28 January 2011

Goldman's Heart

It's easy and perhaps popular to deride Goldman Sachs for its role in the financial crisis, excessive employee compensation, and its overall Gordon Gecko style of arrogance. Besides peddling M&A advice and Facebook stock, however, they do some pretty noble things that most don't see. Their program, 10,000 Small Businesses, is a commendable effort that just completed its first year anniversary. It's part microfinance, part philanthropy, part business consulting; all methods that I passionately believe capitalism should be deployed to make the world a better place. Sure, there's a PR element to this that Goldman stands to gain, but for $500 million, there are better ways to attain that if that was their only endgame.

I've written about Endevour's VC- style approach and the limited microfinance efforts in the US; Goldman's 10,000 Small Businesses addresses both of these areas in a much bigger way. The goal of the program is to grow small business ($150k - $4M in revenue) into sustainable concerns with the ultimate goal of growing employee bases. They look at scalability, ability to gain from the program (ie. people with limited business background), desire to hire, and difficulty in capital raising. They're committing $200M to education and supporting community colleges and other institutions and $300M in capital through loans and grants.

Through partnerhips, they've built a whole ecosystem to do this. Entrepreneurs go through a 20 week crash MBA course designed by schools such as Wharton at their local community colleges. Grants and micro loans come primarily through non-profit local institutions. They partner with local nonprofits to provide support throughout the process. Their advisory panel, led by Warren Buffett, reads like a Who's Who in business, provides unrivaled guidance to small businesses. Goldman has built an infrastructure that leverages its national reach while customizing each effort to the local community affected. They target areas where they can make the most impact as evidenced by their recently announced $20M effort in the New Orleans area. Where else can the owner of Mel's Chicken Shack get access to capital, a Wall Street education, and local support to grow their business?

So the first year has yielded modest results. According to a recent Fortune article, they've invested in 50 businesses and educated 100 business owners, and spent $60M so far. They've kept their eligibility standards high to ensure yielding the desired results (scalable companies that grow employee bases). It will be interesting to see how the program matures and how successful these small businesses ultimately become.

I love to see capitalistic-based companies deploy their know-how into the non-profit space. Let's hope 10,000 Small Businesses is a wild success and dramatically strengthens the small business community in the US. And who knows, perhaps they may see a good opportunity to invest in a small opinion-based business blog (just need $150k more revenue to qualify).

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