🔒Here’s how West Hartford’s Fairview Capital landed a $50M investment from billionaire Steve Ballmer

The Ballmer Group’s courtship of West Hartford-based Fairview Capital almost ended with the two parties going their separate ways.

The Ballmer Group — a philanthropic organization led by Steve Ballmer, the 10th-wealthiest person in the world, and his wife, Connie — recently committed $400 million to Black investment managers and Black businesses, with the goal of increasing capital to underserved markets.

Fairview — which invests in private markets through a funds-of-funds strategy, focusing on venture capital along with diverse and emerging managers — is receiving $50 million from the investment. 

Steve Ballmer is the former CEO of Microsoft Corp. and current owner of the Los Angeles Clippers NBA basketball franchise. Based in Bellevue, Washington, he has a net worth of $86.6 billion, according to Bloomberg.

The Ballmers were connected to Fairview, one of the “longest-tenured Black-founded asset managers in the United States,” according to the Wall Street Journal, through a mutual acquaintance at the Ford Foundation, said Laurence Morse, co-founder and managing partner at Fairview.

Ballmer Group representatives approached leaders at Fairview, looking for a fund manager that would focus most, if not all, of their investment on Black entrepreneurs. They researched Fairview’s record and asked questions. 

The groups met multiple times over several months in 2021.

Initially, it didn’t seem like a perfect fit. Ballmer Group wanted 100% of its investment to benefit Black fund managers and entrepreneurs.

“We’ve been doing this for close to 30 years,” said Morse, whose firm has managed roughly $10 billion in committed capital since its 1995 inception. “And you cannot constrain really high-quality investment managers, whatever their racial, ethnic or gender persuasion, with respect to the kinds of things they’re going to pursue with investment dollars.”

He added: "Black fund managers should not be compelled to invest capital in any way that you would not compel any other fund managers to invest capital. Some Black fund managers may indeed invest 100% of capital committed to them into companies started or managed by Black entrepreneurs; but when they do so, experience informs us that the outcomes are best when they have 'chosen' to do so based on their expertise and in-depth due diligence, not because some form of extra-market constraint has been imposed upon them."

What Fairview could offer was a diverse network and portfolio of investments that would include a “significant percentage” of companies with diverse founders and CEOs, “but it would not be 100%, and it may not even be 80%,” Morse explained.

Eventually Ballmer Group and Fairview agreed to the terms of a partnership.

“And we said, ‘Great,’” Morse said. “And so from that point, it became a matter of us kind of fashioning the terms of a partnership.”

Underfunded market

Fairview is among four organizations Ballmer Group selected for its $400 million commitment, along with Goldman Sachs, GCM Grosvenor and Ariel Investments.

Ballmer Group said it chose the organizations “based on their demonstrated ability to execute the fund-of-funds strategy at scale, drive at- or above-market rate investment returns and partner effectively with emerging fund managers.”

Black entrepreneurs continue to be underfunded compared to their white peers, Steve Ballmer said, in announcing the partnerships in October.

“We hope it will signal to other investors the value in giving Black investment managers access to capital,” Ballmer said. “There are great people out there, and we are excited to catalyze this segment and look forward to excellent returns.”

Fred McKinney, co-founder of BJM Solutions, an economic consulting firm in Trumbull, said that lack of capital has been one of the biggest hurdles to Black-owned businesses. He cited data from the Federal Reserve that says Black households have about one-tenth the wealth of white households.

“Entrepreneurial failure can mean years of getting back to where you started, so the best decision is often not to pursue entrepreneurship,” said McKinney, who previously held the role of Carlton Highsmith Chair for Innovation & Entrepreneurship and director of the People’s United Center for Innovation & Entrepreneurship at Quinnipiac University. “The impact of (the Ballmers’) infusion of capital specifically designed for Black businesses cannot be overestimated. This will transform Black businesses and the Black community because of the success of Black businesses that access this new capital.”

Fairview has agreed to invest 30% to 70% of Ballmer Group’s $50 million commitment in funds and companies that are Black-led or Black-owned. Fairview will match that with $50 million from other portfolios it manages.

Between 80% and 100% will be invested in early-stage venture capital funds, and up to 20% in later-stage growth equity funds, according to Morse. The portfolio will be built over the next 36 to 48 months, he said. The fund has a 12-year life, with potential one-year extensions.

Fairview also has the ability to commit up to 20% of the capital to co-investment opportunities presented by the underlying fund managers.

Big score

Morse believes Ballmer Group was enticed by Fairview’s solid track record and history of long-term success.

Morse co-founded the company with co-founder and Managing Partner JoAnn Price.

“We’re never dealing with first-time investors,” Morse said. “They will always be people who have some history of investing institutional capital profitably.”

Morse said that of the $70 trillion controlled by asset managers in the United States, less than 1% of that capital is committed to minority fund managers, and an even smaller percentage to Black fund managers.

He said the Ballmers’ investment helps “move the dial,” but more needs to happen to infuse capital into markets that are “woefully undercapitalized.”

“For Steve and Connie to commit $400 million in capital to this space is significant,” Morse said. “It’s a signal of sorts, and one hopes that it becomes a beacon for other investors of their type to take a closer look at what the performance has been for managers in this space and perhaps some of them will find their way to emulating them.”

The investment is the largest from a single family office that Fairview has ever seen, though Fairview has managed larger pools of money.

“I’ve never seen anything that compares to this from a single family office focused on Black fund managers with the notion of increasing capital available to Black entrepreneurs and company founders,” Morse said.

Black entrepreneurs have historically found it especially difficult to obtain capital to pursue business ambitions, Morse said. The Ballmers’ infusion could mean the landscape is changing.

“It’s encouraging and the hope always is that this is not the end of something, but rather the beginning of something that will become more appreciable over time,” Morse said.

Editor’s Note: This story has been updated from its original version to reflect new information on how the partnership between the Ballmer Group and Fairview Capital came together.