SSBCI’s IIE Program: Financing Growth For Diverse Small Businesses

The Biden administration has expanded the State Small Business Credit Initiative (SSBCI) with $10 billion in funding to promote equity and foster economic development. A significant portion of this funding is dedicated to socially and economically disadvantaged businesses. The Initiative for Inclusive Entrepreneurship (IIE) is a national effort to leverage this funding, focusing on:

• Building capacity among funders
• Deploying capital to funds for entrepreneurs
• Fostering collaboration
• Raising awareness of opportunities

Bridging the Funding Gap for Diverse Entrepreneurs

The IIE seeks to unlock significant funding with a 1:1 private investment match requirement, and private investors have committed substantial resources. The IIE program is incubated by Hyphen Partnerships, one of the lead organizations. Other key organizations include:

• Founders First Capital Partners: Focuses on supporting suppliers – providing debt and private equity – to small business government and corporate supplier businesses.
• JumpStart: Focused on helping diverse emerging managers of venture capital funds and diverse founders find funding.

Addressing the Urgent Need for Inclusive Growth Capital

There's a pressing need for inclusive growth capital for diverse small businesses. Data shows that only a small percentage of diverse-owned businesses have access to traditional capital products, leading to higher interest rates for businesses owned by people of color. This lack of access is particularly pronounced in the venture capital sector, where a minuscule percentage of funding goes to Black and Latino founders.

• The IIE is a $100 million effort aiming to bridge this funding gap.
• It leverages public-private partnerships to maximize the impact of the Treasury Department's $10 billion SSBCI program.
• Every SSBCI dollar deployed is designed to catalyze $10 in private investment, with a 1:1 match requirement.

SSBCI Program: A Pivotal Force for Small Business Development

The SSBCI program was reauthorized by the American Rescue Plan Act of 2021, significantly boosting funding and emphasizing support for underserved communities recovering from the pandemic. This program includes:

• Increased funding for technical assistance programs
• Allowing Tribal governments to participate

Other Biden legislation, like the Infrastructure Investment and Jobs Act, Inflation Reduction Act, and CHIPS & Science Act, also creates business opportunities for small businesses.

Matching Private Funds With Public Funds: Fostering Co-Investment

Hyphen brings together the public and private sectors to address social issues through co-investment and collaboration. Over the past year and a half, Hyphen has been incubating the IIE, building its capacity, and sourcing matching capital. This initiative ensures diverse small business owners have the financing they need to grow.

• The IIE aims to raise at least $250 million in private and philanthropic capital to leverage the federal funding for entrepreneurs of color.
• Participating corporate and philanthropic investors include JPMorgan Chase, W.K. Kellogg Foundation, John D. and Catherine T. MacArthur Foundation, Mastercard Center for Inclusive Growth, Skoll Foundation, and Wells Fargo.

Connecting to Capital: Financing for Government and Corporate Suppliers

Government and corporate contracts are crucial for small businesses to achieve significant revenue growth. However, women-owned businesses, particularly those run by Black women and Latinas, face significant obstacles in securing these contracts. Unconscious bias against women entrepreneurs, limited access to capital, and lack of networks and mentorship hinder their growth.

• Founders First Capital Partners focuses on connecting businesses that supply governments and corporations to financing.
• They collaborate with supplier councils, match suppliers with financing options, help them scale, and support alternative capital providers in piloting new approaches.
• Founders First offers a platform called Passport to Funding Readiness, providing education and funding requirements assessments.

Boosting Venture Capital for Diverse Fund Managers and Founders

The first five months of 2024 have seen a disappointing decline in venture capital funding for female founders. JumpStart, a key organization within the IIE, is focused on increasing access to venture capital for diverse emerging managers and entrepreneurs of color. They are actively working to help VCs of color raise $6 billion in assets under management by 2025.

• JumpStart serves as a hub for the IIE, promoting awareness and expanding opportunities for emerging fund managers in the VC space and for potential investors.
• They achieve this by facilitating investment in emerging managers, securing additional funding, supporting emerging fund managers, and communicating SSBCI priorities.
• JumpStart is piloting a program to provide $50,000 grants for legal and compliance expenses associated with SSBCI participation, attracting significant interest with 180 applications from 29 states.