COVID-19 has left the economy under historic distress and putting millions of small businesses at risk. Recent reports indicate that over half of small business owners reported operating at a lower capacity than they were pre-pandemic, and more than half expected it would take at least six months for their businesses to return to normal operating levels, if ever. The outlook, including a disproportionate number of business failures, is even more severe for entrepreneurs of color.
The near-term pressures from the COVID-19 pandemic have intersected with a second crisis, one that is longer-standing and also highly damaging – the racial disparities in business ownership that undermine the nation’s economic dynamism and exacerbate wealth inequities. Nationally, Black and Latino Americans represent about 28% of the population, but only 8% of the nation’s business owners with employees. Moreover, only about 1% of equity capital is invested in Black and Latino-owned businesses. The U.S. could realize exponential growth in businesses and jobs for all Americans if Black and Latino-owned businesses achieved similar levels of growth and scale as White Americans.
To combat these negative trends, the Cincinnati Minority Business Accelerator (Accelerator) seeks to leverage its 18-year track record of growing larger-scale minority business enterprises (MBEs) through a combination of informing the replication of its model nationally, while concurrently establishing a new CDFI fund that will provide equity and “equity-like” capital (with “equity-like” essentially representing flexible debt-financing) to high potential minority-owned firms.
Founded in 2003 following a period of civil unrest in the Cincinnati region, the Accelerator is the flagship economic inclusion initiative of the Cincinnati USA Regional Chamber that has since become the leading national model in the country for supporting and growing larger-scale MBEs. Its mission is to accelerate the development of sizeable minority-owned businesses and strengthen and expand the minority entrepreneurial community through access to capital and other critical resources to achieve sustainable growth.
Since its founding nearly two decades ago with the specific intention of fuelling more equitable economic growth and wealth-building in Cincinnati, it has since had a profound impact on the region creating a portfolio of over 70 larger-scale MBEs that have created over 3,500 jobs and over $1.5 billion in aggregate annual revenues.
Today, it is looking to build on that success by informing national expansion of its model, as well as launching a dedicated pool of investment resources in excess of $100Million. This transformational new CDFI fund is being created to address the well-documented gaps and shortfalls in the availability and access to equity and growth capital for entrepreneurs of color and inner-city based businesses with scalable business ventures. As previously stated, nationally less than 1% of equity capital (be that early-stage venture capital or later-stage private equity) is invested in African American and Latino-owned businesses. This absence of risk-based capital, as well as the lack of connectivity to investors of such capital perpetuates the preponderance of smaller-scale business enterprises in communities of color.
While by no means representing the complete solution to long-standing economic disparities for entrepreneurs of color, growing more larger-scale firms (businesses with annual revenues greater than $1Million) is certainly a critical factor. Recently, a LendingTree.com report ranked Cincinnati as one of the top ten places in the nation where minority entrepreneurs are succeeding. The reported further highlighted that about 43% of such firms earn over $500,000 in annual revenues and 62% have been in operation for over six years – both percentages representing the highest in the nation.
Further evidence of the Accelerator’s national positioning is also captured in a recent announcement whereby the Accelerator will be one of 6 cities participating in the Innovative Financing Models for Coronavirus Recovery Project through the Research and National Technical Assistance program of the Economic Development Administration in partnership with Blueprint Local Investments and the Nowak Metro Finance Lab at Drexel University – https://www.eda.gov/news/blogs/2021/03/18/drexel-university-innovative-finance-models-for-small-business.htm. This project seeks to examine novel and emerging approaches to capital access for small businesses.
Additionally, the Accelerator was also recently profiled by the Brookings Institution in a paper entitled How a new Minority Business Accelerator grant program can close the racial entrepreneurship gap which speaks of the merits of replicating the Cincinnati model in cities and regions nationally – https://www.brookings.edu/research/how-a-new-minority-business-accelerator-grant-program-can-close-the-racial-entrepreneurship-gap/
As these various efforts suggest, the time for addressing long-standing economic disparities is now. It is equally as important to recognize that such efforts, while emphasizing underrepresented populations, create economic opportunities for all citizens in the form of investment opportunities, job creation, and consumer spending, to name a few, while adding to the economic vibrancy of the entire economy.
Efforts to create an ecosystem of equitable growth must include larger-scale minority firms if we are to truly reverse the aforementioned negative trends. The Accelerator is a model for cities nationwide who are committed to a just economy and eager to address the lingering economic disparities continuing to plague the nation.
For information, contact: DARRIN M. REDUS, SR., SENIOR VICE PRESIDENT/EXECUTIVE DIRECTOR, MINORITY BUSINESS ACCELERATOR at O 513.579.3100 | D 513.579.3144 or