Kathleen Wilkerson '92

Charting new ground
Kathleen Wilkerson '92 finds new opportunities in private-equity investing

by Kari Richardson

With years of experience and a r�sum� that includes raising her own fund, Kathleen Wilkerson '92 is no novice in the rough-and-tumble world of private equity investing. But her latest venture has her mapping terrain new to her and uncharted by most of the venture capital community too.

As a managing partner of Next Frontier Capital, she's helping to build a fund that will invest in businesses in underserved communities throughout Illinois and its border areas. Enterprises owned by minorities or women are particularly attractive to the fund managers.

Combining good business strategy with an agenda that enhances social good feels right and makes sense, says Wilkerson, who enrolled at the Kellogg School at age 34, with a professional background that already included starting a bank and taking it public.

"It's an untapped market," she says, pointing out that many low- and moderate-income areas already have an established infrastructure for success: a ready work force and good transportation systems.

"These areas have been denied access to capital," she adds. "That's the whole point of our name --- Next Frontier Capital. This is the next great area for private-equity investing. Lots of areas have been overmined. This is one of the areas left where there is real opportunity."

On the cusp of her 50th birthday in 2003, Wilkerson was looking for new ways to tap her professional experience and put her MBA to use when she attended a Kellogg School conference on finding for-profit opportunities in the nonprofit sector. There, she met the executive director of Chicago Community Ventures, the nonprofit business development organization affiliated with Next Frontier Capital that has contributed $1 million of capital to the fund.

Soon, Wilkerson was discussing a job opportunity in an area she previously hadn't even realized existed.

Inspired by funds such as Pacific Community Ventures, which spurred initial investment in Silicon Valley, and Boston Community Ventures on the East Coast, Next Frontier Capital will close on $10 million of committed capital later this summer and begin making its first investments shortly thereafter. Fund managers already have begun identifying promising companies in which to invest --- firms that are located in low- to moderate-income areas and which are most resistant to foreign competition.

These might include value-added manufacturing companies, commercial services and outsourcing firms, food processing and distribution operations and media focused on serving minority communities.

All must be companies that take a long-term view of their role in the community and reward workers for a job well done.

"So many businesses have gotten in trouble recently for taking a short-term focus," Wilkerson says. "Treating employees well by providing a living wage and medical benefits makes sense. Allowing employees to share in the profits makes sense. Being socially responsible makes sense. All of these things make a business sustainable."

Potential investors, Wilkerson says, like the idea that their capital will aid underserved communities, but are primarily profit-driven. Most are institutional investors with a duty to return money to stakeholders.

Wilkerson is confident in the fund's ability to deliver, citing a study by the Ewing Marion Kauffman Foundation that found that private equity firms focused on underserved areas outperformed private equity firms as a whole.

She cites another Kauffman Foundation study to prove she and the fund's two other managing partners are the right people for the job. Few women and minorities make decisions about who receives venture capital, although diversity would ensure greater ability to find new deals and relate to businesspeople from all walks of life.

Next Frontier's team of three managers, she says, has the required diversity for success.

Wilkerson adds that her latest career move "just felt right." If things go as she plans, it will be the last stop on a successful career.

"I really believe in this," she says. "I believe the way you achieve economic development is through private-equity investing. A growing business is going to have to attract additional capital. But there's no community development if a business is not sustainable and can't return a market return."