Addressing inequality to capital access through impact investing

After receiving a record $5.1 billion in venture capital in 2021, Black-founded startups based in the U.S. received about half of that in funding in 2022. Through impact investing, MassMutual is working to address this inequality in capital access.??

In 2021, MassMutual launched its first $50 million MM Catalyst Fund (MMCF) to directly invest in Black-led as well as rural businesses based in the company’s home state of Massachusetts. Two years later, we’re excited to launch a second MM Catalyst Fund, doubling our investment commitment with a new fund of $100 million. In addition to MMCF, MassMutual also dedicated $150 million to invest capital in Black, Latino, and Indigenous fund managers to advance racial equity. In just over two years, our total impact investing commitment has increased to a total of $300 million, underscoring the tremendous opportunity in the companies and funds that are getting overlooked because of systemic barriers.??

Proven Impact?

To understand first-hand the catalytic impact MMCF’s investments are making, we’ve heard from some of our founders that MMCF leadership and participation in funding rounds positively changed the outcomes of their fundraising timeline and outlook for their businesses. For example, HourWork, a recruitment and retention platform for hourly workers in the QSR industry, has benefitted from MMCF’s investment. In 2020, the company found itself needing to raise seed financing. A year later, HourWork secured its first investment from the MM Catalyst Fund, followed by?two subsequent investment rounds in 2022. The company has increased its revenue more than 4,000% from $111,000 in annual recurring over the period of MMCF’s investments. Today, HourWork is one of MMCF’s best-performing investments and has experienced significant growth, and has engaged millions of hourly workers on its platform.

“The MM Catalyst Fund has really been a gamechanger for us, and I couldn’t imagine being here without the help of the team.”

- @Rahkeem Morris, Founder and CEO of HourWork.

Innovative Investment Approach?

MMCF’s status quo alternatives to sourcing, screening and selecting deals, and due diligence strategies are key to finding and funding companies in a more expansive way. Our team’s hands-on consultative approach at every stage of our process includes:?

• Intentional and broad sourcing: MMCF’s online application lowers barriers for underestimated founders to access our funding. We don’t just rely on our internal networks.?
• ‘Look twice’: We take a consultative, thoughtful approach to meet innovators where they are at – ask questions that reveal traction and market position rather than only focusing on top-level metrics.?
• Selection: We prioritize companies with scalable business models tied to social impact which comes in many shapes. That could mean removing structural barriers like access to better education or finance, or it could mean creating quality jobs in a rural area.?

As I reflect on these past two years since MMCF’s launch, I continue to believe that breaking barriers and advancing racial equity can only be achieved with innovative, agile approaches that will drive real change. I hope that our continued commitment and investments in diverse and overlooked companies will inspire other firms and institutions to follow suit so we can collectively reduce structural barriers and advance racial and economic equity.?

Looking ahead to 2023, our team plans to build on the successes and lessons of the first MM Catalyst Fund – including doubling our new investments, selectively investing alongside fund managers within MassMutual’s First Fund Initiative in diverse-led businesses across the US and Canada, and continuing to support our existing portfolio companies. If you’re a Black founder in Massachusetts and/or company based outside Boston that’s fueling innovation – we want to hear from you. Contact us on the MM Catalyst Fund website.?