Living Cities and Known are partnering to grow a new $100 million fund to spur investment in entrepreneurs of color who are often overlooked for much-needed help.
The two organizations will manage the Living Cities Catalyst Fund III, an effort to confront underinvestment in Black, Indigenous, and People of Color (BIPOC) communities.
The investment is largely intended to allocate additional capital to fund managers who invest in diverse businesses and interests. That is important as those fund managers, including Black-owned firms, are generally not used as a vehicle to provide capital to the so-called ‘new majority’ entrepreneurs
Living Cities’ President and CEO Joe Scantlebury stated, “The funding is needed because the level of private capital and public funding available to brilliant, innovative, and hard-working entrepreneurs of color is shamefully low.” Only 60% of BIPOC business owners gained the full funding they applied for at a bank, versus 80% of their white peers, based on Federal Reserve data.
Scantlebury shared via email that the disparity is the continuation of policies and practices that enshrined white economic privilege, incented anti-Blackness, and made economic violence on and wealth extraction from people of color a standard economic practice in the U.S.
“By 2045, our nation will be a multicultural, multiracial, and multiethnic plurality, so economic practices that enable us to build a more inclusive and equitable economic order must begin now.”
By investing in BIPOC fund managers, who invest in Black and Brown founders at a higher rate than their White peers, the new fund aims to propel greater investment in communities of color. Living Cities and Known shared that the investor base for the $100 million fund includes accredited investors with a mix of private sector and philanthropic investors. More fund information is available here.
Simultaneously, a Citi Global Perspectives & Solutions report estimated $16 trillion in lost GDP due to racial Inequality in the United States. The deficit reportedly contained “gaps in wages, access to housing and higher education and investment in Black-owned businesses.”
Another report showed that a hefty 56% of Black business owners encounter obstacles in obtaining credit that ultimately restricts their ability to grow. This finding is significant, as access to capital is critical for the success of any business owner. The problem is magnified for Black business owners, who typically experience more difficulty getting financing than their non-diverse peers.
The Living Cities Catalyst Fund III follows two funds totaling $75 million that provided financing to serve under-invested communities and to close racial income and wealth gaps.