Innovator Insights: Connie Evans, President and CEO of the Association for Enterprise Opportunity
Connie Evans is a visionary leader, strategist, activist, and social entrepreneur who has founded three urban microenterprise development and finance organizations. Currently, she serves as the President and CEO of the Association for Enterprise Opportunity (AEO), the national nonprofit organization and business trade association representing the US microbusiness development industry. AEO has nearly 400 member organizations that provide training, technical assistance and resources to entrepreneurs across the United States.
A pioneer of one of the first Individual Development Account programs in the nation, Evans is dedicated to providing minority entrepreneurs with the resources they need to succeed. She spoke with Invested Impact about some of AEO’s innovative practices and what they learned from their 2017 report Tapestry of Black Business Ownership in America.
II: How did you arrive personally/professionally where you are today? How does your experience inform your day to day work?
CE: I am the product of a self-employed mother and the youngest of four children. My father died two weeks before I was born of a brain tumor and my mother put four kids through college running a catering business. My mother had a high school education, I went to private school, she bought our home, and as Rosa Evans’ daughter, I could go anywhere in town and sign my mother’s name for credit. When I started the Women’s Self-Employment Project in Chicago in 1986, which was the first and largest microenterprise program in the country at one time, I did not know anything about lending. I was not a business major (bachelor and masters in psychology), but business just seemed to make sense to me having watched my mother. I understood that women could use their own talents to start and run a business that could take care of their families. It was what I had seen all my life so the idea to start a program for low income, low wealth women and provide small loans just made sense to me. I had an incredible mentor, Mary Houghton, one of the founders of Shorebank. When we started WSEP, conventional wisdom was that white men with college degrees were who ran successful businesses and that low-income women were not creditworthy. We busted those myths and I have been working on this issue ever since.
People can do amazing things for themselves when given opportunities and tools. I believe in an inclusive economy. I believe in harnessing the marketplace for everyone and given the opportunity, more people can become producers of wealth, not just consumers.
II: Starting off as a psychologist working with community mental health, how did you shift into microbusiness support? What connections do you see between the fields?
CE: As a master-level psychologist, I always worked in low income communities and used to provide “therapy” sessions to individuals and groups referred by some system. What I quickly came to realize was that if people had money they could handle many of their own issues. Now that is not to say that there is never a need for clinical intervention, but overwhelmingly what I saw was that people needed money and the lack of financial resources put so much stress on people, that their actions were not made from a place of conscious thought and insight. I worked with my employer at the time and we started economic development programs in public housing that had residents starting resident-owned businesses. These were low-income women who started a company that eventually took over the management of the multi-million public housing site. That was when I really saw the amazing strength of low-income women, who people in Chicago had mostly written-off because they lived in public housing.
II: What’s your North Star/Guiding Vision?
CE: I guess you can say that my guiding vision is that people can do amazing things for themselves when given opportunities and tools. I believe in an inclusive economy. I believe in harnessing the marketplace for everyone and given the opportunity, more people can become producers of wealth, not just consumers.
II: How have you seen the landscape of microbusiness change in the past eight years you’ve been with AEO? How have the challenges business owners face changed/evolved?
CE: I think there have been three big changes in the landscape of microbusiness. First, I think we have experienced a paradigm shift in microenterprise in the United States. We have gone from talking about “microenterprise” (a concept most associated with informal businesses in developing countries) to a recognition of “microbusiness” as the largest segment of businesses in this country. They make up more than 90 percent of all businesses in the U. S. The media, funders, legislators, and most people in the industry now use the term microbusiness, which I think is important and a very good change.
A second change has been the disruption in the financial markets caused by the recession. According to [former] Treasury Secretary Jacob Lew, there are 8,000 declines per day for business loans by financial institutions. That is a real market failure for people on Main Streets and cross streets across this country. This disruption has changed the landscape of microbusiness and microfinance in a number of ways. For example, it has created the wild, wild, west in fintech or online small business lenders. That innovation has had positive and negative consequences for owners of Main Street and microbusinesses. At AEO, we have used cross-sector partners to get the best of these innovations into the microfinance community.
A third change that I believe is significant and worrisome is an uptick in the criteria of CDFI small business lenders, which is driving them to serve a more upscale market. Some of these mission-focused lenders have significantly high decline rates. Which leaves me to wonder who is being left behind? AEO believes that we can help address this problem by getting a larger set of products that meet the realities of more customers out into the microfinance or microbusiness marketplace. We created DreamFund since I have been at AEO, in part, to identify and license products that can be used by any CDFI small business lender. Our first product is a short-term uncollateralized working capital loan that not determined by simple FICO scores. Further, we are working to bring two more loan products to the microfinance market place: a line of credit and a capital product that will take the place of friends and family capital among Black start-ups.
We found that the interplay of the wealth gap, the capital gap, and the trust gap is what is keeping Black business owners from reaching their highest potential with their businesses. We think this is quite significant for practitioners who are trying to develop and deploy solutions. It means that if we think we can solve the problem [of] Black-owned businesses not reaching their potential by just applying more capital, we are wrong.
II: You’ve said that the report set out to reframe the conversation about Black-owned businesses. Did any of the information or insights that surfaced as a result of the research presented there surprise you?
CE: We knew that business ownership was an important path to wealth building. I was surprised, however, when we learned that that the median wealth gap decreases to a multiplier of three when comparing Black and White business owners. Successful business ownership by more Blacks can seriously narrow the racial wealth gap.
II: What’s the most valuable takeaway from the report?
CE: I think there are two most valuable takeaways. First is the fact above that business ownership can significantly reduce the racial wealth gap. The second extremely valuable takeaway is that we found that the interplay of the wealth gap, the capital gap, and the trust gap is what is keeping Black business owners from reaching their highest potential with their businesses. We think this is quite significant for practitioners who are trying to develop and deploy solutions. It means that if we think we can solve the problem [of] Black-owned businesses not reaching their potential by just applying more capital, we are wrong.
II: What has the response been to this effort?
CE: The report is being received well by a broad spectrum of people, including those in government, philanthropy and particularly Black business owners themselves.
II: Who’s best positioned to use the data in this report and how?
CE: We are hoping that practitioners use the report to consider new approaches to their interventions with Black businesses. We really need innovative practices that can address this interlinkage of the three barriers. Although we want to see more Blacks start and/or buy businesses in higher revenue sectors, we also need more innovation on how to scale businesses in the lower growth sectors where the vast majority of businesses are located.
We are making a special effort to get new discussions on this topic and with this data within the philanthropic and investment community. We are working with ABFE (Association for Black Foundation Executives) and Minneapolis-based, MEDA (Metropolitan Economic Development Association) to advocate that business ownership should be a strategy embraced by more philanthropists who care about combating poverty, unemployment, and the racial economic divide.
II: How is AEO innovating on capital access and financial products?
CE: AEO is focused on changing the way capital and services flow to underserved low-wealth small business owners and aspiring entrepreneurs. We have launched TILT Forward as a national initiative to develop and launch technology‐led product, capital and marketing solutions for mission‐focused lenders and business‐service providers. The TILT Forward Initiative is building new industry infrastructure to support lower cost product and service distribution, as well as to promote innovation. For example, I mentioned DreamFund above. DreamFund creates scale benefits to support lending to small businesses in low‐wealth communities. These benefits accrue to small businesses, CDFIs and investors alike. It does this by performing two functions: 1) licensing products from third parties and making them available at below‐market rates to qualified applicants; 2) aggregating capital from funders seeking to target their investments and limit their risk (and diligence) to the prospective performance of the loans. DreamFund’s unique structure mimics the safety and security of a for‐profit Special Purpose Vehicle (SPV) within a 501(c)3 tax‐exempt charitable organization.
Another example is Project CUE, which is a multi-bank customer referral marketplace. Seed money for proof of concept resulted from AEO winning the US Treasury “Innovation Challenge.” Follow-on investment is from JPMorgan Chase Foundation. Project CUE is now on track to deliver 3,000 customers/month to Community Development Financial Institutions (CDFIs) by end of year that banks cannot serve — part of that 8,000 per day decline by financial institutions.
Lastly, we have the TILT Forward Network: the largest and most diverse group of CDFIs and entrepreneur support organizations in the US. Network serves as “skunk-works” and knowledge-sharing network for our innovations work stream at AEO.
Business ownership should be a strategy embraced by more philanthropists who care about combating poverty, unemployment, and the racial economic divide.
II: What can we learn about the longevity of black owned businesses?
CE: I do not have data since we did not ask that question in our study. What I will point to however, is a passage that is in our Tapestry of Black Business Ownership report. We inserted the playful and disturbing allegory described in the 1952 literary masterpiece, Invisible Man by Ralph Ellison. AEO asserts at the end of that piece, “Yet despite all of these obstacles and impediments, a strong community of Black entrepreneurs has, nevertheless, persevered, and an impressive entrepreneurial spirit continues to flourish in Black America.”
II: What inspires you to come to work every day? What gives you hope?
CE: If AEO can bring these innovations to scale that I have mentioned, we can help transform the microfinance industry into one that is robust, scalable reaching millions of underserved entrepreneurs with products and services they need to succeed, and is sustainable. That is worth getting up for every day!
