Entrepreneurship offers the ability for individuals and families to achieve economic independence and stability. As entrepreneurs grow and scale their companies, not only are their own lives transformed – but they also help uplift the community around them. This is particularly true in inner cities. Research shows that supporting the growth of inner city businesses is the most effective strategy for long-term job growth and economic opportunity in the urban core.
Despite the benefits of entrepreneurship, women and minorities are significantly less likely to start businesses than their peers. This is a problem for inner cities, where minorities make up more than two-thirds of the population. Poverty, including 34% of U.S. minority poverty, and unemployment are also concentrated in inner cities.
In other words, our inner cities are exactly where entrepreneurship is needed most. A number of organizations have launched initiatives aimed at increasing the number of women and minorities in the entrepreneurial ecosystem.
Entrepreneurship for All (EforAll), Massachusetts
A concentration of creative talent, higher educational institutions and low-cost office space make Lawrence and Lowell fertile grounds for entrepreneurship. But traditionally, efforts to foster home-grown entrepreneurs were overshadowed by efforts to recruit businesses from out of town.
EforAll saw this as a missed opportunity, so it created a model to promote inclusive entrepreneurship across mid-sized cities in Massachusetts. It began in Lawrence and Lowell, two ethnically diverse cities located north of Boston in what’s known as the Merrimack Valley.
The organization implemented a grassroots approach to entrepreneurship that includes a 12-week accelerator program offered in both English and Spanish. The model is designed to help early-stage entrepreneurs transform their initial ideas into viable businesses or nonprofits through ongoing advice, guidance and encouragement. Entrepreneurs benefit from bi-weekly workshops with local business leaders, themed networking events and entrepreneur meetups. They hone their skills and raise money at pitch competitions, and gain valuable advice through weekly meetings with mentors.
But the real centerpiece of the EforAll model is integrating entrepreneurs into their local community. They foster community engagement by utilizing local community members and business leaders as panel experts, judges and mentors, and partner with other community groups to provide wraparound services. That way, as the entrepreneurs launch companies they have a built-in professional network right in their own backyard.
“EforAll isn’t about importing business plans into a region, but rather providing the resources that will help grow creative, locally-sourced ideas into sustainable businesses,” says Pamela Goldberg, CEO of the Massachusetts Technology Collaborative, an EforAll partner.
EforAll has helped over 1,000 student and adult entrepreneurs since it began, resulting in ventures like a vegan ice cream business, customized apparel manufacturing company, and a nonprofit that helps juvenile offenders avoid incarceration. EforAll has now expanded its model to three additional gateway cities – Lynn, Fall River and New Bedford – with the intention of someday taking the EforAll approach to a national (and international!) level.
Metropolitan Economic Development Association (MEDA), Twin Cities
Unlike some of the emerging business incubators and accelerators focused on inclusive entrepreneurship, MEDA was founded in 1971 with the explicit mission to help entrepreneurs of color excel. MEDA has helped more than 19,000 Minnesota small businesses since it was founded and, as income inequality becomes more pervasive, the services offered by MEDA are all the more important.
One of the reasons minorities are less likely to start businesses is because they have fewer personal assets, explains MEDA President Gary Cunningham. For example, entrepreneurs often use home equity to start their ventures, and homeownership rates are lower among minority communities. He also cites a lack of long-term, patient capital as an obstacle for minority-owned businesses. “That’s the capital that helps build the foundation for strong businesses—the kind of funding that entrepreneurs could use to invest in the infrastructure of their businesses, on things like equipment.”
MEDA’s approach to supporting minority entrepreneurship is focused on addressing some of the deep-rooted disparities Cunningham mentions, like access to capital.
Just last year, MEDA announced it would be increasing its loan fund from $8 million to $20 million in an effort to make cash more available for minority-owned startups. Small businesses can access up to $400,000 in working capital to fund ongoing expenses, like payroll and inventory. “Many entrepreneurs go into business and simply don’t have enough money to keep it going,” says Cunningham. “They end up robbing Peter to pay Paul and then ultimately go out of business because they’re undercapitalized.”
Another key component of the MEDA model is providing one-on-one technical assistance. This approach is more time-intensive than a traditional accelerator program might be, but during MEDA’s 45-year history it has found that in-depth consulting (when matched with other supports, like access to capital) is the most effective way to bring a company to profitability.
Using this approach, MEDA has helped launch 500 new businesses and provided technical assistance to more than 19,000 enterprises across Minnesota. In the past year alone, MEDA supported businesses that collectively employed 6,500 people, 40% of whom were minorities. Like EforAll, MEDA hopes to increase the size and scale of its efforts moving forward.
Kapor Center for Social Impact (KCSI), Bay Area
Whereas EforAll and MEDA support minority and women-owned entrepreneurs across industries, the Kapor Center for Social Impact has focused its efforts on cultivating a more diversified tech ecosystem in the San Francisco Bay Area. Through its efforts with the Level Playing Field Institute and Kapor Capital, the Oakland-based agency uses a “STEM to Startup” approach to promote equitable access to the tech sector—a sector infamous for being dominated by Caucasian men. This specialization is important because ICIC’s research estimates that women- and minority-owned businesses represent, respectively, 14 percent and 19 percent of all businesses, and that their representation in high growth, high-tech firms is likely lower. In October 2016, ICIC also hosted a national convening where experts discussed strategies for catalyzing inclusivity in incubators and accelerators.
Rather than focusing efforts on San Francisco or in the heart of Silicon Valley, KCSI has intentionally started in Oakland. Oakland’s diversity and proximity to Silicon Valley makes it a fertile breeding ground for inclusive tech strategies.
“We want Oaklanders to directly benefit from the opportunities that the tech sector offers and for the tech sector to benefit from Oakland’s unique civic personality and assets,” the KCSI website states. “Together with our partners, we will establish Oakland as the epitome of a city that ‘does tech right’ by creating access and opportunities for its residents.”
KCSI does this through research, applying new solutions, and then evaluating effectiveness. For instance, KCSI’s current Tech Leavers Study tries to understand the underrepresentation of minorities and gender in the tech sector by examining leaks in the pipeline that occur due to workplace attrition. Meanwhile, it’s using social science research to facilitate collaborations between researchers and tech professionals to implement best practices that promote diversity and inclusion. These interventions are evaluated at various stages throughout the tech ecosystem to measure efficacy.
Impact investors Mitch Kapor and Freada Kapor Klein are funding these efforts through their Kapor family of organizations. Collectively, Kapor will invest $40 million over three years in initiatives aimed at making tech entrepreneurship more inclusive.
“Genius is evenly distributed across zip codes. Access and opportunity are not,” says Mitch Kapor. “We’re doubling down on tech diversity because it’s good for individuals, communities and the economy as a whole.”
3 Organizations, 3 Different Approaches, 1 Thing in Common
EforAll, MEDA and KCSI are three very different types of organizations, and each takes its own unique approach to supporting a more diverse entrepreneurial ecosystem. So, what do they all have in common?
They were each recently awarded an “Inclusion Challenge” grant from the Ewing Marion Kauffman Foundation. EforAll, MEDA and KCSI were three of a dozen nonprofit entrepreneur support organizations to receive a total of $4.3 million from this new grant program. There were more than 375 applicants, but those selected stood out for their innovative approaches for helping female and minority entrepreneurs achieve higher rates of success.
“The Inclusion Challenge grants will enable these outstanding organizations to expand their services to empower more entrepreneurs and help them succeed,” said Victor Hwang, Vice President of Entrepreneurship at the Kauffman Foundation. “The nation and our economy as a whole will benefit from more entrepreneurs generating income and wealth in traditionally underserved markets.”
The grants may help EforAll expand its model to mid-sized cities outside of Massachusetts, or MEDA to provide its one-on-one technical assistance to more of the Twin Cities’ burgeoning entrepreneurs. For KCSI, the grant may fund breakthrough research about the nuanced obstacles facing minority and women-owned enterprises.
In any event, Kauffman’s support for these organizations will help cultivate a more diverse entrepreneurial ecosystem in inner city communities, where paths for women and minorities have not always been smoothly paved.