By Hiranmayi Srinivasan
BIPOC-owned companies are some of the fastest growing businesses—yet they have the least access to capital. Here are ways to use your dollars to invest in BIPOC communities and entrepreneurs.
Black women in the United States make up the majority of those starting new businesses—17 percent, compared to 15 percent of white men, according to recent research by the Harvard Business Review and the Global Entrepreneurship Monitor (GEM). Yet, only 66 percent of businesses run by Black and Indigenous people of color (BIPOC) receive a percentage of requested funds—compared to 80 percent of white business owners. And according to research by Fundera on the racial funding gap, only 29 percent of BIPOC business owners receive all the funding they request from a bank, while more than half of white-owned business get all their funding this way. BIPOC business were also disproportionately affected during the pandemic—66 percent feared permanently closing and struggled to get loans, as shown by numbers from the United States Chamber of Commerce.
BIPOC businesses face many barriers when it comes to accessing funds and financing options, and investing in BIPOC-owned and led companies can help decrease the racial funding gap.
“The vast majority of new entrepreneurs are Black women,” says advisor Vonetta Young, who helps BIPOC individuals with private equity and venture capital. “So if we want to support the next generation of businesses that will last decades or more, this is exactly where we should be investing.”
Here are ways you can use your dollars to invest in BIPOC companies.
1.Invest in early-stage companies.
Invest in BIPOC companies that are just starting out. Entrepreneur Thomas Boyce Sr. says newer BIPOC companies face barriers in financing and gaining access to capital. In fact, this 2016 study by the GEM found that 61 percent of Black women self-fund their entire startup capital.
If you’re an accredited investor, you can become an angel investor for BIPOC startups and support companies by providing funding, networking opportunities, and other guidance in one of the most crucial times in a company’s life. “Accredited investors can make angel investments, which means they invest very early on in the life of the company and usually with at least $5,000 (and generally up to about $500k),” says Young.
According to 2019’s State of Women-Owned Businesses Report, businesses owned by women of color (about 6.4 million of them) employed nearly 2.4 million people and generated $422.5 billion in revenue.
2.Support crowdfunding campaigns.
Not an accredited investor? Crowdfunding platforms are a great way to support BIPOC businesses. “One of the best options to invest in BIPOC communities is to support crowdfunding campaigns,” says Latoya Leslie, founder of Lesoya LLC, a company that works to support communities and individuals through technology-based solutions.
She recommends looking at crowdfunding platforms like IFundWomen to look for BIPOC businesses to invest in, where she is currently raising funds for her own company. The platform provides categories like Black-owned, and Latinx-owned, so you can browse through different campaigns to fund. You can donate anywhere between $50 to a couple of hundred dollars, depending on the campaign and its needs.
Republic is another online investment platform to check out. While it has many categories, such as real estate investing and cryptocurrency, it also has a section for startups. Each company is marked with tags such as “minority founders” or “Black founders,” so you know where you’re investing your money—and most have a $100 minimum to invest.
Young says another option is to go through special purpose vehicles (SPV) led by accredited investors, “sort of like hitching your wagon to someone else’s horse, if you will.”
3.Be a conscious shopper.
You can invest in BIPOC companies just by being a conscious shopper, understanding where your money is going, and intentionally spending to support BIPOC communities. There are BIPOC businesses to check out for everything from kids companies to beauty brands to home decor—not to mention plenty of BIPOC influencers to follow.
A quick Google search will lead you to directories of BIPOC-owned and focused businesses to support in your area. Or look for Black-owned badges or labels at your local retailer; Target has a whole section online of Black-owned and -founded businesses to shop.
Consciously investing in BIPOC-companies—whether you’re an accredited investor or an intentional consumer—is a small way we can all work toward ending systemic issues, such as the racial wealth gap, that prevent growth in BIPOC communities.
See Original Article at Real Simple