Growing Community Wealth Through Funding BIPOC-Owned Businesses

Della Clark ’s vision for minority entrepreneurship is about making minority-owned businesses count, serving as catalysts for sustainable economic development in their communities. Since 1992, Della has worked to bring this vision to fruition as President of The Enterprise Center — an organization at the forefront of the Greater Philadelphia region’s entrepreneurial ecosystem.?

“Everything that The Enterprise Center does is aligned with our mission of growing minority wealth through accelerating minority-owned businesses,” says Della. “When I joined The Enterprise Center, I knew that I had found my life’s calling. I also — naively — thought that we could train and educate our way out of inequality.”?

According to the data platform Crunchbase,?only 2.4% of venture capital is flowing to founders of color. Della is now embarking on bridging the capital gap for minority enterprises with Innovate Capital Growth Fund, a Small Business Investment Company (SBIC) sponsored by the nonprofit Enterprise Center.

“We need Innovate Capital and more mission-based funds in general,” says Della. “We may not be able to right past inequities, but today we?are?able to invest in high-potential mature firms that may not have had access to equity capital when they first started.”??

The goal for Fund 1 is $50 million with an investment thesis based around building the balance sheet and scaling minority standout companies to create wealth and a new model for future investments.?In this conversation, Della Clark and I discuss the fundraising strategy?we have designed to attract institutional impact investors to this innovative venture.

Why is a?mission-aligned fundraising strategy the right fit for Innovate Capital?

Della Clark (DC):?It eventually became evident to me that access to capital is the No. 1 disruptor for minority-owned businesses: If a small business owner does not have capital to sustain operations and fund growth, the business stays small. I also observed that our larger, more sophisticated minority-owned firms were struggling to fund the next stages in growth strategies — whether it be investing in technology, people, or acquiring another firm — because their balance sheets were over-leveraged with debt. These businesses were not able to access equity capital at their early and growing stages, resulting in lower growth trajectories compared with majority-owned firms that were able to build their balance sheets sustainably with investment from friends and family and angel investors.?

Jenny Kassan (JK):?Innovate Capital is providing supportive equity funding to those who have had almost no access to non-extractive capital in the past. The team behind this fund has been supporting overlooked entrepreneurs for decades and they know what is needed for them to be successful. Mission-aligned funding will allow this fund to achieve its goals, prove its investment thesis, and move on to a larger fund with SBIC leverage.

What is your approach to successfully convincing investors they can do good and see a healthy return from Innovate Capital Growth Fund?

DC:?You know, I am known around town for busting kneecaps. (Just kidding!) For me, this is the culmination of 30 years of building relationships and getting my message out there. More than once, I have been called an evangelist for minority-owned businesses. Still, it has not been an easy road. A lot of investors say that they’re values-based but still want funds to promise stratospheric returns on their investment, which is not something we can do.?

JK:?Innovate Capital has huge competitive advantages compared to many other funds — it is addressing an incredibly underserved market with generous potential returns; the team has decades of experience providing business support services and debt financing via its CDFI; and, unlike so many equity funds, it has a “no failure” model — the fund will do what it takes to support all of their portfolio companies to succeed. We encouraged the fund to emphasize these differentiators that are likely to be very attractive for values-based investors.

DC:?I don’t let “No” bother me. I am out there every single day meeting with and pitching to new potential investors, and I am happy to report that we have $30 million committed towards our initial $50 million raise. My approach is to stay on message and stick to the vision.?

What is a piece of advice you’d offer to a business owner considering a creative approach to raising capital?

DC:?My advice is to think big! It might seem like a good idea to try and preserve your ownership stake and minimize debt by bootstrapping everything on a small raise, but it will slow your growth if you quickly burn through the capital that you raise.?

JK:?Women of color fund managers face major challenges when raising capital. It is not a simple task to raise a $50 million fund when the odds are stacked against you and the minority-owned businesses you plan to invest in. But if you can exhibit the huge amount of tenacity, fierce commitment, and courage that Della has, you are bound to succeed.