At the request of Arc Chicago, LLC, the Fund created in connection with Benefit Chicago, Next Street assessed the gap between the availability of and demand for equity and equity-like capital among small- and medium-sized businesses owned by people of color in Chicago.
How we assessed the ecosystem
Our team sourced data from focus groups, interviews, US Census data, and other available research to understand the supply of equity capital, the demand for equity and equity-like capital, the needs of entrepreneurs of color, and best practices from around the country.
Our report affirms that more needs to be done for communities of color, especially small businesses, to dismantle racist structures that have historically permeated the flow of equity capital in America. Tangible solutions are needed – our research shows that there are real steps we can take to help entrepreneurs of color access capital, and that Chicago reflects the troubling national landscape.
For Black and Latinx entrepreneurs in Chicago, 80% of their equity capital needs go unmet and that there is a gap of at least $146 million between the supply and demand for equity capital for these communities. We think solving these issues is possible with four primary actions:
- Creating multiple new sources of equity capital focused on financing entrepreneurs of color
- Encouraging shifts toward equity-like capital products, such as revenue-based financing, that are a better fit with moderate-growth businesses
- Hiring, promoting, and retaining more racially and ethnically diverse people among general partners and key staff at equity funds and other institutional investors
- Moving beyond considering this issue as just a social issue, and understanding that closing the capital gap drives economic growth