Fellowship Spotlight: Apis & Herritage Capital Partners
When Todd Leverette and Philip Reeves enter a room, their boisterous personalities, shining smiles, and joie de vivre make the atmosphere feel a bit brighter. These co-managing partners of Apis & Heritage Capital Partners are building a private equity fund created to close the racial wealth gap through the establishment of employee-owned businesses.
When this dynamic duo started the VC Include Fellowship for BIPOC First-Time Fund Managers in February 2021, they had not yet raised any money for their fund. By the end of the year, and after finishing the program, they successfully closed $49.25MM.
But let’s step back and illuminate the why and how of Apis & Heritage (A&H).
Why Employee-led Buyout Approach?
“Our work really started with one of the most troubling statistics that we’ve ever heard, and that is the fact that the average Black and Latinx worker in the United States has zero dollars in retirement savings,” explains Todd, “So we were trying to figure out what is a scalable tool where we get more wealth into the hands of Black and Brown workers.” They identified the model of the ESOP (Employee Stock Ownership Plan) to do just that.
The ESOP model is an employee benefit plan that gives workers ownership interest in the company. It was created by the same piece of federal tax legislation that created the 401K.
Some significant statistics about ESOPS:
ESOPs give low- and moderate-income workers economic security and often help them plan for retirement for the first time
Low/moderate-income workers in an ESOP have a median account value of $165,000. By contrast, the typical American household has just $17,000 in savings
Low/moderate-income workers in an ESOP closest to retirement have 10 times more wealth than the typical American in that age group
“This model has been creating wealth, primarily for white workers in the US, for the past 50 years,” says Todd, “It has the ability to really address the intergenerational poverty in communities and workers of color, and we believe it is one of the best models out there.”
How the A&H Strategy Works
Through their employee-led buy out transaction, A&H buys profitable, privately-held companies from retiring owners and transitions them to 100% employee-owned businesses with significant tax savings. They seek enterprises with $1-4 million of EBITDA (earnings before interest, taxes, depreciation, and amortization) in manufacturing and essential service sectors such as maintenance, landscaping, mechanical trades, home healthcare, and other services, with at least 40 employees, of which at least a third of the workforce are BIPOC.
“Over the next ten years, ten trillion dollars of businesses need to change hands because of aging Baby-Boomers, and a lot of those founders don’t have exits,” Philip breaks down, “so we are able to go to those founders and say, ‘Why don’t you sell the business to the people that helped you build it?’ And we’re going to finance and guide that transaction and let the employees carry it to the next level.”
How the VCI Fellowship Helped A&H
“They say when you’re having conversations with investors, act like you’ve been here before,” Todd says with a grin, “but if you haven’t been here before and nobody who’s been here before has told you what building the business means, how would you know? So the value of the VCI Fellowship can’t be measured in dollars. It’s a relational value, it’s an experiential value, it’s giving 10, 20, or 30 years of experience in the space, and giving that to us as first-time fund managers to really accelerate what we’re doing.”
With the partners’ tendency to finish each other sentences, Philip chimes in, “fund management is clearly an apprenticeship business, and people of color were never apprenticed at scale. So VCI fills that void with people that are steps ahead of us.”
“It’s kind of like a map,” Todd continues, “that gives you the lay of the land. The destination is your vision for your fund, what you’re trying to achieve and accomplish, but knowing the lay of the land can help you get to where you’re trying to go. And VCI gives that to you in spades.”
We are so proud of Todd and Philip, and look forward to witnessing and celebrating their explosive success for many years to come. It’s an honor and a genuine joy to have them as part of the VC Include family and to watch them make the world a brighter place.
