A $400,000 bank loan was the only thing standing between Elsa Deleon and the chance for her New Orleans business to take on a second contract with a government agency. After being turned down by banks, she didn’t know where to turn. Getting that loan would allow her to grow her business team from 10 employees to potentially 20 people.
It didn’t matter that the Army Corps of Engineers had been extremely satisfied with their first contract with her company, C&R Contracting Services, LLC.,and that they wanted to hire her company again. She wasn’t going to be able to get the capital to purchase more equipment and bring on new employees to take on the job until she got her first check from the Corps. It was a catch 22. She turned to the Good Work Network, an organization dedicated to supporting small and women-owned businesses like hers, to figure out if they might be able to help. Through their relationships, Elsa learned about a mobilization fund that might help her bridge the gap between securing the contract and getting her first payment.
Over the last year, I have heard similar stories in cities all over the country. No matter where I’ve gone—Albuquerque, Atlanta, Chicago, Kansas City, Los Angeles– founders and business owners of color struggle to navigate the incongruent, inadequate and inefficient landscape of business services, regulations and resources in the communities in which they live and work. They usually don’t have generational wealth to rely on to launch or expand their businesses, so they seek loans – and face rejection after rejection. They are denied these loans because of low credit scores, or no credit at all. But it’s not just capital they are missing, it’s also access to markets for their products or services, and relationships with other entrepreneurs to exchange ideas with or receive mentorship from.
Founders like Elsa know they have what it takes to compete in the market, but they find themselves shut out of critical networks because of their gender and the color of their skin. That was certainly the experience of Sky Kelley, the founder of Avisare, a platform that matches small vendors with local government agency contracts. “I’ve got three strikes against me. I am black, I am a woman and I am a solo founder. No one took me seriously," Sky says. She pursued a spot in the prestigious and competitive TechStars accelerator in Los Angeles as a way to get a stamp of “approval” from a network that had resources and relationships that invest in founders who want to scale their businesses. Another major relationship that Sky credits with helping her business is with the City of Los Angeles, and especially Kecia Washington, the director of innovation and strategic partnerships for the city’s Department of Water and Power. “Because Kecia Washington believed in me, she vouched for me with other city staff including the city’s new chief procurement officer.” Her advice to other entrepreneurs starting out? Find your Kecias.
Working with city government can be a critical factor to business growth and stability. According to Interise’s 2017 Impact Report, growth by contracting can have enormous benefits. Among the nearly2,600 businesses that graduated from their StreetWise MBA program, one-third have achieved growth through new contracts, with the average value to each business with new contracts valued at $2.4 million.
That's why we dedicated a round of our City Accelerator initiative to cities working to increase spending with businesses owned by people of color. The five local governments that participated in our Inclusive Procurement cohort recognize the responsibility and opportunity they have to invest in businesses owned by people of color in their local economy and address the challenges their systems have created that lead to business failure. See the results from Charlotte, Chicago, Los Angeles, Memphis, and Milwaukee here and in our upcoming guide for practitioners next month. We believe that the increased procurement dollars that go these vendors, often referred to as minority business enterprises (MBEs) or disadvantaged business enterprises (DBEs), can translate into wealth for the entrepreneurs and their families, increased incomes for their employees and jobs for local residents.
However, government alone cannot fix the entire business environment. It takes multiple actors working together to develop an ecosystem where businesses can thrive.
For cities, the first step is acknowledging that entrepreneurs of color experience a myriad of systemic challenges that were designed intentionally to exclude them. Cities can then strategize with partners to address those challenges all at once, avoiding siloed, piecemeal approaches and the financial and social costs that come with them. In our latest City Accelerator cohort on Local Business and Job Growth, local governments are exploring how to better coordinate services and plug gaps in their ecosystems by understanding and revising their own processes and policies that perpetuate exclusionary barriers for businesses owned by people of color that have roots in racism. We will learn with them how cities can play holistic roles in convening stakeholders and aligning strategies with other actors in their ecosystem.
How San Antonio Grew Its Local Business Network
All of these issues have been top of mind in San Antonio, Texas, which has spent nearly the past decade working to improve its local business ecosystem.Celina Pena, the Chief Program Officer at the LIFTfund, a Community Development Financial Institution, says it took a long time for the city to become a “fair city where you can get business done.” Prior to the LIFTfund, Celina was the program director for the small business department for the City of San Antonio, where she saw the acute needs of businesses struggling to secure financing to pay employees and vendors in order to fulfill their government contracts.
The city’s disparity study in 2010 was a pivot point, Celina says. “Everyone knew more needed to be done to support small business owners across their life cycle, not just at launch and not just to get city contracts.”
One of the things she did while she was with the city was include a Small Business division in the charter of the Economic Development Department, which expanded the agency’s wheelhouse of small business support to encompass expertise in lending, technical assistance and procurement. Now at the LIFTfund, she helps fill the funding gap that the city’s funds nor other banks can provide business owners.
Initially, the physical location of the LIFTfund office – on the 19th floor of a fancy bank building with limited parking – posed a challenge. Entrepreneurs had a hard time even finding the place. So they partnered with the Economic Development Department itself to create Launch SA, which acts as a connector and navigator for companies that want to do business with the city. Ryan Salts, the director of programming at Launch SA, calls it a “311” for businesses at the earliest stages of their life cycle. “It’s a collaboration of roadmapping and resources for business owners in the city,” he says. And its prominent location on the first floor of the city’s main downtown library, with ample parking spaces, helps business owners access the services they need most: funding and financing, information about permits and licenses, and access to mentors.
“You need to learn from the experiences of other people who have succeeded,” says Renee Watson, the director of the mall Business and Entrepreneurship Department for Bexar County, Texas, which includes San Antonio. “We have an informal list of [about]150 private-sector mentors from all industries and stages. It is valuable for business owners to learn from their peers who have accomplished things in a similar environment, like, ‘How do you deal with regulations? Who do I need to talk to? How do I make noise?’”
Renee is sensitive to how the county and the city help build the capacity of businesses by doing direct outreach, de-bundling projects as well as through mentorship.
Renee runs a prime contractor program and is in charge of increasing supplier diversity for the county. She sees what’s missing in the landscape. When primes can’t find subcontractors, sub suppliers or sub consultants in the community, they go to Renee.
She says, “I don’t care how many times the entities may challenge the utilization, if they are looking for a contractor who can bond and do a $100 million job who is African American or Hispanic, they don’t exist … yet.” To address this gap, in 2005 Renee created a two-year mentorship program in partnership with the local chapter of the Associated General Contractors of America. The mentorship was designed to help include more Hispanic women in construction. One of the women who was mentored was a CFO for a general contractor. As a result of the program she started her own company, grew it through local, state and federal contracting opportunities and now operates a school and an incubator for other Hispanic-owned businesses.
Looking across the cities we work with, there are similar stakeholders like Celine, Ryan and Renee, people who can and are learning to partner more effectively to feed the ecosystem so that its entrepreneurs can flourish.
Whether they’re universities, service providers, corporate executives, industry-specific organizations, foundations, labor organizations or financial institutions, when the feeders coordinate efforts to increase the success of entrepreneurs of color, they can collectively spark the evolution of an entrepreneurial ecosystem.
Centering entrepreneurs of color in your ecosystem so that they can create wealth for themselves, their families and jobs in their communities requires time and intention. You must develop relationships with them.
As Celina says, “Don’t be afraid to bring entrepreneurs to the table, even those who only complain or disagree with your efforts. Share information with them and be challenged. Things are only working in San Antonio now because we heard the voices of the entrepreneurs and the community instead of cutting them out or talking down to them. We brought them into the fold as leadership in emerging businesses.”
Renee admits that 20 years ago, actors across the county’s ecosystem were not coordinated, and supplier diversity was low. She credits partnerships with school districts, chambers of commerce, entrepreneurs and vendors, and the non-MWBE communities with helping to create a culture of collaboration. “There are a number of gaps that make it difficult for entrepreneurs of color to succeed,” Renee says, “But you can work on those gaps. We’re all undoing racism; it’s not going to be quick. But we can move faster together.”
