesses that have a ceiling on net income of $6.5 million over the last two years at the time of investment. Furthermore, smaller businesses have to make up a certain percentage of portfolio companies. Small is defined as having under a net income of $2 million over the last two years at the time of investment.
Another attribute of the SBIC model is the utilization of key partnerships with banks and management. The SBIC performs robust financial due diligence on a potential portfolio company. If the company passes the SBIC’s financial analysis, the SBIC provides a substantial amount of initial capital to owners and management. Investment often results in a win for the SBIC, the managers, the owners, the employees and the company.
Jim Goodman, president of Gemini Investors, put it this way, “Especially since 2008, many small businesses have been starved for growth capital. SBICs play a vital role by filling this gap through private equity funding of small businesses. Over the last quarter century, most private equity funds have raised their minimum investments, creating a gap for smaller SBIC funds such as Gemini.”
In 2013, $3.5 billion in financing was invested in small businesses by SBICs — that’s 1,068 small businesses receiving capital that’s crucial to their growth. Thirty percent of these businesses were minority or women-owned firms or were in low-to-moderate income areas. All of this was achieved at what is perceived as zero cost to taxpayers. In fiscal year 2014, investments from SBICs helped create or retain over 113,000 jobs.
To put this into perspective, we can take a look at some of the well-known United States companies that benefited from SBIC investors in their early stages. These firms include Intel, Apple, Staples, Buffalo Wild Wings, Federal Express and many more.
People who are interested in starting investment companies should take the time to explore whether investing through an SBIC is right for them. SBICs create promising outlooks for investors, banks and businesses. Such investments also contribute to the creation and maintenance of jobs, which improve communities and increase their opportunities.
Individual investors should consult a licensed investment adviser before placing their monies in SBIC funds. While we are not investment advisers, we know a number of people who have done well by making this type of investment.
John Hoffmire is director of the Impact Bond Fund at Saïd Business School at Oxford University and directs the Center on Business and Poverty at the Wisconsin School of Business at UW-Madison. He runs Progress Through Business, a nonprofit group promoting economic development. Laura Steele, Hoffmire’s colleague at Progress Through Business, did the research for this article.
John Hoffmire teaches at SaÏd Business School at the University of Oxford.