In an exclusive op-ed piece for Black Enterprise, Sen. Elizabeth Warren outlines her plan to create economic justice and to assist black entrepreneurs.
If you work hard and have a good idea, you should be able to start a small business and build something solid — a life you and your family can be proud of. There’s just one problem with that promise: the government helped create a wealth gap with decades of sanctioned discrimination, tilting the playing field against Black and Brown communities for generations.
As a result, Black, Latinx, and Native American households have a lot less wealth than white households. That means less money for entrepreneurs of color to put into their businesses to get them going. On average, Black entrepreneurs start a business with $35,000 in capital. That’s a third of the startup capital for the typical white entrepreneur.
It’s no surprise that this disparity in startup money is the single biggest reason that promising Black-owned businesses on average are less profitable and bring on fewer employees than white-owned businesses. It’s partly why entrepreneurs of color own less than 20% of businesses with paid employees despite making up almost 40% of the population. And it’s contributing to a small business gap that costs all of us millions of jobs and billions in economic growth.
This weekend, I will be attending the Black Economic Alliance (BEA) Forum in Charleston, South Carolina to discuss the steep challenges facing Black businesses in America, and how as President, I would remain committed to the fight for social, racial, and economic justice.
Black businesses face an uphill battle in our country; this is a fight we must all see as our own because the challenges facing Black businesses are rooted in big, structural problems. So the question is, what do we do about it?
The way I see it, there is only one way to make progress and that’s by fighting for big structural changes across the board. We have to take this problem head on and that’s why today I am proposing a new plan to help close the startup capital gap for Black and Brown entrepreneurs: a Small Business Equity Fund, run by my new Department of Economic Development,
This Fund will be equipped with $7 billion to provide grants — not loans — to entrepreneurs for startup capital so their businesses can thrive from the beginning without having to worry about ongoing interest payments or the risk of default.
The funds will be administered locally — through states, cities, and towns — but the state and local partners will need to meet federal requirements, including partnering with private parties to make investment decisions, instituting strict conflict of interest rules, and collecting data on outcomes. That way we can ensure taxpayer money is generating a strong return.
In addition to creating this new fund, we must take steps to address the lack of diversity among investors. The average Black-owned business only gets three percent of what a similar white-owned business typically receives in outside investments shortly after founding. A big reason for this disparity is the startling lack of diversity among investors: 86% of venture capitalists are white, and women and minority-owned firms make up less than 10% of the asset management industry. This hamstrings entrepreneurs of color: studies show that investors are more likely to partner with entrepreneurs that share their gender or race.
To address diversity among investment managers, I’m proposing three steps. First, states and cities will be required to partner with Black, minority, and women-owned investment managers to administer the money from my new Equity Fund. Second, on day one of my presidency, I will direct all federal pension and retirement funds to seek out a more diverse set of investment managers. And third, I will triple the budget for the Minority Business Development Agency (MBDA) — an organization dedicated to empowering entrepreneurs of color with access to funding networks and business advice — so it can expand on its good work.
This entire plan is paid for by my ultra-millionaire tax — a small 2% tax on giant fortunes over $50 million.
My new plan embraces the fundamental truth that we can never achieve racial justice without economic justice. We must do everything within our power to close the ever-widening racial wealth gap in America. I’ve proposed an expansion of the Community Reinvestment Act that will ensure mortgage lenders in communities of color lend to everyone on an equal basis, a student debt plan that cancels student loan debt for more than 80% of Black borrowers and invests $50 billion in HBCUs, and a new down payment assistance program that will help people in formerly redlined areas buy a home.
My plan helps level the playing field for Black, minority, and women entrepreneurs. We need to give every American the opportunity to build wealth and a bright future for themselves and their loved ones.
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