Venture Capital Investing in Opportunity Zones


Every once in a great while, something happens in life when things come together in a way that you just know the timing is perfect, the situation is ideal, and it’s time to act quickly. This is one of those times.  

In today’s world, when politicians from both parties and a technology billionaire all agree and move swiftly on something (the Opportunity Zone Act), it’s a unique event. Add in the fact that investors have significant capital gains and are now highly incentivized to deploy some of that capital into the neediest areas of our own country, and it is indeed a special time to be ideally located with the knowledge and expertise to act. 

The idea behind the Opportunity Zone Act was to find a way to unleash the estimated $6.1 trillion of paper profits on American balance sheets into revitalizing depressed communities in our country. Forbes Magazine explains it this way: 

  • "Officially called the Investing in Opportunity Act, it promises to pump a massive amount of cash into America's most impoverished communities by offering wealthy investors and corporations a chance to erase their tax obligations." (link). 

The rules specify that to realize the maximum tax benefits, only capital gains can be invested, and they must remain invested in the zone for 10 years. Accredited investors, firms, REITs are all eligible to participate. The investments must be placed into Qualified (i.e. dedicated) Opportunity Zone Funds. 

Opportunity Zone Funds Are New -- And Returns and Impact Are Potentially Huge

The Opportunity Zone Act was included in the Tax Act of 2017 and was approved and announced in January 2018. The US Treasury Department only came out with sufficient guidance for funds to operate at the end of October 2018. 

Exactly what is it that makes this a uniquely compelling window of opportunity? Three things, never before combined like this: 

  1. The returns possible on venture capital fund investing in high potential small-to-medium-sized companies, 
  2. The enormous potential for capital to drive positive impact in communities in the United States
  3. The historic tax break. 

The first two, of course, are not new ideas. But the Opportunity Zone Act and its unprecedented tax incentive create a symbiosis and scale of opportunity that has never before existed. 

Because of our General Partner's 30+ years of experience as a successful serial entrepreneur, as an investor and advisor to startups and high potential enterprise, and as a go-to expert in global economic development via entrepreneurship, we clearly see the magnitude of this historic opportunity. The Pearl Fund will be on the leading edge in moving swiftly and effectively to address it. 

Investors who self-select to join this charge will be those who are comfortable investing a portion of their capital gains portfolio into the higher risk / higher reward arena of venture capital, those who are eager to pioneer uncharted territory and are prepared to learn and pivot as we go, and those who value the additional returns of deploying capital in a way that may do good in our communities and potentially create historic precedent.  

For more on Venture Capital and Opportunity Zones see: