Entrepreneurship | August 13, 2020

Buying Black shouldn’t be so hard. Here’s how investors can help.

Tynesia Boyea-Robinson
Guest Author

Tynesia Boyea-Robinson

ImpactAlpha, Aug. 13I have always done my best to support businesses that are led by people of color. Since I am actively working to grow and support Black businesses, it is important to me to align my personal and professional aspirations.  

So when I heard about the My Black Receipt campaign, I thought it was the perfect opportunity to expand my support of Black businesses. The campaign encourages consumers to buy from Black businesses and upload their receipts to prove it. So far, it’s tracked over $7 million in purchases. I’ve bought everything from makeup to exercise pants and posted every purchase on my social media feed.

By sharing my experiences in the campaign, I heard from my followers a variety of challenges to buying Black – from having to travel long distances, to having trouble with order fulfillment, to not finding a Black-owned option at all. These frustrations don’t surprise me. Black entrepreneurs have barriers to success that white entrepreneurs don’t—namely, barriers to capital. For example, Black entrepreneurs are less likely to get loans than their white peers in the same industry.  

Without capital, a business owner cannot pre-order inventory to quickly fulfill orders. She cannot invest in people to provide customer service or vendors to increase marketing reach or enhance website functionality. If businesses don’t have the right level of capital, they can’t invest in things that will help them grow and bring in new customers. 

All businesses must overcome capital issues – that’s the price of entrepreneurship. Yet the barriers faced by Black businesses go beyond those faced by individual entrepreneurs. The challenges (and solutions) of Black entrepreneurs are systemic. Every Black business owner is operating in a system that is more likely to hinder than encourage their success. 

The $55 billion plan: Accelerating Black-owned businesses to create wealth, jobs and growth

To truly support Black businesses, it’s important for all of us to step back, understand the systemic challenges that Black business owners face and work together to address them.

Here are three ways you and your organization can address these systemic barriers and help make buying Black as simple as a click of a button:

Develop inclusive models and practices

Were you annoyed by how far away that Black-owned restaurant was from your house?  Well, when businesses want to rent or buy commercial space, they are often required to use their personal assets, like their homes, as collateral. While this may not seem like a discriminatory practice, it is built on a legacy of racist policies. The average white family has about ten times the level of wealth than Black families, mostly due to different values of homes in predominately white versus predominately Black neighborhoods.

This inequity is the legacy of federal sanctioned practices like redlining. That means that when equally qualified white and Black restaurateurs look for space in a neighborhood that’s close to where you live, the white restaurateur has a built-in collateral advantage due to her race. Innovative, inclusive policies can help, such as a “co-op capital” model which relies more on character than credit or assets. These models often perform better than traditional funds, too: In Albuquerque, one small business co-op loan fund has made over 200 loans with a default rate of 1%. 

Partner with authentic, community-centric organizations

Maybe you decided to buy online from a Black business, and you were perplexed by how long it took to receive your order. This was probably due to lack of inventory, which is usually a factor of lack of working capital. And why can’t Black businesses get working capital? Because of the same barriers outlined above—Black entrepreneurs can’t rely on their personal assets in the same way as white entrepreneurs, nor access institutional capital in the same way.

How community banks and local lenders are bridging racial gaps in COVID recovery

Black businesses are much less likely to have a formal relationship with a bank (as seen in the racialized disparities of the federal Paycheck Protection Program), and so have less flexibility. Partnering and investing in community-based organizations, like Community Development Financial Institutions, can help bridge this gap and get entrepreneurs the funds they need.   

Shift your personal perceptions

Ultimately, it comes down to the individual fund manager or banker to decide which entrepreneurs get investments. These institutions are predominately white and make decisions that help people who are predominately white. I do not believe all white asset managers are motivated by hoarding their capital for people who look like them. But most people perceive experiences they do not understand as riskier. People like to invest in people who look like them—it’s that simple.

Diversifying who influences and manages capital can ensure the assets and opportunities of Black businesses are not overlooked.  The Diligent Corporation, for example, invested in increasing the diversity of the boards of private equity funds, with a commitment to fill over 50 board roles with people of color or women. If you are an investor or work for a bank and want to make it easier to buy Black, the solution is simpleinvest more in Black businesses and Black entrepreneurs.

Tynesia Boyea-Robinson, CapEQ

How can we start to implement these solutions? My firm, CapEQ, is leading a collaborative effort with the Surdna Foundation, the W.K. Kellogg Foundation, and the Brookings Institution to help grow Black businesses called Path to 15|55. This initiative is bringing together government agencies, non-profits, financial institutions, and investors to support Black businesses, recognizing that if 15% of Black-owned businesses are able to hire at least one more employee, the American economy could grow by $55 billion. 

That $55 billion could certainly help strengthen a lot of Black businesses. Join us in our work, or contribute your receipt to the My Black Receipt campaign. Together we can make buying Black as easy as buying on Amazon.

Tynesia Boyea-Robinson is president & CEO of CapEQ, an impact investment and advisory firm.