New Revivalists is a series from ImpactAlpha and Village Capital profiling the people, places and policies reviving entrepreneurship — and the American Dream.
New Revivalist: Jessica Norwood, The Runway Project
Place: Oakland, Calif.
Mission: To help close the racial wealth gap with friends-and-family pre-seed capital for black entrepreneurs.
Jessica Norwood didn’t set out to create a new kind of loan for black entrepreneurs.
Exploring the persistent racial wealth gap as a fellow with the Nathan Cummings Foundation, she zeroed in on the reasons for low rates of business startups among African-Americans. Chief among them: a lack of the kind of early “friends and family” capital that is key to getting such businesses off the ground. A typical business needs about $30,000 to get off the ground; average black household wealth is about $11,000.
“People said, ‘You’ve named a big problem. So what are you going to do about it?’” Norwood told ImpactAlpha.
In 2016, Norwood set out to raise a fund to fill the friends-and-family gap. The Runway Project initially aimed to raise $300,000; Norwood quickly attracted $1 million, primarily through a certificate of deposit at Self Help Credit Union.
In the past year, the project has deployed $175,000 to fund nine entrepreneurs in Oakland and is on a pace to back two more each month. The enterprises range from a locally-sourced floral business to skin- and haircare products to restaurants and food delivery.
The average five-year, 4% loan is $23,000 and requires interest-only payments for the first two years. Norwood calls it “believe in you money.”
“We want it to feel like friends and family money,” she says. “If you had a rich auntie, which kind of terms would they give you? We really tried to step into that in a full-bodied, holistic way.”
The loans are structured as personal loans for business purposes and require no collateral, thanks to a collateral fund backed by RSF Social Finance. The Runway Project helps the entrepreneurs with their business plans and pitches; the first group of businesses have already raised an additional $100,000, she says. “We’re not just putting loans out. We’re trying to support and connect that ecosystem to wrap around the entrepreneurs.”
Norwood is now setting her sights on a $10 million fund to expand The Runway Project to three or more additional cities (about $2 million will be available as follow-on funding for the Oakland-area borrowers). The larger fund will allow Runway to raise capital from more diverse sources, beyond the low-interest (though federally insured) certificates of deposit. For its portfolio companies, Runway is looking at alternatives to traditional equity term sheets, including a variety of revenue-share structures.
“A lot of times, the entrepreneurs who are coming to us have been struggling to get the right kind of capitalization for a long time,” she says. “They might qualify for the $20,000 loans, or up to $50,000, but may have needs that require different kinds of capital. They might need a lot more than that.”
Norwood is buoyed by the rising level of interest and activity “from when we started talking about the intersection of the racial wealth gap and these entrepreneurs who are underutilized and under-resourced.”
“I’m seeing a lot more traction, a lot more movement,” she says. “But it still seems to be a small portion of things, relegated to a particular corner. We haven’t made it all the way, to where we have all the fund managers and advisors thinking about this. So there’s more to go.”
More from the New Revivalists:
- Daryn Dodson: Tackling investors’ racial and gender biases to unlock hidden value
- Heather Fleming: Bringing global social innovation home to the Navajo Nation
- Brian Dixon: The 34-year-old African-American VC turning inclusion into a competitive advantage
- Bryce Butler: Quarterbacking capital into Louisville’s neighborhood economies
- Mark Warner: ‘Virginia is for Entrepreneurs’ shows policy leadership
- Lisa Skeete Tatum: Unlocking the value of women’s talent in the workplace
- Ben Hecht and Ellen Ward: Closing the racial wealth gap with early capital and innovative finance
- Arlan Hamilton: The VC taking cold calls from underestimated entrepreneurs
- Charlie Brock: Building a startup ecosystem for Tennessee’s entrepreneurs
- Carmen Rojas: Building a 21st-century economy that works for working people
- John Lettieri and Steve Glickman: Turning capital gains into community investments
- Propeller: Helping local entrepreneurs rise with New Orleans’ revival
- Brandon Dennison: Transforming coal country, one social enterprise at a time
- Jacob Haar: Financing the financiers expanding small-business lending in America
- Bryce Roberts and Tim O’Reilly: VCs that help startups raise revenues, not rounds
- Margaret Bradley: Turning Philadelphia institutions into impact investors
- Derrick Braziel: Breaking down barriers for Cincinnati’s entrepreneurs of color
- The New Revivalists: The people, places and policies reviving entrepreneurship — and the American…