Small Business is the Engine of our Economy: Four Ways the Next Administration Can Spur New Growth

By Allison Kelly, ICA Fund CEO

Small business is the engine of the American economy and the leading creator of new jobs. The past few years have brought economic strides worth celebrating. Under the Biden Administration, we’ve seen over 13 million jobs added and record growth in new small businesses with over 10 million applications filed in 2021 and 2022. These achievements reflect resilience and opportunity across communities nationwide. We like what we're seeing, but more can be done.?

Despite strong growth, our economy simply isn’t working for everyone. One of the greatest opportunities we have to move our country forward is to invest in small businesses, which employ nearly half of all U.S. employees. Nationally, there’s been a surge in new business applications, yet Black-owned businesses still make up only around 3% of U.S. small businesses.?

At ICA Fund, a nonprofit venture capital organization that provides debt-free investments to women founders and founders of color, we’ve seen the impact that diverse small businesses can make in communities when they have the business coaching, network connections, and capital to succeed. Rize Up Bakery, a San Francisco Black-owned business, exemplifies the power of small business support. Founded by Azikiwee “Z” Anderson, Rize Up reimagines traditional sourdough and aims to inspire young Black bakers. After participating in the 12-week ICA Fund Accelerator program, ICA made an investment from our Seed Capital Fund, which Z used to purchase new equipment and make facilities upgrades. Due to Rize Up’s success, we invested again earlier this year to support expansion plans.?

To truly foster an inclusive small business landscape and strengthen our economy, policymakers must ensure that all entrepreneurs have the resources they need to have a real shot at building established, long-term, sustainable small businesses.?

A four-step plan for the new Administration

For everyone to be able to benefit from a strong economy, decision makers in the incoming Administration must support founders in the following ways:

1. Fund Technical Assistance Elected officials should continue to advocate for funding programs like the State Small Business Credit Initiative (SSBCI), which provides capital and technical assistance to promote small business success and growth across the country. Technical assistance support organizations will help entrepreneurs who are just starting out to navigate the challenges of opening a business. Investing in technical assistance ensures founders have the legal, accounting, or financial advisory services they need to support their small businesses.
2. Ensure Equitable Capital Access: Access to capital is critical for small business success. Applicants who receive a small business loan are 54% more likely to qualify for future loans, 54% more likely to survive, and typically increase sales by 41%. Expanding programs like California’s Investment and Innovation Program for Community Development Financial Institutions is essential. Policymakers should also support organizations like ICA Fund that provide debt-free equity investments, which foster innovation and improve success rates for diverse founders.

1. Democratize Connections: Continued funding for organizations that support founders, beyond just a loan check, ensures that small business founders from underrepresented communities gain access to business networks. Connecting entrepreneurs to larger networks allows them to build relationships and access opportunities that help their businesses thrive. Further, federal agencies should continue to work to meet small business and diversity procurement goals, and lawmakers should ensure these goals are followed and met.

1. Comprehensive Data Collection: Current data on small businesses often overlooks the demographics of their owners, leading to an incomplete understanding of the sector. California passed SB 54, which mandates that venture capital firms do an annual report on the diversity of the founders they’re backing. The first of its kind in the country, this law will increase transparency and help more women founders and founders of color access venture capital that other states should follow.?

With greater access to networks, technical assistance, funding and comprehensive data, visionary would-be entrepreneurs have the freedom to pursue innovative ideas. If Harris is serious about harnessing the passion of small businesses and lifting the ambitions of American people, her Administration must use this moment to build an economy that works for everyone.

Allison Kelly is the CEO of ICA Fund, an impact-focused nonprofit venture capital firm in the Bay Area that helps women founders and founders of color grow their businesses and create wealth for themselves, their employees, and their communities through coaching, capital, and connections.