Creating opportunities for entrepreneurs from underserved communities
Here in America, we love people who can take a dollar and spin it into a successful, sometimes world-changing business. In the Bay Area, especially, entrepreneurs are like heroes and celebrities. We laud them for their vision, creativity, and willingness to take risks. And the entrepreneurial ideas we like best are those driven by a passion to solve societal problems. In the process of building a business, the entrepreneur creates intergenerational wealth for their family, community, and society at large.
In the best-case scenario, wealth created through entrepreneurship could offer one possible avenue to closing the racial wealth gap—the disparity in median household wealth between the different races. The challenge is that you need wealth to create wealth, and in the U.S., most wealth is created through homeownership, assets, and family inheritance. At The Greenlining Institute, we recognize that communities of color have historically been systematically deprived of the ability to accrue wealth as a result of decades of structural racism and exclusionary policies and practices such as slavery, Jim Crow laws, and redlining.
My generation is left with a woefully inequitable economy and a widening racial wealth gap. Today, for every dollar of wealth that a white family has, the median Asian family has 63 cents, the median Latinx family has 7 cents and the median African American family has less than a nickel. At this rate, it would take an average Latinx family 84 years and an average African American family 228 years to catch up to the amount of wealth an average white family has.
We must employ every strategy available to us to close the racial wealth gap. Supporting entrepreneurship offers one possible solution. Research shows entrepreneurship can create intergenerational wealth-building opportunities for businesspeople of color. Data from the Panel Survey on Income Dynamics found that African American entrepreneurs not only have higher levels of wealth, but also higher levels of upward wealth mobility -- the upward or downward movement of Americans from one wealth level to another -- compared to African American workers employed by another individual or entity such as a corporation, nonprofit organization, or government.
We must employ every strategy available to close the racial wealth gap.
Studies also show a positive association between higher levels of wealth and business ownership. For example, Latinos and African Americans who own their businesses have a net worth that is ten times higher than the general Latinx and African American population.
To create more opportunities for entrepreneurs of color, we need to understand the challenges they face. Historical barriers to wealth creation, like those mentioned earlier, coupled with a lack of diversity in the entrepreneurial ecosystem, limited access to investment resources, and a dearth of support networks puts entrepreneurs of color at a disadvantage. Entrepreneurs use wealth to finance their innovations and start their businesses. Entrepreneurial ventures starting out with strong financial foundations are better able to weather risk, adapt to challenges and scale as opportunities arise.
We must also work to increase the diversity of the entrepreneurial landscape. Research shows that entrepreneurs of color are underrepresented, and that the face of American entrepreneurship is overwhelmingly White, male and wealthy. According to the Census Bureau, the U.S. is on the path to becoming a majority minority country by 2050 and California has been a majority minority state since 2000. Building an entrepreneurial ecosystem that reflects the rich diversity of the U.S. is key to ensuring that the innovations of the future are shaped by the voices and perspectives of diverse communities, including communities of color. Lastly, we must also work diligently to ensure that underrepresented entrepreneurs have robust support systems they need to succeed in this highly competitive field.
At The Greenlining Institute, we are working to remove these barriers to entrepreneurship in the clean energy sector through the CalSEED program. CalSEED, the California Sustainable Energy Entrepreneur Development Initiative, is a California Energy Commission competitive grant program that funds early-stage innovative clean energy technology ideas.
Often, the high-risk nature of the field makes early stage seed funding the hardest type of capital to secure. To address this barrier to entry, the CalSEED Concept Award provides promising innovators with $150,000 in grant funding to develop their ideas. Concept awardees are then eligible for an additional $450,000 to develop prototypes.
In order to bring diverse applicants from all communities, we have developed and carried out a targeted outreach strategy. Our outreach efforts strongly encourage applicants from diverse communities across California to participate in the development and implementation of equitable clean energy solutions -- including applicants from small, woman-owned and diverse-owned businesses as well as applicants from communities of color and underserved, low-income, LGBTQ, rural and veteran communities. Increasing the diversity of the entrepreneurial ecosystem is not enough; we also want every CalSEED awardee to succeed. So once accepted into the program, CalSEED awardees have access to industry experts, investors, professional development resources, and technical assistance services.
This year, applications for CalSEED will be accepted from February 28 through March 16.
While CalSEED is working to remove barriers for entrepreneurs of color in the clean energy sector, we must see this type of commitment to social equity demonstrated in all sectors of the economy. Policies and programs with a strong commitment to equity will have multi-benefit outcomes for all sectors of society. Entrepreneurship programs like CalSEED will encourage innovative clean energy technology solutions while also creating pathways for intergenerational wealth-building with the end goal of closing the racial wealth gap—one entrepreneur at a time.
Parwana Ayub is Greenlining’s Environmental Equity Fellow.