Sen. Elizabeth Warren is out with another plan, this one to close the racial wealth gap by helping entrepreneurs of color get their businesses off the ground. She’s proposing a $7 billion Small Business Equity Fund to give grants, not loans, to ensure that entrepreneurs of color start off with similar resources to white entrepreneurs, and pledging to diversify the government’s investment managers.
Because of the wealth gap, “The typical Black entrepreneur starts a business with $35,000 in capital—a third of the startup capital for the typical white entrepreneur,” Warren writes at Medium, a disparity that makes it difficult to get credit as well. So these entrepreneurs start at a disadvantage that’s then compounded by getting less outside investment from disproportionately white venture capitalists and asset management firms. The result—the thing Warren’s plan intends to fix—is that “entrepreneurs of color own less than 20% of businesses with paid employees despite making up almost 40% of the population.”
Warren’s $7 billion Small Business Equity Fund, to be paid for through her ultra-millionaire tax, would be run through state and local governments and be available to entrepreneurs with less than $100,000 in wealth who are eligible for the Small Business Administration’s 8(a) program. Beyond that, Warren would tackle the massive disparities in investments going to entrepreneurs of color—“The average Black-owned business only gets 3% of what a similar white-owned business receives in outside investment shortly after founding”—by “direct[ing] all federal pension and retirement funds to seek out a more diverse set of investment managers,” pressing states and cities to do the same in order to participate in the Small Business Equity Fund, and tripling funding for the Minority Business Development Agency.