Why Project Black, $1.45 billion investment fund, is perfect for N.J.

African American Chamber’s Harmon feels private equity fund created by Ariel Investments could work on state-level scale

Project Black, a private equity fund created by Ariel Investments as a way to scale sustainable minority-owned businesses, announced earlier this month that it had closed with $1.45 billion in committed capital from limited partners and co-investors.

Mellody Hobson co-founded Ariel Alternatives with Leslie A. Brun, who serves as chairman and CEO of the private equity subsidiary of Ariel Investments.

Despite the fundraising challenges that arose from the bear market, we raised one of the largest private equity funds for a first-time manager in history — a statistic that is both humbling and energizing,” Brun said in a note to supporters.

The billion-dollar total is more than just staggering, it is a stepping stone.

So said John Harmon, the head of the African American Chamber of Commerce of New Jersey.

“It shows what’s possible,” he said. “It shows intentionality and potentiality.

“As a follow-up to many of the overtures and promises made by corporations during the aftermath of George Floyd, you have the first Black fund management company giving them the roadmap to realize what they all said they wanted to do.

“Corporations said, ‘We want to support Black business, we want to put Black businesses in a position where they could scale and grow and have greater impact in the communities they live and work.’ This fund delivered.”

And then some. The buy-in was (at least) $100 million — a figure 13 corporations agreed to fund.

Brun said in the note that the fund can help turn around numbers that are on the other end of the scale, as 95% of minority business enterprises have less than $5 million in revenue.

The fund already is making a difference. Its first acquisition was Sorenson, the leading U.S. communications provider for people who are deaf and hard-of-hearing.

“Prior to our purchase last April, just 3% of Sorenson’s leadership team and board of directors were comprised of minorities,” Brun said. “As we assumed control and actively sought to augment the organization with seasoned leaders, including CEO Jorge Rodriguez, representation significantly increased.”

Minorities now make up 43% of the senior leadership and board.

Funding Project Black

Ariel Investments announced its inaugural fund, Project Black, has closed with $1.45 billion in committed capital from limited partners and co-investors. A look at the 13 companies that contributed at least $100 million to the fund:

  • AmerisourceBergen Corp.
  • Amgen Inc.
  • Ballmer Group
  • Hobson/Lucas Family Foundation
  • Lowe’s Cos. Inc.
  • Merck & Co. Inc.
  • NextEra Energy Inc.
  • Nuveen, the asset manager of TIAA
  • Qatar Investment Authority
  • Salesforce Inc.
  • Synchrony Financial*
  • Truist Financial Corp.*
  • Walmart Inc.

* Represents a co-investor in a vehicle structured to support Project Black and participate in investments while complying with certain regulatory requirements.

The initiative figures to be helpful in one of the biggest opportunities — increasing supplier diversity. Minority firms currently receive an average of just 2% of the corporate spend of Fortune 500 companies.

“We recognize that a $100 million minimum investment drawn down over a multiyear period was an audacious ask, particularly in the context of a first-time fund, and yet, we know large commitments will help maintain the alignment of interests needed to navigate complex supply chain environments as well as to fund our purchase of 6-10 platform businesses with $100 million to $1 billion in revenues,” Brun said in the note to supporters.

“Although our companies may not be minority enterprises upon acquisition, through Project Black’s ownership of at least 51% of the common equity and other deliberate actions, they will become certified Minority Business Enterprises that can serve as Tier 1 suppliers to the Fortune 500.”

Harmon knows the concept can work. As someone who sits on numerous boards throughout the state and around the country — including the U.S. Chamber of Commerce — Harmon said he has seen an increased commitment to the Black business community firsthand.

There will be no greater example than Thursday night, when more than 600 are expected at the chamber’s annual gala. It’s the second consecutive sellout for the event — and it happened despite increasing capacity this year by 50%.

“People want to be a part of what we’re doing,” Harmon said

Harmon said he dreams of being able to create a Project Black that is just for Jersey.

“It’s a step that makes all the sense in the world — and there are tons of companies that could benefit from it,” he said.

“One thing I could offer up is that the chamber could help direct those resources and get them into (a) fund. The chamber could also identify the businesses that would step up to be participants in these relationships with larger companies.”

Project Black is the ultimate proof of concept, Harmon said.

“It is a template of something that folks say they want to do,” he said. “Here’s an opportunity to seize that moment.”