Proposal for creating positive outcomes for Opportunity Zones

Recap why Halagard’s solution is rightfully focused on Opportunity Zones

Halagard is a modern capital markets solution. We are focused on helping SMBs access EQUITY capital efficiently and cost-effectively. Our solution is an ideal vehicle for investors to move capital into Opportunity Zones (OZs). Many leaders have stated, significant capital flowing into OZ businesses is the key to the success of OZs. Without our solution, it is doubtful that significant capital will flow into businesses in OZs. The two main reasons capital will be restricted without Halagard is as follows:
  • The OZ legislation doesn’t allow for loans, which is how 99% of capital gets to SMBs today
  • Without loans, investors must seek individual deals and create private placements into businesses. An investors ability to examine a large number of businesses is limited so they will cherry pick the most significant and safest options.
    • Hence, allowing the history of failed economic redevelopment efforts to repeat.
    • The way to create self-sustaining change within every OZ is to move capital into multiple businesses in each OZ. Creating jobs and economic lift.

Success always begins with a plan to measure outcomes

Ideally, the leadership in both the Executive & Legislative branches will want to measure the outcome of investor efforts in each OZ. Establishing these measurements should be a priority for the new White House Opportunity and Revitalization Council. We believe the information generated by these measurements should be available not only to the above officials but also investors.  Therefore, ensuring all parties interested in OZs success have a standard framework to measure their impact. The SBA, MBDA, NWBC, HUD, other agencies including local and national Economic Development organizations (The Group) all currently have measurements and tools they use to track businesses. The current way The Group manages and collects data creates two primary issues that blocks the creation of a standardized data set for OZs and the ability to measure success.
  • Large organizations and government agencies are notorious for keeping data locked up in organizational silos. Sharing is not a natural action.
  • The measurements & tools used by these agencies don’t reach inside individual businesses and measure performance such as financials and jobs.

Our Recommendation for Success

Our recommendation is a partnership between The Group, Halagard and a significant data player like Amazon AWS to create a master database. Each party would bring existing data, to create a new master database focused on OZs. Therefore, solving the data siloing problem. To solve lack of performance data, Halagard would add data related to investments in OZ businesses and their annual performance.  Creating metrics by OZ and business that can measure micro & macro success. Together all parties create the foundation for standardized measurements and analytics of OZ’s.

The way it would work

Part 1 - Building A Master OZ Database

Step 1 - Halagard, in conjunction with The Group, would identify a Pilot OZ. Step 2 - The governmental agencies would bring their respective data together for the pilot creating a comprehensive database of SMBs in the OZ. Amazon AWS or similar coordinates the integration and management of data. Step 3 - The Group would execute an outreach program to each business within the OZ to validate current data and to gather additional data such as business plans, capital needs, capital would be used, usage, number of employees, payroll, etc. Step 4 - The database would be updated, and this would become the baseline for that OZ. All members of The Group would have full access to the data to help with their various missions  

Part 2 – Halagard adding value, business performance data

Halagard would leverage and augment the database built by The Group as follows Step 1 - The data would go into the Halagard system Step 2 - We would work with investors to determine the minimum criteria for businesses to be considered investable within an OZ Step 3 - Halagard performs an in-depth evaluation of the businesses in the Pilot OZ against the criteria,
  • * those within defined criteria and with promising outlook would be invited to provide all details required for underwriting a security
Step 4 - Those businesses which decide to participate would be underwritten and scored by the Halagard process.
  • * The standardization of underwriting data and financials for every business creates simplicity for investors. Simplicity allows them to create models and review a large number of investments quickly.
  • Standardization minimize risk, potentially enabling more capital to be deployed by Investors into OZs
Step 5 - Halagard decides which businesses move forward and are combined into a securities bundle similar to a mutual fund or ETF.
  • We envision a bundle per OZ, which could contain 5,10,20,30+ businesses
  • The data generated by underwriting of each business in a bundle allows for macro analytics on the OZ and microanalysis of each business. Therefore, all stakeholders would have a baseline and ability to monitor the performance of OZ investments.
Step 6 - The bundles would be offered to Qualified Opportunity Funds (QOF) following all USA securities regulations
  • The bundles would give investors access to a portfolio or multiple portfolios of SMBs in OZs; creating a well-diversified way to put capital to work and dramatically increasing the distribution of capital in the OZ.
  • We call these securities SMBC or (SMB cap)
Step 7 - One year after the initial sale, the bundles can trade in the Halagard Marketplace like any Security on Wall St.. Thus, creating something desired by all investor’s; liquidity and a secondary market. Step 8 - At the end of every year, each business would provide an annual report. The data would be consolidated by business and bundle creating a national view of the OZ performance.
  • Specific data from Halagard is sent to The Group master database allowing The Group to analyze the economic health of each OZ down to individual businesses.
Step 9 - The data from Halagard enables the Executive, Legislature, Agencies and investors to determine what kind of rules, incentives, investments, industries, etc. work best. Once the pilot completes, Part 1 & 2 would be repeated for all 8,761 OZs.

The Future and measuring all small businesses

Once the master database is built for all OZs, The Group can shift their focus to adding data for all Small & Medium businesses to the master database. Being able to measure and analyze SMBs is essential. Why? SMBs makes up nearly 50% of the GDP and employees 6 out of 10 private sector employees. It is critical for Legislative and Executive branches to understand how SMBs are performing during their decision-making.

Conclusion

Our goal at Halagard is to help SMBs grow, increase employment and turbo-charge economic opportunity. Halagard is uniquely built to support the goals of OZ legislation.


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