In launching his candidacy for the Republican nomination for governor, 37-year-old political unknown Jesse Sullivan has touted his background as a venture capitalist as a key pillar of his campaign.
But public records show the entity Sullivan has described as a “venture capital firm,” Alter Global, was created in February 2016 as a tax-exempt charity. Alter Global made limited financial investments and was heavily dependent on cryptocurrency for its funding.
It wasn’t until January of last year that Sullivan created a more traditional for-profit venture capital firm, the similarly named Alter Global LLC, with more than two dozen investments, largely in developing countries, none in Illinois.
“I’ve been a venture capitalist. The other one I would not list as venture capital,” Sullivan said of his initial Alter Global nonprofit venture. “I’d list it as an entrepreneurial support organization, nonprofit.”
Questions about Sullivan’s background have surfaced since the little-known resident of Petersburg in Central Illinois announced his first run for political office on Sept. 9. He started his campaign with more than $10.75 million in funding from out-of-state donors, most of whom are in the tech or digital sector.
The biggest single donation was $5 million from Chris Larsen, a Californian who is chairman of the cryptocurrency firm Ripple Labs and, according to Forbes, has a personal net worth $6 billion.
Larsen, in a statement, said he has known Sullivan as a donor to Sullivan’s charity and later to his for-profit venture, which he called “hugely successful.”
“He is an amazing leader and father — always ready to serve, always eager to listen and learn, and confident in his business and social convictions,” Larsen said. “He’s focused on technologies that can both solve the climate crisis and grow the economy and put Chicago in the rightful position as a top-five global financial center by embracing fintech and crypto. He’s a bridge-builder to a more unified future.”
State campaign finance reports show Sullivan has not made any donations of more than $1,000 from his own wallet; donations of amounts less than that were not yet available. Only $13,000 has come from Illinois residents, those records show.
State and federal campaign records show Sullivan never made a campaign donation to a candidate or political group until June of this year when he gave $10,000 to the Illinois GOP’s fund for federal candidates.
Sullivan is one of four announced candidates for the Republican nomination and the right to take on Democratic Gov. J.B. Pritzker, a billionaire heir to the Hyatt Hotel fortune. Also running are Bull Valley businessman Gary Rabine, state Sen. Darren Bailey of Xenia and former state Sen. Paul Schimpf of Waterloo.
The GOP field may not be final. U.S. Rep. Rodney Davis also is exploring a run, depending on how he fairs in the Democratic drawn reapportionment of the state’s congressional boundaries.
Sullivan, who lists faith, family and service as his core values, said in announcing his candidacy that after “a lot of prayer with my wife, I decided I feel like my life experiences and background have led me to a place that I actually could help turn things around in the state of Illinois.”
Sullivan is not the first businessperson to make the governorship a first-time political aspiration.
Bruce Rauner, an equity investor with a track record of wealth and financial success, also presented himself as a blank slate outsider candidate to voters. After winning office in 2014, his tenure was engulfed in a devastating budget standoff with a pro-union Democratic legislative majority and plagued by internal staff upheaval, leading to his defeat after one term by Pritzker.
Rauner donated $95.3 million out of his own pocket to his two campaigns for governor, including more than $37 million in his initial successful run.
Like Rauner, Sullivan has said, “We need to run the state like a business.”
A native of Petersburg, a town of 2,258 people northwest of Springfield, Sullivan received his bachelor’s degree from St. Louis University and a master’s degree in global government and diplomacy from Oxford University before getting his master’s in business administration from Stanford’s Graduate School of Business in 2015.
A year later, he founded Alter Global in Redding, California, “a venture to try to back some of the best entrepreneurs around the world,” he told the Cook County GOP last month.
Sullivan said he returned to Petersburg from California five years ago after his wife finished her studies at Stanford. He said he came back because his father had later stage cancer and moved in next to him. Sullivan said he ran Alter Global from his Petersburg home, though he used a California address on his tax documents.
His campaign website describes Alter Global as a “venture capital firm that finds and scales the best companies in emerging economies around the world, to reduce extreme poverty and spread the benefits of the new, innovation economy to the developing world.”
The Alter Global Sullivan founded five years ago was a 501(c)(3) tax-exempt charitable organization as approved by the Internal Revenue Service. Its first-year revenues from donations and programs was $255,865, and it ended that year with $84,741 in assets. Sullivan paid himself $88,000 as its chairman and CEO.
Two years later, the charity reported revenue of more than $4.1 million from contributions and ended the year with more than $3.5 million in net assets. The source of the funding was largely donations of cryptocurrency.
While some see cryptocurrency as the currency of the future, its value is extremely volatile. By 2020, Alter Global lost more than $1.4 million in investment income and reported its net assets at $1.2 million, records show.
The nonprofit was so reliant on a few sizable contributions of Bitcoin and Ripple cryptocurrencies that it included a special statement in its 2020 IRS filing saying it had been unable to meet the threshold of public support the agency required of charities. Alter’s filing said none of the donors “stand to benefit” from the charity’s actions.
Records don’t show any charitable grants made by Alter Global as a nonprofit. The entity listed salaries, benefits and program services among its largest financial expenses. In its 2020 IRS filing, Sullivan was paid $119,550 as the charity’s CEO, and its chief operating officer was paid $82,425.
Unlike a traditional venture capital firm in which investors provide money to businesses in which they see a future profit potential, Alter Global’s mission was “to relieve the poor by supporting global entrepreneurship,” according to its 2016 IRS filing.
Rather than making traditional financial investments in emerging businesses, Sullivan, in an interview, compared the nonprofit Alter Global to a matchmaker that connects financial investors to business ventures.
It also attempts to match “Alter Global Fellows,” people with specialized expertise, with firms needing guidance. The fellowships last six months and people are paid by their employers like an internship, he said.
“So we selected every venture that we worked with, but rather than us putting capital in, then we would always match them with other capital providers and we would not get paid for that,” Sullivan said.
Sullivan said a nonprofit subsidiary was created to make direct cash investments, allowing a financial return to the charity if it was successful. But the subsidiary, Alter Investments, never made an investment and Sullivan said it should have been closed.
An IRS statement showing Alter Investments as the vehicle that invested $250,000 in a Bangladesh startup was a “scrivener’s error,” Sullivan’s campaign said. The Bangladesh investment, Sullivan said, was from another entity which he said he incorporated in Delaware, Alter Global SPV 1.
Alter Investments is not in good standing with the California Department of Justice for failing to file copies of its tax returns with the agency. Sullivan said fees and penalties will be paid before the entity is closed.
The charity registry of the California Department of Justice also shows the nonprofit Alter Global did not file copies of its tax returns and renewal documents for 2018 and 2019, and its 2020 filing was rejected with its status listed as delinquent. The campaign said the nonprofit was “correcting any oversights.”
Despite having more than $1 million in assets, the nonprofit Alter Global received a pandemic paycheck protection loan of $67,545, with the purpose of supporting four jobs. Sullivan’s campaign said the forgivable loan served its purpose as a “stopgap” when the charity was unable to find donors attracted to its mission during COVID-19.
Sullivan said he formed his for-profit venture, Alter Global LLC, in 2020 to allow it to perform as a traditional venture capital firm and invest cash as well as to attract additional investors.
“If all the returns are going to head right back into the nonprofit, then I couldn’t get limited partners to be able to raise enough capital to put in because they wanted” a return on profit, Sullivan said.
“If we really wanted to unlock more investment dollars or more capital to help these companies, we realized the best way to do that is actually to set up a separate entity, Alter Global LLC, where they can actually invest their money and then they can get returns.”
Sullivan said none of the tax-deductible contributions used for his nonprofit were rolled into the for-profit entity and that Alter Global LLC paid the nonprofit Alter Global $10,000 to avoid any perceived “undue benefit of the brand.”
Sullivan’s campaign said more than 4,000 jobs have been created by ventures that received assistance from the nonprofit entity and another 3,600 jobs through 25 investments across 20 counties.
Sullivan cited professional assistance the nonprofit provided to Paystack, a Nigerian tech financial processing service, as one of its major successes. The firm was acquired by U.S. digital payment firm Stripe for a reported $200 million a year ago, according to the online publication TechCrunch.
Sullivan said with his experience in cryptocurrency as a funding source for his charity, he wants to make Chicago a leader in “creating the future of the internet and all the jobs that come with it.”
“Now, it’s like people think it’s fake money but it’s really the future of the internet and what’s going to be created and all the jobs that come with it,” Sullivan said. “So, I’m a long-term believer in the potential of the technology.”