Top companies from Target to Sephora have pledged to increase their spend with minority-owned businesses. Now, a fund aimed at helping midsize businesses scale up and work with Fortune 500 companies has reached $1.45 billion and promises to bolster the supplier pipeline.
Project Black is looking to fund middle-market companies' transition into certified minority businesses of scale that can serve as direct suppliers to Fortune 500 companies. The fund plans to pursue six to 10 companies with $100 million to $1 billion in revenue that may or may not be currently minority-owned.
First announced in 2021 with a $200 million investment from JPMorgan Chase, Project Black is the first private equity initiative of Ariel Investments, a Black-owned global asset manager with over $16 billion under management. The fund will be operated by the newly formed private asset management offshoot Ariel Alternatives, headed by Leslie A. Brun, founder and former CEO of the $500 billion investment firm Hamilton Lane. "Our goal is to help close the racial wealth gap by creating minority-owned businesses of scale through access to both capital and customers," Brun said of Project Black in a statement.
Leveraging contacts from the asset management side, Ariel Alternatives aims to build connections and partnerships between its network of the world’s largest corporations and the portfolio companies within Project Black. Along with forging new connections, each Project Black portfolio company will receive funding from investors — including Merck, Nuveen, Salesforce and Walmart — that have each committed $100 million to $200 million over the fund’s seven-year investment period.
Bringing more minority-owned businesses into the big leagues
"It's a big deal," Fortune senior editor Ellen McGirt said of the fund in a recent edition of her RaceAhead newsletter. Or, as Mellody Hobson, co-founder and co-CEO of Ariel Investments, put it: “We are scaling change. In so doing, we will redefine what it means to be a minority-owned business in the United States."
The fund will target companies that are already growing, with annual revenues between $100 million and $1 billion, but still lack the scale to compete toe-to-toe with the direct suppliers vying for corporate contracts. It's also intentionally focused on high-margin sectors that make up the majority of corporate spend — including healthcare, industrial, media and marketing, technology, and financial and professional services.
"The key point here is that Project Black leverages existing corporate spends — what Fortune 500 companies are already doing — in a way that can help narrow the wealth gap in underrepresented communities," Hobson wrote in an email to clients and stakeholders when the fund was first announced. "We are helping to nurture a virtuous circle of spend and build. By spending with firms owned and run by people of color, big business is able to simultaneously help foster and elevate our communities. This is a powerful dynamic."
Three Black senior investment professionals — APC Holdings co-founders Richard Powell and Frantz Alphonse, who first had the idea for Project Black, along with former Joshua Partners chairman Charles Corpening — will partner with Brun to execute the fund's day-to-day investments.
This type of capital infusion comes at a good time: Although many Fortune 500 companies are looking to direct up to 15 percent of their total spends toward minority-owned businesses, they only spend an average 2 percent with minority-owned vendors today.
Within 10 years, Project Black is looking to scale its portfolio companies to command up to $10 billion in new corporate spend annually while creating 100,000 new jobs in communities of color.
"Ours is a novel idea that has never been done before," Hobson wrote to clients. "While these ambitions are not new, they have not been done at scale by people of color, for people of color. Herein lies a new narrative where we are not able to adequately characterize Project Black’s cultural impact. We have the ability to break today’s mental models which relegate minority-owned businesses to a second-tier status because they lack scale. Size matters. Just a handful of companies can shift this paradigm and lead to new possibilities for underrepresented communities."
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Mary has reported on sustainability and social impact for over a decade and now serves as executive editor of TriplePundit. She is also the general manager of TriplePundit's Brand Studio, which has worked with dozens of organizations on sustainability storytelling, and VP of content for TriplePundit's parent company 3BL.