Bring Your Balance Sheet: The Resources, Risks and Realities of Urban Innovation
Day-in and day-out, enterprising leaders throughout Baltimore work to solve some of the city’s most persistent challenges. But they face significant, systemic, and often insurmountable hurdles that prevent them from achieving success that would not only be their own, but Baltimore’s as well.
Imagine what this city would look like if these entrepreneurs and innovators received the financial capital, mentorship, and network supports to advance and grow the impact they create. Imagine if all the talent and capacity in our community was elevated, if all our local innovators were afforded the opportunity to participate in Baltimore’s progress and prosperity.
On February 15, we did just that. Partnering with the Aspen Institute Center for Urban Innovation, Impact Hub Baltimore, and Art in Praxis we hosted “Investing in Urban Innovators,” a day-long conference bringing together local and national leaders for a cross-sector conversation about social innovation, the image of entrepreneurship, and the realities of capital access.
Baltimore is a segregated city. Sixty-three percent African American, the city’s economic divide follows racial lines. With a median income of $60,113, white households amass wealth at nearly twice the rate of black households, which average $32,528 in median income. The unemployment rate for workers of color is three times the rate for white workers. Forty-two percent of black families experience homeownership, which provides both financial stability and creates a foundation for achieving upward mobility, compared with 60% of white families. Wrought by a history of systemic disinvestment and division, in Baltimore, the racial wealth gap is a chasm.
At the forum, founders, funders, and investors came together in recognition of these challenges, to bridge the gap and to coalesce around the change that is possible and indeed, already percolating. To usher in this shift, speakers and attendees alike exchanged personal challenges and strategic approaches, examined the critical role of trust in a sector mired in risk and failure, shared lived experiences, and breathed life into new possibilities for justice, equity, and inclusion.
The State of Urban Innovation in Baltimore
Ben Jealous, partner at Kapor Capital, Jamie McDonald, founder of Generosity, Inc., and Rodney Foxworth, CEO of Invested Impact discussed the lack of visibility for certain entrepreneurs, the struggle with lack of funding, and how the power of capital- in all forms- cannot be underestimated.
“Hard times in Baltimore have inspired people to innovate for a long time. We have very smart people from unlikely places with great ideas.” — Ben Jealous, Kapor Capital
“We have a strong small business culture and in some ways, we have not done a very good job recognizing [them] as entrepreneurs. I think we make this false distinction between entrepreneurs in the tech vein versus entrepreneurs in the mom and pop, consumer-oriented businesses rooted in the community. In some ways, they are taking the most risks and they have the most to lose. They’re often out on their own trying to make it and they don’t have the natural places that they can turn for capital, for mentorship, or for collaboration,” Jamie began.
“There have always been entrepreneurs that have done their work lacking access to capital of all sorts, not just financial- but social capital, information networks, the invisible capital we don’t often think about,” added Rodney, speaking to the isolation and paucity of resources so many entrepreneurs endure. However, Jamie is beginning to see a shift in these circumstances with the burgeoning growth of formal co-working spaces (Impact Hub Baltimore, Fast Forward) and informal, community-centered spaces (Dovecote Cafe) in Baltimore, and an increase in opportunities for people to come together, to lean on each other for support and community as they take risks and push boundaries.
“I’d encourage us, as a city,” Jamie continued, “to think about how we separate entrepreneurs into two different buckets and think instead about how we bring those communities together and recognize the true entrepreneurial talent in Baltimore that can be built upon. The generational transfer of knowledge that could be happening is probably sitting in those mom and pop shops, barber shops, coffee shops, and corner shops that are all around Baltimore. We should rethink how we see them, we should recognize them as leaders and tie them into the innovation community we have been building in a way that’s more productive for Baltimore overall.”
Following up on Jamie’s suggestion, Ben talked about the responsibilities of funders and venture capitalists like him: “It’s actually the challenge for folks like us who either have capital to allocate or can convince others to allocate capital to take the risks, to make the connections, to help grow in the way that Baltimore knows how to grow- which is from its own genius.” Why we haven’t seen this locally already? Ben observes, “investors tend to put their money into companies and people who “remind them of themselves,” but, he added, “We, as investors, need to be thinking about the walls, the invisible fences we put up that keep us from investing in the most powerful forces in Baltimore.”
New Approaches to Funding Non-Profits
John Brothers, president of the T. Rowe Price Charitable Foundation, Alex Forrester, co-founder and COO of Rising Tide Capital, and Shawn Escoffery, program director of Strong Local Economies at the Surdna Foundation delved into the role of philanthropy and representation.
“Philanthropy cannot only look at people of color as job seekers, but must also see them as job creators.” — Shawn Escoffery, Surdna Foundation
“Philanthropy should be out front blocking and tackling,” John began, clarifying funders’ grantmaking responsibility. “Our job is to listen. Our work is to build up organizations and to champion community efforts, not lead them.” He also spoke about collaborative efforts: “If you’re not bringing your balance sheet to every meeting, if you’re not discussing the flow of resources, you’re only exchanging ideas.” In addition to being concerned about resources, Alex zeroed in on the importance of the other types of capital Rodney mentioned earlier, calling for the recognition that knowledge and social capital are equally critical to financial capital in order to achieve success. Building trust is fundamental in developing social capital, Alex said, emphasizing that “once trust is earned, it really must be given.” Funders must trust innovators, upending the idea that they taking risks rather providing the fuel they need to flourish.
Shawn Escoffery of the Surdna Foundation addressed the barrier created by funders’ perceptions of who entrepreneurs are. “Philanthropy cannot only look at people of color as job seekers, but must also see them as job creators.” At Surdna, Shawn’s team is made up of people of color intentionally so it aligns with and reflects the communities they serve. “Philanthropy can’t speak about inclusion or diversity if their own organizations and grant panels are not diverse themselves. We have a commitment to diversify the field of investing and we need to push philanthropy in that regard.”
Recognizing, Deploying and Supporting Human Capital
In a conversation moderated by Jennifer Bradley of the Aspen Institute Center for Urban Innovation, Fagan Harris, President and CEO, Baltimore Corps, Tiffany Harvill, Chief Operating Officer, Propeller: A Force for Social Innovation,and Laurin Hodge, Executive Director, Mission: Launch Inc. dug into the disparities in power that entrepreneurs face and how failure isn’t an option.
“It is celebrated for some people, but failure is not an option for those with a community to support.” —Jennifer Bradley, Aspen Institute Center for Urban Innovation
Throughout the day, speakers touched on how various organizations deal with perceived risks of funding entrepreneurs that “don’t look like them.” An entrepreneur might break into networks by going to events and talking themselves into meetings with potential funders, but once in the meeting, they have much more riding on the interaction than the funder.
Once in the room, perceptions count for everything. Many deal with this by code-switching: speaking in platitudes and avoiding topics that seem ‘radical’, straightening naturally curly hair to fit a traditionally Eurocentric image, and projecting as much of a trustable ‘just like you’ image as possible. Tiffany Harvill, COO of Propeller, related stories of being in meetings and thinking, “better not say too much, better not rock the boat, because people that look like me are few and far between at this level” showing that even with the authority to be at the table, innovators of color worry that speaking up too much could put them on the wrong side of the doors of opportunity and put their endeavors at risk of failure. Laurin Hodge of Mission: Launch spoke to credibility and who is allowed and who gives authority in funder/innovator relationships, “as long as we’re begging for it, the power dynamic doesn’t change.”
For most entrepreneurs of color, failure is not an option. As Jennifer put it, “it is celebrated for some people, but failure is not an option for those with a community to support.” A misstep in any way and they could lose the trust they’ve worked to build, the resources they hoped to gain, and the success they hoped- and needed- to achieve.
Access to Capital for Small Businesses Making Social Change
Jon Aram, Co-Founder and CEO, Next Street, Derrick Braziel, Co-Founder and Managing Director, MORTAR, Jessica Feingold, Senior Development Manager, East Coast, Kiva , Michael Jeans, President and CEO, Growth Opportunity Partners,and Dan Letendre, Managing Director, Community Development Financial Institutions, Lending and Investing Executive, Bank of America talked to Connie Evans, President and CEO, Association for Enterprise Opportunity about how entrepreneurs and funders are finding new tools to work together.
“If you’re going to hire diverse talent, you have to let them be diverse. If you can’t empower the people you hire, how can the community believe there is faith and trust in them?” — Michael Jeans, Growth Opportunity Partners
Lack of access to capital has historically been a barrier that continues to block disadvantaged communities from building wealth, preventing most from establishing even a small savings account. Generational wealth is so far out of reach that surviving day-to-day is the sole concern for many people of color. A number of active models that respond to disproportionate impact were discussed, one of them being Kiva, a crowdfunding platform that “allows people to lend money via the internet to low-income entrepreneurs.” Connecting communities in 86 countries, Kiva is coming up on $1B in lending with a 97% repayment rate; twenty-eight percent of their loans have been distributed to African-Americans. Proving that strangers will lend to one another and pay each other back over the internet, Kiva recognizes the power in harnessing community support. Equipped with a framework that’s welcoming of individuals with both formal and informal business structures, there are three layers to their fundraising model: trustees, private fundraising, and public fundraising. Once their application is accepted, borrowers go through public and private fundraising periods during which they’re tasked with raising money directly from their community, but are also afforded the opportunity to solicit loans of $25 or more from lenders worldwide. Kiva’s approach to crowdfunding doesn’t just make funding available, it makes it accessible for many who otherwise wouldn’t be able to capture such economic empowerment.
Though this is a very effective and impactful model that makes accessing capital a community effort, financial capital alone is not enough to empower communities. “If there’s no real access point for opportunity, then it’s not tangible,” says Michael Jeans, President and CEO of Growth Opportunity Partners (Growth Opps), a small business management consulting and lending organization launched by JumpStart Inc. Growth Opps works with corporations ranging from $100K to $60M in revenue and has infused trust in the culture of their funding and workplace. Setting the stage for deep learning that elevates all parties involved, Growth Opps employs an inclusive practice that addresses the inherent need for funders to administer a combination of human, social, and financial capital. Such a concoction of capital provides the all-around support and stability entrepreneurs truly need to leverage long-term sustainability and ROI. Stabilizing the foundation grantees build from, arming them with financial literacy and connecting them to complementary networks and resources creates opportunities for these individuals to pay it forward and empower other entrepreneurs in the same way.
By re-framing grantmaking to “uplift the business owner and not just the business,” funders will achieve more success producing greater returns and impact. In redesigning the outdated systems within the financial sector, we will dutifully diversify workforces to better align them with the communities they serve. Jeans urges philanthropic institutions to consider, “If you’re going to hire diverse talent, you have to let them be diverse. If you can’t empower the people you hire, how can the community believe there is faith and trust in them?” Mutual trust and the relinquishing of power to the people who are closest to the ground and more in-tune with solutions are essential in avoiding counter-productivity in efforts to be inclusive. With trust, risk is transformed into opportunity for advancement, and all power and privilege resides where it truly belongs.
Two Meanings of Equity
Jennifer Bradley, Aspen Institute Center for Urban Innovation talked to Mac Conwell, Deal Team Coordinator, Maryland Development Technology Corporation (TEDCO), Patti Glaza, Managing Director, Invest Detroit Ventures, and Stefanie Thomas, Senior Associate, Investments, Impact America Fund.
It is through developing personal relationships, really getting to know grantees, not lumping people into general categories, and meeting Innovators where they are, that funders can reach Innovators effectively. Patti Glaza with Invest Detroit Ventures highlighted that, “funders need to understand that both types of entrepreneurs [small mom and pop and high-grossing tech ventures] are needed for a healthy ecosystem.”
Mac announced TEDCO’s new initiative, a Minority Business Pre-Seed Fund and partnership with Harbor Bank. “We noticed a trend in the black entrepreneurial community, that there is this lack of friends and family funding,” Mac said, noting that “there are a lot of reasons for this, but mainly, there is a wealth gap issue,” and elevating the fact that many minority communities don’t have many high wealth families of friends that many entrepreneurs rely on in order to achieve success. His efforts on this endeavor respond directly to the difficulty entrepreneurs of color face accessing capital to help build their businesses. Read more about the fund here.
The challenges facing entrepreneurs of color loom large, but with coordinated efforts across sectors and commitment to addressing systemic challenges from all corners, the obstacles may begin to dissipate, connections can become stronger, and innovation can truly take place.
Until the next time we are so fortunate to have so many incredible individuals, institutions, and organizations in the same room, we will continue to ask of ourselves, our colleagues, and our collaborators: How do we guard against innovation becoming separated from power and privilege? What must we do to ensure that equity and justice remain fundamental to our pursuit of social impact?