Black entrepreneurs receive startup loans to ‘interject some balance in capitalism’
Carol Ozemhoya | OW Contributor | 11/5/2018, 12:54 p.m.
Incidents of racial profiling and racism seem to be at an all-time high across the country. But behind the scenes in cities and small towns, good things are happening as well, as many people realize that diversity only makes the country a better place to live and work.
In San Francisco, GW “Chef” Chew, a Black entrepreneur, says he loves to cook and is an ardent vegan. He combines the two passions through a new company, Something Better Foods, that has created a line of plant-based meats, from Philly cheesesteaks to fried chicken, as well as with a nonprofit Oakland restaurant, the Veg Hub. According to the San Francisco Chronicle, Chew needed financial backing to get Something Better off the ground. That’s where Oakland’s Runway Project stepped in and lent him $20,000.
“That money was a blessing,” he told the Bay Area newspaper. It helped him land a manufacturing site in Vallejo. Runway also helped with advice, coaching him on his business and marketing plans. He’s now raising more money to prepare for a distribution deal he landed with Whole Foods for next year. Runway offers loans and other support to help Black entrepreneurs start businesses. Many startups tap friends and family for early money, but minorities often don’t have well-heeled personal or professional networks.
While the median net worth of White households is $171,000, that of Black households is $17,200, according to the Federal Reserve. The racial wealth disparity “is a big gap,” said Claudia Viek, founder of the Invest in Women Entrepreneurs Initiative, a nonprofit that is not affiliated with Runway. “Providing that early-stage, more-patient capital meets an acute need. It’s a way to interject some balance in capitalism.” Runway founder Jessica Norwood calls the loans “believe-in-you money” but hastens to add: “It’s more than the money part. This is a story about what it means to be friends and family to one another, to be in deep community with each other. This is saying to folks who have been chugging away that we believe in them.”
The enterprises funded aren’t pitching the next big tech thing. Instead they’re Main Street stalwarts with products such as floral arrangements, fashion accessories, apparel, artisan juice, handmade pies and skin care creams. Runway’s approach sounds terrific, said Ben Mangan, executive director of the Center for Social Sector Leadership at UC Berkeley’s Haas School of Business, who has no ties to Runway. “There’s a huge need for this kind of capital, and it’s almost impossible to find it,” he said. “We have a massive problem to solve when it comes to creating wealth for people who have a disproportionately small share. We need every smart, viable experiment we get.”
Runway is small. It’s made 13 loans over the past year — and so far has a 100 percent repayment rate. But it has big ambitions to spread nationwide, and is currently raising money and developing a model for that. Runway’s five-year, no-collateral loans carry a 4 percent interest rate, and repayments are interest-only the first two years. The Self-Help Federal Credit Union administers the loans. Community members can support loans by taking out certificates of deposit at Self-Help.
As with all CDs, their money is federally insured. In lieu of collateral from the entrepreneurs, Runway raised philanthropic money to act as a guarantee — for every $1 it lends, it has $1 sitting in an account at Self-Help as a backstop. San Francisco’s RSF Social Finance provided some of that backstop capital. “It was a real moment of joy for me and for Jessica to do that,” said Lynne Hoey, RSF’s senior director of credit, adding that there’s “a multibillion-dollar market opportunity to fund entrepreneurs” that otherwise are shut out.