Opportunity Alabama

States and localities seeking to adapt the Opportunity Alabama model should focus on three major pieces of guidance:

Pick a Lane and Hire or Contract Around It: The skills needed to support consumer-centric small businesses are completely different from those needed to back great high-growth biosciences or tech startups. And, any of these skills are totally different from those needed to effectively underwrite or help “scale” real estate deals (where knowing how to build single-family housing is entirely different from supporting mixed-use historic revitalization projects). Trying to be a connector across all capital needs in low-income places all at once was, in Opportunity Alabama’s experience, excessive. This guidance involves working with community stakeholders to identify the largest ecosystem gap that can be paired most readily with potentially available capital and focus there for building out your internal team talent. Alabama has multiple organizations providing technical assistance and access to capital for small businesses, and an emerging venture ecosystem to support our growth companies. What the state had absolutely lacked was catalytic real estate support—so over the last few years (and thanks to the revenue stream provided by their fund vehicles), Opportunity Alabama built out an in-house team of real estate experts who can both help scale deals and deploy capital.

Focus on Aggregating Local Capital: Opportunity Alabama initially expected that much of its capital (both operating foundation support and private investment) would come from national investors and philanthropy. While the entity had some success with both (thanks to entities like Woodforest, Arctaris, Lumina Foundation and EFA), it was a drop in the bucket compared to what Opportunity Alabama was able to achieve locally. Only after Opportunity Alabama fully built an investment infrastructure, hired a strong management team, deployed millions in capital, and received consistent local buy-in could it attract the kind of non-OZs-motivated national capital it hoped would “crowd in” from the start. The lessons learned are to find or create an incentive powerful enough to make every single local capital allocator listen to your pitch, get as many of them as possible into your infrastructure, and THEN go big with it. If local legislative advocacy is present in your state, consider what incentive at the state level might motivate collaboration, and push your state house, or your local/regional government, to create it.

Have a “Hook” to Build Your Ecosystem: Opportunity Alabama would not exist without OZs. Over the last 20 years, various efforts to start CDFIs, leverage the State Small Business Credit Initiative, create local-vesting venture funds, etc. all ran into the same problem: they didn’t provide a big enough “tent” to draw in all the possible capital allocators, communities, and project sponsors, and/or they didn’t offer a compelling enough incentive to make them stay to listen. In Alabama, OZs acted as the center tentpole, but that’s not to say that a special “localvesting” oriented state tax credit could not do the same thing in other communities. And with what we think will be a favorable setup for OZs renewal in 2025, there may be a second opportunities for leveraging a “revamped” OZs 2.0 to build a new Opportunity Alabama anywhere.

Expand the New Ecosystem’s Focus and Impact: Today, Alabama has achieved outsized results in the OZs space, and the broader ecosystem is developing as well. As of the writing of this piece, Alabama now has double the certified CDFI loan funds compared to 2018 (supported by the first CDFI Fund TA awards made to Alabama in years) and multiple local philanthropies, and increasingly, multiple national philanthropies have developed programrelated investment strategies around attracting capital to place, and are deploying them for millions in game-changing, loss-leading investments across the state.

The ecosystem that began as an idea now generates investors in Historic Tax Credits that are preserving the fabric of rural communities, philanthropic lending to nonprofits that are scaling solutions to social ills, blended capital investment in new housing production, and whole new small business support ecosystems to generate the next round of commercial district

OZs are not cure-alls, but when paired with local leadership, technical capacity, and intentional alignment of capital, they can be the foundation for a new era of housing and place-based development.