Commonwealth Group

Serving Main Street small businesses, their investors, employees and all their other stakeholders

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Commonwealth Group LLC

Our focus

The economic health of communities all across the country is tied the sum total of all the Main Street small businesses found in those communities. They serve as the economic backbone of the nation. More than 50% of all the jobs in the country (that includes large business, small business, government and non-profit sectors) are accounted for by small businesses with 20 or fewer employees, more than all the other categories combined.

Yet small businesses struggle to survive in a very Darwinian world, where big business usually has access to all the resources they need, including capital, credit and expertise, but small businesses rarely get adequate access those resources. Helping small businesses get access to them, in a fashion similar to how big business does, is at the core of what Commonwealth Group LLC (CG) is focused on, as part of a larger mission to help transform how business serves society and the planet.

Following years of exploring issues related to small business capital formation, securities laws, access to credit and banking laws, general community economic development issues and the various corporate, financial and structural vehicles available to work with has led CG to develop a number of solutions aimed at helping small businesses, their communities and all the other stakeholders, concerned with their collective health and success.

In pursuing such objectives, one cannot help but get deeply immersed in a major transformation that is occurring in the world of business, on a global scale. That transformation relates to the very core objective of business, which for a long time has worshiped money and profit as the sole purpose of business (it was not always that case, but it evolved into that over time). Large segments of the populace now rejects that premise and instead is saying that business should exist to serve humanity and the planet, not the other way around.

We explored this rapidly growing shift in this LinkedIn Pulse article Capitalism 2.0:  7 Reasons to Believe the Transition has Begun. In that article, we introduce the concept of “impact investing” where investors are helping to drive this transition by their investment choices. We also describe new forms of corporations called B Corporations and benefit corporations, and how they are helping to lead the effort to this new form of capitalism, by advocating in their very purpose social and environmental benefits, in addition to the financial ones.

The twin topics of impact investing and benefit corporations stand at the very center of what CG is all about and we have developed a number of solutions based on them. We will continue to develop new ones as time, resources and experience lead us into new and beneficial directions.

Below we describe how we have taken those ideas and developed a broad solution set to address them. On our About page, we then describe the specific programs we have put in motion to implement those solutions.

Our broad solution set

After much thought and effort focused on the above, Commonwealth Group has developed a new approach to nurturing small business, modeled on one of the world’s most successful companies – Berkshire Hathaway, a public holding company that owns numerous subsidiaries (both wholly owned and partially owned).  However, whereas Berkshire focuses on large companies (both public and private ), CG has developed the idea of public holding companies that focus on investing in and owning Main Street small businesses.

We call these special type of public holding companies Small Business Holding Companies (SBHCs) to distinguish them from companies like Berkshire and most other public holding companies. We introduce this idea in this LinkedIn Pulse article How to Increase the Flow of Capital to Small Businesses While Enhancing Liquidity for Investors. (For a introduction to the premise of SBHCs, see this approximately 25 min video)

The key purpose of SBHCs is to leverage the tools normally only available to large companies, particularly public companies. As a public company, SBHCs would have enhanced access to capital, credit and other resources and can in turn, make those resources available to smaller companies who would have difficulty getting access to them on their own. SBHCs do so by raising money from the general public as a public company and using it to invest in and provide a wide spectrum of support services to their small company subsidiaries.

Thus, SBHCs stand in between the investment community and the small businesses they are interested in nurturing. This provides benefits not only to the small businesses, but changes the fundamental paradigm for investors interested in supporting small businesses. Normally such investments are very risky and illiquid. SBHCs eliminate those problems for investors.  As a public company, the shares of SBHCs would be freely tradable on a stock exchange or other trading platforms, giving their shareholders 24/7 liquidity, something nearly impossible with direct investments in small, private companies.

At the same time, SBHCs can actually support a much wider spectrum of small businesses than are usually done individually by Angel funds, venture capital funds, private equity funds, family offices, hedge funds, foundations, pension funds, mutual funds, BDCs (business development companies) and others.  That means they can support everything from raw startups to growth companies to companies that are even decades old. No other single investment vehicle would normally simultaneously provide these benefits to such a broad spectrum of small businesses.

Thus, SBHCs provide the “how” for addressing the needs of small businesses and their stakeholders. What about the “soul” of these organizations? That is the “why” question related to their underlying purpose.

To answer that, we return to the topic of benefit corporations, whose meta purpose is to serve society and the planet. SBHCs provide the means to fulfilling the broader purpose inherent in benefit corporations. In fact, we consider that an SBHC inherently fulfills a public benefit and therefore is intrinsically aligned with the purpose of benefit corporations.

Our own SBHC

To translate these ideas into a practical reality, Commonwealth Group has formed its own SBHC called Commonwealth Capital (CC), to not only pursue the kind of objectives outlined above, but to serve as a model for others to do so likewise.

However, in the interest of driving this SBHC concept as widely as possible, instead of just being a public holding company that owns and invests in its own small businesses, CC has been designed to incubate other SBHCs as well.  A small business holding company of small business holding companies, as it were, where future SBHCs are formed as virtual holding companies under CC until they are large enough to be spun out as free standing public companies in their own right.

In furtherance of this mission, Commonwealth Capital has been formed as a California benefit corporation that incorporates the triple bottom line (TBL) in all that it does. And not only is CC a benefit corporation, but it will require all its future SBHCs to be formed as benefit corporations, along with any subsidiary company that will likely be spun out as a free standing public operating company.

All other subsidiaries, whether they are holding companies or operating companies, will be required to incorporate the triple bottom line in all of their activities and practices, regardless if they convert to the legal status of a benefit corporation or not.

Many of the prospective holding companies and operating companies that CC will invest in or acquire will be brought to CC. In addition, CC will pro-actively establish various businesses to help CC carry out its overall objectives. Some of those subsidiaries will exist to provide a spectrum of support services solely to the other CC subsidiaries. Others will exist to serve both them and the broader universe of businesses outside of Commonwealth Capital. In some cases, these will be individual companies and in other cases they will be programmatically oriented enterprises that will help to spawn, nurture and support large numbers of companies, all within a particular programmatic direction.

For more information about those CC efforts, see our About page.

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