We are in a(nother) moment of reckoning. As an unprecedented global pandemic and mass demonstrations change the face of our nation, the need for a race-centered economic package that builds wealth and dismantles inequality has never been more evident. Black people have been dying from COVID-19 at alarming rates for months. We’re being killed by the police—and then further brutalized when we express our rights to protest. The reasons for disparate deaths at the hands of disease and the state are no accident. They are the result of an oppressive economic and political system meant to suppress us, while benefiting from our labor and “compliance.”
The truth underpinning the old adage, “When white folks catch a cold, black folks get pneumonia,” has never been more unassailable than now. The health challenges evidenced by COVID-19 alone have cast the light of reality on race-based disparities. We must take a hard look at our institutions and learned biases and commit to building a better world. The old “normal” is gone. While there’s been increased interest in learning about our nation’s dark history, it is actually a remedial step, especially for investors. We need to understand exactly how things were broken so that we can effectively invest in our collective future.
We must reckon with our racist capital system, the one built on a land grab supported first by exterminating native people and then by enslaving black ones. To this day, we continue to dehumanize people of color (BIPOC) to support wealth and status for those whom we’ve come to call “white.”
To illustrate the racial wealth disparity: For every $100 of white wealth, black families have only $5.04. While 25 percent of black families have zero or negative net worth, only 10 percent of white families fall into this category. The average black family whose head of household has a graduate degree accumulates $200,000 less in wealth than its white counterpart. Even in the 99th wealth percentile, black family median wealth is $1.574 million versus over $12 million for whites. These data points, and so, so many more, are why race must be front and center in all decisions about who gets access to capital, and how. Venture capitalists, funders and banks must all address these deep disparities if we are ever to right the playing field for black people.
In this context, entrepreneurship is one pathway to economic growth and wealth-building for BIPOC. However, black and brown business owners are usually constrained by undercapitalization and lack access to traditional advisor and investor networks. As a result, BIPOC are less likely to be approved for small business loans, and when they are approved, receive lower amounts at higher interest rates compared to their white counterparts. The picture on the equity side of the equation is not any brighter. While at least 77 percent of venture capital is invested in white men, only 1 percent of venture-backed founders are black.
Social and capital connections play a huge role in how decisions are made, and black people are often excluded from these “old boy” networks. Fewer than 1.3 percent of the $69.1 trillion in global assets under the four major asset classes—mutual funds, hedge funds, real estate and private equity—are managed by white women and BIPOC, and only 1 percent of total assets are managed by black people. That lack of diversity in venture capital and private equity results in a lack of diversity in the founders funded. This very reality inspired me and my colleague JaNay Queen Nazaire to create Living Cities’ Builders and Benefactors (B&B) network, which brings together venture capitalists, angel investors and ecosystem players of color.
With BIPOC as the fastest growing populations in the country, and soon to comprise the New Majority, our B&B network has helped us deepen our research on the investment strategies necessary to channel more capital to fund managers of color and support their greater likelihood of investment in more BIPOC businesses, all en route to better outcomes for all people in U.S. cities.
The orchestrators of our sociopolitical network structures continue to be responsible for enormous disparities—from perpetuating a lack of access to health care and education, to the way our tax structure bolsters affluent communities and leaves the rest of us under-resourced. Investors can step up and address the gaps in our economic policies by connecting with BIPOC leaders and entrepreneurs in cities across the country. They have solutions. Invite them in.
We must rewrite how capital and access to capital work. Take Monique Woodard, a venture capitalist, who, along with others in our B&B community, is intentionally investing in underestimated and diverse founders to help close our nation’s racial wealth gap. She recently invested in Encantos, a producer of digital media for multicultural (AKA New Majority) families. Their programming attracts parents and caregivers who support bilingual skills for kids. Another example of a simple truth: When BIPOC hold capital and the power of decision, we often make different, more enlightened decisions than our white counterparts. That is why we must increase investment in BIPOC fund managers and founders of color.
What is the pathway forward? For our collective societal benefit, we owe it to ourselves to interrogate our capital and social systems. We must learn our history, in detail. We must repair past harm done. We must redress disparities. We must “amend” the systems that have dehumanized, devalued and burdened black, indigenous and people of color for hundreds of years.
As investors, we know what it means to research in support of more efficacious decisions. Go forth without fear. Learn more and do better…for us all.
Demetric Duckett is managing director of Capital for the New Majority at Living Cities.