Entrepreneurs and the Racial Wealth Divide: A Q&A With Jessica Norwood
African American entrepreneurs have a significantly harder time than their white counterparts do in securing funding from friends and family to launch their businesses. Entrepreneur Jessica Norwood founded the Runway Project to help them get the seed funding they need to get off the ground. She talked with the Erb Institute about how this approach both enables these entrepreneurs and benefits the broader business community.
Why did you start the Runway Project?
There is level of wealth inequity in this country that is directly derived from racist practices in the financial and banking institutions. Those institutions have enabled an economy that uses African Americans and other people of color as labor without ever compensating them. Because of that, we have a racial wealth divide, and as that divide increases, we are on track for African American wealth to hit zero dollars in the next 20 years, or maybe even more accelerated than that. And that decline also runs in tandem to what we expect to happen with climate change.
How are the racial wealth divide and the climate crisis linked?
This happens in an extractive relationship—when you extract more than you put back into the land and into the people. People of color are the largest, fastest-growing population, and when they do not have the resources that they need to really move in the marketplace, then the economy itself tanks. And the quality of our lives will tank. The more you are financially insecure, the more things can happen to you that you cannot get out of.
So how does the Runway Project address this problem?
When you calculate wealth, people who own businesses tend to be wealthier than those who do not. And we thought that entrepreneurship was an important place for us to start talking about how to address the wealth gap. So I mapped out a continuum of capital for the life of a business and realized that if they never got the starting money, they never could get a bank loan or a VC company, and they probably couldn’t meet an angel investor. Whatever they thought they would get on that continuum of capital was really impossible if they did not get “friends and family” capital first. And friends and family capital was never going to happen inside of the racial wealth gap.
So I created a solution—it’s not the only solution, and I hope there still will be others that come along. But our solution is to mimic friends and family loans as close as possible to what that relationship would be if we knew one another and I was able to support your business. So we make loans at a relatively low interest rate, we have an interest-only period so people can really work with that capital and use it to grow their business, and we include technical support for the life of that business. And we do not require collateral and do not look at credit scores to make our decisions, because those things have really kept a lot of people from being able to access capital. The ethos around Runway is really that friends and family relationship, with pre-loan and post-loan support. We stick with them as long as we can.
Does enabling these entrepreneurs create more sustainable businesses?
Our entrepreneurs don’t necessarily say, “I’m a socially responsible business,” because it’s just culturally not the language that they use—but they absolutely are. They are grounded in communities. They’re looking at sourcing goods and services from other people of color, they’re starting healthy food-based businesses, and they’re looking at some of the best practices around fresh, healthy, sustainable farming.
These companies are thinking about the overall health of their product and the community. They are looking at the entire supply chain and making sure it honors a set of values around sustainability and best environmental practices. Some of these companies do get different certifications for their sustainable practices, but some don’t—they are African American businesses in communities of color who do what they do because it’s right. So it may not be presented the same way, but it’s absolutely happening.
Does this push the broader business community to be more sustainable?
Yes. The businesses themselves are pushing the system from their standpoint and really demanding a more responsible and sustainable strategy around the system. Also, I don’t think you can be sustainable with a culture of extraction—both financial extraction and talent extraction. So these efforts make us more sustainable, because we’re talking about what repair of that system looks like.
Can you share an example of someone the organization has helped?
One of our companies is Gourmonade, which sells high-end lemonade, like basil mint lemonade, in the Mission District in San Francisco. When the founder, Vicktor Stevenson, first opened his business last summer, he got profiled by police thinking that he was breaking into the kiosk. They came in with hands on a gun, asking him what he was doing. He had a grand opening on a Saturday, and this was a Monday. He had just moved into the neighborhood. But what was really beautiful was that the entire Runway community got the story out, bought up all the lemonade, and tried to show him some support. They wanted to make sure that people understood that this man and his business and his family were deeply supported and connected in the community.
Why is the Runway Project’s approach good for everybody, not just the entrepreneurs you help directly?
It’s important for our community to see a wide range of entrepreneurs and businesses, because it gives them an opportunity to think about what they could do, so it’s inspirational for many people. For a long time, because African Americans were pretty much relegated to only certain types of businesses—in the service industry, mainly—they don’t necessarily have the exposure to other industries from a business ownership standpoint.
An economy requires a risk-reward paradigm between everybody buying and selling. We can’t afford to have a system where we exclude whole swaths of communities because they don’t look like the profile of what we think business should be. That’s not the country that we say we are, so all of us have to grow into and act like who we say we are. It is the business of each and every person to support the whole health of our community.
What potential do you see for up-and-coming leaders to help solve this problem?
We have existed on an economy that has been extractive—from the people and from the land and resources. We have all the data that says that what we’re doing now does not work and is not helping—it’s making people more and more vulnerable, and it’s putting resources toward the top few people, and everybody else is struggling. So, at this point, all of us are in the business of repair. I would implore every up-and-coming leader to ask themselves and their future employers and partners: What does repair look like? What is your repair strategy?
Norwood is speaking about this issue of repair at the 2019 Net Impact Conference in Detroit.