A 2019 recipient of the Wells Fargo Diverse Community Capital program’s Activator grant, OFN member Main Street Launch is directing grant proceeds toward the growth of their new African American Entrepreneurship Institute, recently launched in the Bay Area. The purpose of Activator grant funding is to support community development financial institutions (CDFIs) working on and ready to make active or implement or expand a strategy with the potential for industry or market replication.
This post was written by OFN Blog guest author Jessika Lopez, Program Manager, Main Street Launch.
In the Bay Area, the cost of living has increased dramatically and has become unaffordable for low- and moderate-income (LMI) communities of color, especially African American households. Seeing these communities change before our very eyes, we at Main Street Launch, a 40 year-old CDFI based in Oakland, felt it was time to do something beyond small business lending to support our African American-owned businesses.
Skyrocketing Cost of Living Impacts African Americans
Rent prices have risen a shocking 51 percent in Oakland and 37 percent in San Francisco over the last five years. What we’re seeing in the Bay area is that a one bedroom will cost about $2,470 a month in Oakland and $3,500 in San Francisco.
Out of control rental costs are compounded by the fact that as of 2016, African Americans had 10x less the median wealth of their White counterparts, with $17,409 for Black households compared to $171,000 for White households.
Over the last decade, this disparity precipitated a mass exodus of African American households. African American households simply cannot afford to stay in the communities they have known for generations and they are being forced to move further inland.
Gaps in Local Pathways Limit Economic Opportunity
Through our research, we learned that African American entrepreneurs have 12x the median wealth compared to African American nonbusiness owners. However, due to barriers that are specific to African American entrepreneurs, the pathway to success is a difficult one. So we spent time learning and understanding, and when we felt ready, began to build out a new model to support African American entrepreneurs.
African American entrepreneurs are not only starting off with lower wealth, they face a trust gap, limited access to capital, and an overall lack of small business resources that are tailored to their needs. There is also very little consistent research on African American entrepreneurs, much less at a local level. After taking the time to understand the gaps, history, and the local ecosystem, Main Street Launch officially established the African American Entrepreneurship Institute (the Institute) in February 2019, supported by a $2 million Activator grant from the Wells Fargo Diverse Community Capital program.
New Enterpreneurship Model Creates Pathways for Success
The Institute is made up of the following three pillars:
- Access to capital, including flexible concessionary lending products
- Programs to support businesses at all life cycles (Entrepreneur in Residence, Supplier Diversity, and Succession Planning programs)
- Strategies (Research, Advisory Board, Ecosystem Building, and Expansion)
The Institute relies heavily on local partnerships with the San Francisco African American Chamber of Commerce, Oakland Chamber of Commerce, and the National Coalition of 100 Black Women to support all aspects of this work. These partners have been an integral part of recruitment and implementation of our programs, and they are founding members of our Advisory Board. In addition to serving its advisory role, the board is also breaking down silos by bringing these groups together at the same table in order to collectively support African American entrepreneurs.
Geographic Expansion Intersects with Entrepreneurs' Migration
In December 2019, Main Street Launch expanded the Institute’s efforts to Stockton, CA. Stockton, despite being only about 70 miles east of Oakland, has a history and economy that more closely resemble cities in America’s Rust Belt.
Main Street Launch chose Stockton because many African American households have moved from the Bay Area to Stockton for the lower cost of living, but there are fewer local resources to support entrepreneurs. We felt that we could offer much-needed lending and programmatic support to this community.
More broadly, because Stockton is so different from the Bay Area, Main Street Launch aims to learn from this expansion in order to create a model that can be tailored to fit all types of local communities around the country.
With this work, Main Street Launch is in the initial stages of creating a roadmap for cities, counties, foundations, and local community-based organizations to adapt the Institute model to the needs of their communities and push forward a way to bridge the racial wealth gap through entrepreneurship.