In a Nutshell
What: A Q&A with Momentus Capital President and CEO Ellis Carr focused on how the newly formed organization he leads is leveraging its national presence and scale to drive more local, place-based solutions for community challenges; issues in community development that warrant greater attention, and more.
Location: Arlington, VA and San Diego, CA
It was a busy summer for Ellis Carr. First, the Arlington, VA-based community development financial institution (CDFI) he had led since 2016 – Capital Impact Partners – announced that it had merged with CDC Small Business Finance and Ventures Lending Technologies to form Momentus Capital, with Carr tapped to serve as the new entity’s president and CEO.
Leveraging more than 80 years of combined experience with small business and community development lending, while also layering in an innovative technology platform for mission-driven lenders, Momentus Capital was formed to provide entrepreneurs and changemakers in underestimated communities nationwide with financial, knowledge, and social capital – regardless of where they are in their growth trajectories.
Just a week later, Vice President Kamala Harris announced the formation of an Economic Opportunity Coalition bringing together 24 of the country’s leading companies and mission-driven organizations – including Momentus Capital – to catalyze and align tens of billions of dollars in public and private investments to accelerate economic opportunity in communities of color and under-resourced communities throughout the United States. Momentus Capital was the sole CDFI selected for the coalition.
Eleven days after that, Carr was named one of Fast Company’s Most Creative People in Business this year, in recognition of the role he’s played in the success of Capital Impact Partners’ Equitable Development Initiative. Introduced in Detroit in 2018, the Equitable Development Initiative provides training, mentorship, and potential capital for real estate developers of color committed to creating mixed-use buildings and affordable housing in their communities. Designed to catalyze equitable community development while facilitating career growth for developers who face barriers to opportunities, the initiative has since expanded to the Washington, D.C., area; the San Francisco Bay area; and Dallas, and has been adapted in each market to best address local needs.
With summer now turning to fall, we talked to Carr recently to learn more about how Momentus Capital is leveraging its national presence and newfound scale to drive more local, place-based solutions for community challenges; the potential of the Economic Opportunity Coalition to address longstanding inequities; issues in community development that warrant greater attention; and more.
IFF: What was the impetus for bringing Capital Impact Partners, CDC Small Business Finance, and Ventures Lending Technologies together under the Momentus Capital umbrella?
Carr: For a long time, we have thought about how we can help support communities more effectively, particularly in addressing wealth, health, and educational disparities. Despite good progress that we made individually at Capital Impact Partners and CDC Small Business Finance (CDC), there was and still is a tremendous amount of work to be done. Oftentimes we have seen that the community development and economic development sectors are siloed and don’t work that well together, and with a combined 80+ years of experience and investments of nearly $25 billion collectively across small business, affordable housing, education, healthcare, healthy foods, and more, we felt that it was incumbent upon us to come together in a unified way to drive capital into communities holistically. We’re taking the best of organizations that are really complementary in terms of skill sets and experiences to provide a seamless set of solutions for the communities in which we work, and operating under the Momentus Capital structure allows us to be extremely local in our work while also having a national presence that enables us to provide the needed resources in communities.
We’re taking the best of organizations that are really complementary in terms of skill sets and experiences to provide a seamless set of solutions for the communities in which we work, and operating under the Momentus Capital structure allows us to be extremely local in our work while also having a national presence that enables us to provide the needed resources in communities.
Given the fact that CDC built Venture Lending Technologies and has been leveraging the platform to drive its scale, we also felt that Capital Impact Partners and the CDFI sector as a whole could benefit from a loan underwriting management system that’s homegrown and being driven by folks who are actually working in the industry. It was built by CDC because they felt like there were no other lending platforms out there to support small business lenders in the way they needed. It grew organically and 250 mission-driven organizations – primarily those who originate loans administered by the Small Business Administration – utilize it today. About $25 billion in loans were originated through the platform last year, and we see an opportunity to augment the system so that it can be used by CDFIs who are focused on housing and community facilities to better serve their communities.
IFF: How will this evolution of the Ventures Lending Technologies platform support Momentus Capital’s strategic vision?
Carr: We created a strategic framework last year with our board, and there are a few things that I’ll call out that I think are relevant. First, we want to be able to drive scale capital into communities. And that means that by 2025, we want to originate $2.5 billion annually into communities across the country. Last year we were at approximately $600 million, this year we’ll be at about $850 million, and we want to be over the $1 billion-mark next year. We understand that we can’t do this work alone, though, and so we’re not focusing on Momentus Capital in an insular way. We want to support and grow the entire industry.
We understand that we can’t do this work alone, though, and so we’re not focusing on Momentus Capital in an insular way. We want to support and grow the entire industry.
We see Ventures Lending Technologies as a way to provide locally based lenders with the capabilities they need to be successful. One of those capabilities is technology. Another capability that is needed across the sector is product innovation to respond to the gaps that mission-driven lenders see in their communities. And lastly, we believe that mission-driven lenders who have built trust locally also need the capital to truly be able to support those new product innovations – particularly the ones that are being tested so they can get to scale. The reason that is important is that oftentimes in the CDFI sector we are helping investors understand the delineation between real and perceived risks in underestimated communities.
Creating new products that are meeting the needs of the communities we are serving may seem risky because the products are unproven. And oftentimes for us to be able to influence public policy, we need to be able to speak about the collective work that we’re doing as an industry in urban metro areas and in rural communities. By providing the technology to mission-driven lenders, the products that we’ve tested in underestimated markets, and capital, we will have a large enough sample size to be able to talk about the work that we’ve done collectively in a way that’s really helpful in advancing public policy.
Today, the technology platform is a loan management system, allowing lenders to originate, underwrite, process, and service their loans. We want to build on that to create a platform that allows a lender to do all of those things well, but also provides them with tools for customer acquisition, product development, and product selection. For example, we’ve developed a product for African-American entrepreneurs that we are testing in Detroit that is FICO agnostic and FICO blind. We created it because many of those entrepreneurs aren’t eligible for SBA loans primarily because of their FICO score, and we think this is a barrier that many mission-driven lenders are dealing with. By creating a product focused on underrepresented communities for which the FICO score is not the predominant indicator of success or failure, making that product available through the technology platform, and providing capital solutions through our soon-to-be-announced, mission-driven investment bank, we have the opportunity to really stand with and behind community-based organizations across the country.
IFF: Can you share any details about the investment bank and expand upon why it’s necessary?
Carr: We are developing a mission-driven investment bank which we believe is the first of its kind, and the focus is to better connect investors with community organizations through community-centric securities offerings. The philanthropic community and corporations are interested in supporting communities, but the challenge is that these types of institutional investors are typically looking to write checks of at least $100 million and an organization like Momentus Capital can’t necessarily handle taking an investment of that size on its balance sheet. Because of that, we believe there’s a need for an intermediary that sits between the institutional capital markets and organizations like ours and other CDFIs that can aggregate the work that we’re doing collectively and create investment and transactional structures for institutional investors that have a similar look and feel to what they’re already investing in.
Institutional investors and CDFIs often don’t speak the same language or have an understanding of each other’s sectors, and we believe that is the reason why investments haven’t happened at scale. What we want to make sure is that this entity can really work. We’ll be working with community-led organizations to ensure that community-led solutions are what we’re leading with and what are being aggregated, as opposed to investors driving all of the requirements. As an industry, that will allow us to drive capital where it’s most needed and to do it in a way that aligns with the visions that communities have for themselves.
IFF: Is there anything Momentus Capital is working on right now that you haven’t been asked about since announcing its launch but have been hoping to talk about?
We strongly believe that there’s a role for us to play in ensuring that diverse founders have the ability to retain more ownership in their businesses.
Carr: One thing we’ll be talking about a lot more in the next six months that not many people are aware of yet is the work that we’re doing on the investing side — essentially focusing on equity vs. the traditional debt products our sector is known for. There are two big challenges in this area. First, only 1.4% of Black founders received venture capital funds. And yet, impact investments currently make up less than 2% of CDFI portfolios nationwide. Our impact investments team is looking to change that. We’ve brought on a group of diverse folks who have expertise making investments both domestically and abroad, and our goal is to address the historical inequities that have existed in this country by providing opportunities for businesses and business enterprises to scale and grow, to create more jobs and economic opportunity for underestimated communities.
We strongly believe that there’s a role for us to play in ensuring that diverse founders have the ability to retain more ownership in their businesses. Rather than making long-term investments that may cause the company to stray from its mission of serving communities, our interests in their organizations are non-dilutive. This gives them the necessary growth capital to be successful in the long-term without diluting the interests of both the workers and the owners in the way traditional private equity firms typically do. I think expanding our investments business is important for that reason.
IFF: Shifting the focus slightly, how do you expect the Economic Opportunity Coalition (EOC) to accelerate economic and community development in underserved communities, and specifically in communities of color?
Carr: I think the EOC has a strong probability of success because there’s a focused outcome that it’s seeking in addressing the racial wealth gap by leveraging the $12 billion plus of capital and resources that the federal government has allocated to CDFIs and Minority Depository Institutions (MDIs) last year and this year with private sector dollars. We are at the beginning of a series of conversations that will allow CDFIs to get much needed support as a sector, both from an infrastructure perspective and through the development of relationships with corporations that are focused on and committed to providing more opportunities across the country.
It’s encouraging that the memorandum of understanding that was created to support this effort applies to a number of agencies — like the Department of Housing and Urban Development and the Department of the Treasury — that CDFIs are already working with. That may seem like a small thing, but even aligning around definitions and target areas can add a lot of value to the work of CDFIs that are trying to leverage resources across multiple agencies. That’s a level of coordination that I haven’t seen before, and with the financial commitment from corporations involved in the EOC, my hope is that we will be able to provide support for CDFIs’ infrastructure and liquidity to support more small business owners and to increase opportunities for the expansion of community infrastructure.
IFF: Are there any issues related to economic or community development that you think deserve more attention from the CDFI industry?
I’m passionate about pushing the industry to think in a transformative way about the issues we’re working to address.
Carr: I think that climate-related issues are something that we should be talking about much more as a sector, particularly as they relate to underestimated communities. There are several CDFIs that have already been hard at work on this, but there’s more that can be done. When I think about strengthening our country, I also think about early childhood education. Again, there are a number of CDFIs leading the charge on this already, including IFF, but we need to think collectively about how the industry can better support children during their most formative years to make sure they’re starting their educational careers in the strongest possible position. There need to be more investments in this space to be more competitive on a global scale.
I’m passionate about pushing the industry to think in a transformative way about the issues we’re working to address. Oftentimes we are short staffed and overwhelmed in a lot of ways, which causes us to think about the issues right in front of us. But I think it’s important for us collectively to think about how we can do things very differently to accelerate the pace of change that we all want to see.