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Others’ Success Is the Payoff

By Mariam Williams

Of all the terms used to describe Eastern Kentucky, “entrepreneurial” isn’t one that is usually high on the list. Nevertheless, during a speech that enraptured the Venture Club of Louisville audience at its December meeting, L. Ray Moncrief expounded on entrepreneurial economies in rural Kentucky – the type of economy he’s been building since he made Kentucky his home some 32 years ago.

Moncrief is executive vice president and chief operating officer of Kentucky Highlands Investment Corp., a development venture capital investment firm in London, Ky. Additionally, he serves as president and chief executive officer of Southern Appalachian Management Co. LLC and as president of Eclipse Management LLC, the general partners of Kentucky Highlands’ subsidiaries, Meritus Ventures LP and Southern Appalachian Fund LP, respectively. The two venture capital funds total nearly $49 million.

Born in Vidalia, La., and a graduate of Louisiana Tech University, Moncrief moved to Kentucky in 1978 to be chief financial officer of Outdoor Venture Corp., a military tent manufacturer and supplier located in Stearns. He still serves on the company’s board of directors today.

Outdoor Venture was a portfolio company of Kentucky Highlands. Moncrief left Outdoor Venture in 1983 to become a partner in a separate Kentucky Highlands portfolio company. When the company was liquidated in 1984, Moncrief accepted a position as chief operating officer at Kentucky Highlands and has served in various capacities since then.

Kentucky Highlands was founded in 1968 as Job Start Corp., part of President Lyndon Johnson’s War on Poverty. Job Start became an investment corporation in 1972 and underwent a name change in 1976 under the guidance of Fred Beste and Tom Miller.

With lack of infrastructure prohibiting large businesses from coming to the area and encountering failure when people without industry or entrepreneurial experience were appointed to run new businesses, Miller set about developing talented individuals who were ready to pursue their own ideas.

Miller, whom Moncrief calls “the father of developmental venture capital,” said the main difference between developmental and traditional venture capital is that developmental venture capital allows for higher-risk investments because it includes social benefits like job creation in its risk calculation, rather than solely relying on monetary gains.

And the social return is a satisfying payoff for Moncrief.

‘Break that chain of welfare’
“There are countless people in whom we’ve invested who have boot-strapped themselves and moved out of multigenerational welfare into a self-sustaining life,” said Moncrief. “I have the social return of seeing people who once didn’t have a choice or opportunity grow and educate themselves, become successful business people and break that chain of welfare dependence.”

Kentucky Highlands currently operates as a 501(c)4, a nonprofit tax-exempt organization that is administered exclusively for the promotion of social welfare. The firm provides entrepreneurs in 22 Southeastern Kentucky counties with expert technical assistance and capital through traditional loans and through equity financing. Kentucky Highlands’ various loan programs allow for financing ranging from $500 to $10 million.

Since its inception, investments exceed $212 million spread out among 400-plus companies. They have generated more than 10,000 jobs, $1.6 billion in salaries and wages and $300 million in tax revenue.

Beste, now CEO of MidAtlantic Venture Funds in Pennsylvania, hired Moncrief both to Outdoor Venture and to Kentucky Highlands. He recalled that Moncrief’s work ethic, job performance and amicable personality stood out to him.

“He was a solid business man, and I knew that he would have a manner of working with entrepreneurs that would be constructive and supportive. That was 25 years ago, and he’s become one of, if not ‘the,’ premier venture-capital economic developers in the country,” Beste said.

Moncrief’s long list of national accolades includes a 2006 appointment by President George W. Bush to the Community Development Advisory Board, which advises policy decisions of the national Community Development Financial Institutions Fund.

Moncrief describes himself as a natural builder and said his love of the work keeps him motivated. He’s in charge of equity investing through Kentucky Highlands, Meritus Ventures and Southern Appalachian Fund and co-manages the latter two with a partner in Tennessee. Additionally, he oversees general management of Kentucky Highlands with President and Chief Operating Officer Jerry Rickett and works out problematic deals. His days are 12 or more hours long, and his active involvement in the management of many of Kentucky Highlands’ portfolio companies and his national speaking engagements require him to travel often.

Yet he doesn’t foresee retiring, ever.

“I love working. I enjoy addressing a situation that seems hopeless, to keep pushing until I see the sun on the other side,” Moncrief said.
Statistics echo the hopeless perception. Gallup-Healthways Well-Being Index™ ranked Kentucky’s 5th U.S. Congressional District, which encompasses Eastern and Southeastern Kentucky, dead last out of 435 in residents’ overall quality of life.

Moncrief has witnessed poverty as pervasive as the statistics indicate: families sleeping in one room on a dirt floor, or a bag of potato chips serving as Sunday lunch. He and his staff have purchased alarm clocks for employees of new businesses who had no previous concept of getting up to go to work.

But Moncrief sees auspicious horizons, too. He describes the entrepreneurs he interacts with as “educated, smart, confident, bold” and young. Most are in their 30s, have developed new technology and have an idea of the market they want to attract. They rarely have a complete business management team, and some don’t have work space.

In 2008, Kentucky Highlands opened a 9,600-s.f. Business Innovation and Growth Center to provide incubator space and access to training for new entrepreneurs. Moncrief credits the firm’s intimate involvement with its portfolio companies’ management and their boards of directors for its success. In his 26 years there, he’s seen only six businesses fail completely without yielding any return.

Miller, now retired in Berea, said more developmental venture capital firms must grow throughout the region.

“Everyone in Central Appalachia ought to be doing what Ray Moncrief is doing,” said Miller.

“There are billions of dollars held by families in Eastern Kentucky who made their wealth mining coal. We want to attract their attention and have them invest in some of our funds,” Moncrief said.

Kentucky Highlands is the only firm of its kind between Business Triangle Park in North Carolina and Nashville, Tenn. Moncrief envisions numerous $50 million to $100 million venture capital funds focused on investing in Appalachian counties from northern Mississippi to southern New York.

It “would break stereotypes. I think so many times, we develop an attitude of, ‘we can’t do,’ when you look at pockets of poverty – the Mississippi Delta, Rio Grande and Appalachia. I believe there is enough requisite intellect, enough capable entrepreneurs in those areas to be successful business people.”

Above: JC Egnew, president of Outdoor Venture Corp. and Congressman Hal Rogers touring a new Outdoor Venture Corp. plant that opened in Stearns in 2010.

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