Investing in financial innovations to narrow the racial wealth gap

Guest Author

Maria Kozloski

What if you made it much easier for workers of color to become business owners, and thus build wealth much faster? What if you offered creative, revenue-based loans to underserved business owners to help them hire more workers and grow?

In 2021, the Rockefeller Foundation’s Zero Gap Fund invested in two innovative models that aim to explore these critical questions. Both are committed, in different ways, to addressing the racial wealth gap, one of the most persistent signs of inequity in American life. Both show huge potential to scale up to address needs that remain vast. 

These two investments are evidence of the Rockefeller Foundation’s growing commitment to advancing racial equity and economic justice in the United States through innovative financial tools. That commitment combines the acumen, determination, and focus of the global Innovative Finance and U.S. Equity and Economic Opportunity teams, which I am honored to lead. The Zero Gap Fund was launched in partnership with The John D. and Catherine T. MacArthur Foundation through the Catalytic Capital Consortium, as a vehicle to channel private investment toward addressing the world’s most pressing challenges.

Our first investment is in Apis & Heritage Capital Partners, a Washington, D.C.-based minority-led impact fund created to address the racial wealth gap head on. A&H’s approach is to use the tools of big finance and employee ownership to turn workers into business owners. Using capital supplied by Zero Gap Fund and other investors, A&H aims to transition at least eight companies in its first five years, turning at least 500 workers at those companies into owners. A&H is targeting companies where at least one third of its workforce are workers of color.  

As of June, A&H Legacy Fund I closed on its first two transactions—a Denver-based sewer and water systems company with about 50 employees, about 50 percent of whom are Latino, and an El Paso based landscaping company with about 120 employees, the majority of whom are lower income hourly-wage Latino workers. 

“We’re looking to have life-changing impact for a set of workers who too often reach the end of their work lives with little, or nothing saved,” said A&H’s Todd Leverette, who co-founded the fund along with Philip Reeves.

Revenue-based financing

The second Zero Gap Fund investment, in San Diego-based Founders First Capital Partners, supports a similar aim. Founders First provides both investment capital and training support to underserved company founders, including women, People of Color, and military veterans, and businesses located in low to moderate-income areas.

Founders First combines a revenue-based direct lending model with targeted instruction and training to help companies grow. Of the more than 400 companies that have gone through its accelerator programs, 83 percent reported increased revenues in 12 months and 53 percent reported increased revenues by 25 percent in six months.

One beneficiary of the Founders First magic is Valarie King-Bailey, chief executive of OnShore Technology Group, a Black-owned Chicago-based company that offers services to test and validate corporate software systems. OnShore has a large roster of clients in the life-science industry, including Moderna, and business ramped up when Covid-19 hit.

Needing to meet the new demand and bring on more employees, King-Bailey borrowed $250,000 from Founders First in the summer of 2020. Revenues doubled for the year, up to $4 million, and are on track to top $5 million this year. 

With both these investments, the Zero Gap Fund aims to foster companies that can help change the face of wealth creation in America. Few metrics offer a clearer sense of long-term advantage and disadvantage than household net wealth—that is, all assets minus all liabilities. And in the United States, the differences are stark when comparing households of different racial and ethnic backgrounds.

According to the Federal Reserve, the median wealth for white households headed by those under 35 years old stood at $25,000 in 2019 compared to $11,000 for Hispanic households and $600 for Black households. For heads of household is over 55, those numbers are $315,000 for white households, $115,000 for Hispanic households, and $53,800 for Black households.

Nothing helps create and solidify lasting wealth like ownership of a house or a business. Both of our investments are designed to help increase the foothold that underserved Black, Indigenous, and People of Color have in creating wealth that can last through generations. 


Maria Kozloski is senior vice president of innovative finance at the Rockefeller Foundation.