In focus groups with business owners, when we asked about finance and advice, they got angry. It was clear there was an opportunity there.
– Tim Ferguson
Bankers are trained to look at past performance, not future potential. They don’t get paid to look at a deal the way we would look at it. – Ron Walker
The journey began when Tim Ferguson and Ron Walker met for coffee at the hotel in the spring of 2005. They had worked together on the board of the Boston Center for Community and Justice, and now Tim wanted a reality-check on an idea.
He'd spent a career managing complex operations for world-class financial institutions that directed global capital flows to large corporations and institutional investors on both sides of the Atlantic and in Asia. Small business was not on his radar until a friend asked, “When you’re 70 years old, what do you want to have done?” Tim began to spend time looking into the economies of cities and the role of the small and midsize companies that produce most of the jobs there. “There was a huge gap between what they needed and what was available.” Yet there were a lot of $5 million to $60 million companies that were doing incredible things with nothing like the resources that his corporate clients had.
When you’re 70 years old,
what do you want to have done?
Ron Walker, then Executive Vice President of Boston’s Sovereign Bank, had been thinking along similar lines. By 2005, Ron was the region’s most senior African-American executive in commercial banking, with an encyclopedic knowledge of the challenges faced by small companies. Bank consolidation – and later the subprime mess – was pinching off credit to the kind of companies that create most of America’s new jobs. It gets worse, he told Tim. Although minority-owned businesses had been growing faster than all others for a decade, their loan denial rates were five times higher.
What these successful small companies needed as much as capital was expertise, the kind of know-how that Fortune 500 companies get from investment banks, global marketing networks and the elite consultancies – and that great European companies traditionally got from merchant banks. This was the Aha! moment. Tim had trained as a merchant banker at Hambros in London. What if there was a merchant bank for small companies in urban markets?
Like Tim, Ron was at an inflection point in his career. The obvious next step was to become the president of a bank. But founding a business to create a completely new approach to the small business market looked more exciting. Nobody else was doing it: Ron knew substantial city companies for whom high-level strategic advice and growth capital would have material impact.
What if there was a merchant bank
for small companies in urban markets?
He remembers thinking, “If we could do this right we could create a new market.” And, shortly following, Ron Walker and Tim Ferguson were partners in a new enterprise.
Hibernian Hall was a 1913 building that had been unoccupied for decades before being purchased by a community development group in 2000. While the developer built out space for Next Street, the partners worked in the unfinished fourth floor on picnic tables.
If we could do this right
we could create a new market.
Choosing a Roxbury location sent a message. “We wanted to put our money where our mouth was,” Tim remembers. It showed the city we were serious. It showed clients that we were where the banks weren’t, and it’s turned out to be a potent attraction for talent. The typical Next Street recruit has top academic credentials and has worked for the most successful companies in America: big business, investment banks, and the elite consultancies. They come to Next Street for the chance to do something new that pays – and that matters.
As of summer, 2011, Next Street has provided over $130 million in capital for 80 employers that now generate approximately $600 million in annual revenue, and jobs for 4,000 people. Most are located in low-income areas. Two thirds are women- or minority-owned businesses. One third are nonprofit organizations. The firm continues to advise more than half of the clients that we have ever worked with.