Reimagining Financial Systems to Support Black Businesses and Entrepreneurship
Wealth, not ability, is the most significant predictor of future prosperity. Wealth predicts not only health, education, housing, and employment but also power, self-determination, and sustainability. Over the past year, as businesses have shuttered and racial and economic disparities have widened, there has been increased recognition of the ways our nation’s economy has systematically excluded people of color — particularly Black communities — from building wealth and achieving prosperity. And yet, many grantmakers continue to invest their assets in the same economic systems and structures perpetuating racial inequities.
SCG’s 2021 Virtual Conference, RISE UP: Closing the Racial Wealth Divide, called for funders to reimagine their investments and direct their resources to a new economy that forwards racial justice and economic opportunity. Our session, Aligning Your Values with Actions: Investing in Black Communities, turned to Diane M. Manuel (Director of Foundation and Client Relationships, Adasina Social Capital) to guide an eye-opening panel conversation on racial equity and financial giving, alongside Tracy Gray (Founder and Managing Partner, The 22 Fund), Zahirah Mann (President and CEO, SLATE-Z), and Jason Riffe (Director of Housing Initiatives, United Way of Greater Los Angeles).
Our speakers advocated that our region’s collective health and future is dependent on our sector’s targeted investments in Black businesses, entrepreneurs, and community infrastructure. Together, these panelists elevated several meaningful investments that align charitable efforts with an organization’s capital-oriented values.
Reframe your perspective on the control of financial capital
From this nation’s inception, white people have designed and controlled economic systems and passed down their wealth generationally. For generations, Black and brown people have continuously innovated with a fraction of the number of resources their white counterparts have had. And yet, most wealth advisors, consultants, and investors continue to be white, and only a fraction of venture capital goes to entrepreneurs of color. Current systems of wealth maintain this status quo, and white investors have little incentive to disrupt it. In fact, Black entrepreneurs are often expected to break into these spaces to access and redirect the flow of capital. However, if Black entrepreneurs aren’t receiving venture capital to begin with, and they are still required to demonstrate a track record of success for any opportunities, how are they expected to crack into that significant channel of wealth?
Funders and investors need to proactively tear down the barriers excluding Black entrepreneurs from financial systems and furthering their efforts. What kind of innovations and outcomes would we see if communities of color had greater access and authority over capital disbursement? Funders can begin by directly investing in Black leaders to finance their projects, support their entrepreneurship, and build their skills and succeed in our new economy. Think about a specific, ideal recipient of your funding and where their life will likely be five years in the future. If it doesn’t seem so different than where we are today, you might be offering a temporary Band-Aid — not successfully disrupting the financial barrier in place. Ultimately, investors should aspire to create an environment where a Black-led organization or entrepreneur has direct access to capital and no longer needs a White intermediary between their ambitions and bank investment.
Expand your notion of ‘community’
Each of us has a sense of who we consider being part of our “community.’ Often, it is the people that we love, who are proximate, and who feel ‘part of us.’ However, the pandemic blurred some folk’s sense of community as we collectively experienced a once-in-a-generation crisis and saw so many communities that resembled our own impacted. Expanding our notions of who’s in our community can be enormously powerful, primarily as we work toward racial equity. We are all focused on our communities and our neighbors. We can redefine community to not only include the people in our immediate proximity but also people in the communities we serve and in our larger region. Fundamentally, if some of us are not well, then we are collectively unwell. This shift can potentially change how we look at our community’s needs, empathize with others, and invest our resources.
Centering community perspective
Philanthropic investments too often come up short when they are not guided by the on-the-ground needs of impacted communities. It isn’t about just making a grant but also centering the expertise of residents and deeply rooted community organizations. These individuals are doing the work every day. Their lived experiences offer them unique insights into the solutions and how we should collaborate to be more effective in our work. Grantees often need further support to conduct research and thoughtfully engage with community members to ensure the most affected people have a seat at the table. For funders, this means supporting direct services and investing in the pathways for community leaders and members to get involved in the process.
Push colleagues to align values with financial incentives
Funders with good standing with other donors, capital groups, and investors can leverage their influence to support Black communities and leaders. If your colleagues don’t traditionally fund racial equity or BIPOC-led organizations, push them and lead by example. Show them where you direct your funding and ask them to join you in your commitment to forwarding equity. Moreover, funders can take an additional step and serve as relationship builders and introduce the folks doing the work to their network of investors and donors. As mentioned, these Black entrepreneurs don’t often have the connections needed to acquire an invitation to apply for a grant or meet with venture capitalists looking to invest. Extend the trust your network has for you to those doing the work you want to support. Ultimately, this is an example of how funders can leverage their own privilege and access to create pathways for those historically excluded.
Honor the skills and experience of a nonprofit executive as if they were those of a for-profit leader — because they very often are
Though they may differ in funding models, nonprofits often share the same entrepreneurial spirit as many businesses. Like their for-profit contemporaries, many nonprofit leaders exhibit a drive to create value and achieve impact. But, whereas for-profits have more resources to innovate and label items such as research, development, and on-the-ground engagement under their ‘cost for good,’ this same work often comes at considerable expense to a nonprofit. Funders have an opportunity to provide nonprofits with equal footing with their for-profit counterparts by investing from a full-cost perspective. Philanthropy can finance an entire initiative — the evaluation, the communication, the research, the development, etc. — to ensure that nonprofit leaders can maximize their impact. Many nonprofit leaders carry the will and the skills to develop new solutions and opportunities for Black and Brown business leaders; they just need comprehensive and sustained investments.