By: Todd Nelson | Finance & Commerce | April 23, 2018 7:00 am
Carlos Lopez needed some “rocket fuel” to accelerate growth of Casa Travel & Technologies, his Burnsville-based company that enables travelers to use cash to buy airfare.
Lopez turned to the Minneapolis-based Metropolitan Economic Development Association for some of that financial accelerant this year. It came as an investment from the Otto Bremer Small Business Fund at MEDA.
Lopez’s company targets the one-third of the U.S. population that he said is “unbanked or underbanked.”
“You can’t stick cash in Expedia or Delta.com,” Lopez said. “Airlines love this because they can’t reach this demographic.”
Many of the brick-and-mortar agencies that such travelers once used have disappeared, said Lopez, who negotiates with airlines for access to their wholesale inventory. Lopez founded his company in 2004 as a lifestyle travel business but pivoted to his present business model in 2014.
Lopez believes he must move quickly to capitalize on what he sees as his company’s great growth potential. That means improving its technology, automating the ticketing process, offering mobile ticketing and hiring more employees – all of which takes capital. The company has 12 employees and contractors now, a number that could double or triple by the end of 2018, Lopez said.
Casa Travel & Technologies already offers its services through some 600 MoneyGram and other alternative financial services locations throughout the country, Lopez said. But he’s pushing to add 1,000 more to that total in the coming months. Lopez also is looking at opening a call center in Mexico.
“This business is positioned to be from an enterprise value a $30 million company within the next couple of years,” Lopez said. “We have the ability to scale to about 10,000 locations, but it requires some rocket fuel.”
The St. Paul-based Otto Bremer Trust invested $1.2 million in 2016 to help MEDA, which provides consulting and lending services to minority-owned businesses, offer some new ways for minority entrepreneurs to access capital.
More early-stage minority-owned businesses with high growth potential now stand to benefit from MEDA’s strategy, said Gary Cunningham, president and CEO of MEDA.
MEDA’s locally developed solution also helped it receive $1 million from the Philadelphia-based Opportunity Finance Network, one of five such awards nationally from the network’s NEXT Fund for Innovation.
That award and the Otto Bremer Small Business Fund are different, Cunningham said, because they offer a form of “patient capital” or an “equity-like” product. Most of MEDA’s other lending is debt capital or lines of credit on equipment.
“For minorities, particularly those who have tremendous potential to grow, what saddles them down is debt and debt payments,” Cunningham said. “There’s nobody really investing with them so that they can actually accelerate their growth.”
Companies pay interest only for a period of time when they receive capital from the Opportunity Finance Network award or the Otto Bremer Small Business Trust, he said. The debt instrument has warrants attached so that MEDA will benefit if the company sells.
MEDA will conduct a “Shark Tank”-like competition during which entrepreneurs will make pitches to investment bankers and MEDA staff in the hope of receiving an investment from the Opportunity Finance Network award. MEDA did the same with the first Otto Bremer Small Business Fund investments, Cunningham said.
MEDA hopes to expand such offerings to help it meet the $20 million in financing requests it has vetted but does not have capital to fulfill, he said.
MEDA’s loan portfolio has grown from $5 million to $18 million since Cunningham began leading the organization in 2014. MEDA last year leveraged that $18 million at a 3-to-1 ratio in participation loans with banks, Cunningham said. The average wage that 1,000 MEDA loan participants pay is $24 an hour and people of color make up 56 percent of their workforce.
At Casa Travel & Technologies, Lopez looks at MEDA’s investment and continued funding as a bridge to an equity round. He started with a U.S. Small Business Administration loan, which he has since repaid, as well as his own capital and capital from angel investors.
“I’m excited that MEDA stepped up to the plate,” Lopez said. “Getting funding for more hyper-growth businesses that are building for a potential liquidity event is a challenge for a lot of companies, particularly minority-owned businesses.”
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