Access to Capital

Access to external capital is one of the largest predictors of success of a young company. However, the combination of low starting income and systematic discrimination exclude individuals from historically marginalized communities from accessing capital. Studies have shown that government intervention in both debt and equity capital markets can get funding into the hands of business owners who need it most.

CASE STUDY: CHICAGO’S MICROLENDING INSTITUTE

City-backed revolving loan fund strictly dedicated to providing loans to businesses that otherwise would have difficulty gaining access to capital

OVERVIEW

  • Origin: Established in 2012 under Mayor Rahm Emanuel; Business Affairs and Consumer Protection Dept.
  • Funding: $2.6 million in public funds used to date for loans; fund initially capitalized with $1 million
    • Chicago partnered with three microlenders to oversee lending activities and manage fund
  • Partners selected were Women’s Business Development Center, Chicago Neighborhood Initiatives and Accion
  • Target interest rate of 13% on loans with 3.5% annual fee

RESULTS TO DATE

  • The program has grown each year for the four years of its existence
  • Distributed $2.6 million in loans in over 255 microloans
  • Number of microloans in the city has tripled
  • Over 90% of loans granted to businesses owned by minorities or womenOver 60% of loans have been granted to businesses in low-income communities
  • Program has created or retained 1,008 jobs

CASE STUDY: PORTLAND INCLUSIVE STARTUP FUND

City-led venture capital fund that invests in newly formed businesses owned by underrepresented populations

OVERVIEW

  • Origin: Established in 2015 by the Portland Development Commission
  • Funding: $1.25 million initial capitalization: $500k from City of Portland, $500k from Moltnomah County, $250k from State of Oregon
  • Raised additional $1.75 million from private investors and foundations
  • Equity investments of $20k to $50k
  • Selected fund manager provides intensive mentoring and business advisory services similar to traditional VC

RESULTS TO DATE

  • Used RFP process to select professional manager: Elevate Capital
  • Within 8 months of launching, first cohort of startups fully financed
  • All founders of financed startups are entrepreneurs of color and 50% are women