Based in the Bay Area, G.W. “Chef” Chew’s company, Something Better Foods, has created a line of plant-based meats, from Philly cheesesteaks to fried chicken, and opened a nonprofit Oakland restaurant, the Veg Hub. The firm became one of the earliest borrowers from The Runway Project, receiving a $20,000 loan from the nationwide initiative to support black entrepreneurs with capital as well as other essential assistance, the San Francisco Chronicle reported on Sunday.
“That money was a blessing,” Chew said, according to the Chronicle. The loan helped Chew secure a manufacturing site for Something Better Foods. The Runway Project also helped with advice, coaching him on his business and marketing plans, and Chew is now raising more money to prepare for a distribution deal he landed with Whole Foods for next year, according to the newspaper.
The Runway Project co-founder Jessica Norwood created the initiative in 2016. As Next City reported at the time, Norwood’s vision was to close the “friends and family” capital gap for black entrepreneurs — a gap that includes building supportive communities around entrepreneurs, in addition to a source of capital that would meet the needs of very early stage businesses.
“This is the one thing that keeps getting missed in the story,” Norwood told Next City in 2016. “It’s a very obscure, small piece, it doesn’t seem like it would register or create as much of the ripple effect that it does, but it’s the beginning, it’s the genesis, it’s the part of money that tells people ‘I’m with you. I believe in you.’”
According to data compiled by the crowdfunding platform Fundable, friends and family are still the largest sources of startup capital, investing $60 billion a year, compared with $22 billion a year from “angel investors” or $20 billion a year from venture capital firms. The average amount raised from friends and family is $23,000, according to Fundable’s data. But the disparity in “friends and family” capital available based on race remains significant. The median net worth of white households is $171,000, compared with just $17,600 for black households, according to estimates from the Federal Reserve released in September 2017.
The lack of friends and family capital hasn’t stopped black people from starting businesses — black women, in particular, are still the fastest growing segment of entrepreneurs — but the disparity in access to capital has kept many black-owned businesses from growing faster and creating more jobs. Only 2.5 percent of black women-owned firms have employees besides the owner, compared with 20 percent of U.S. firms overall.
Under its current model, The Runway Project actually combines three kinds of capital. First, the loans are funded by certificates of deposit purchased at a local financial institution — Self-Help Federal Credit Union in the case of the Bay Area. Second, to collateralize the loans, rather than requiring collateral from borrowers, The Runway Project organizes philanthropic contributions from either individuals or institutions to be placed in a separate deposit account at the financial institution — one dollar deposited for every loan dollar available. (A similar setup to the “co-op capital” model pioneered by Nusenda Credit Union in Albuquerque.)
The third type of capital is social — the “friends and family” are provided by a local business accelerator with strong roots in black communities and other under-capitalized groups. In the Bay Area, the member-owned Uptima Business Bootcamp serves that role.
“Member ownership allows us to redistribute the wealth rather than having a number of venture capitalists invest and take equity stakes and have the proceeds go to people who have significant amounts of wealth already,” Uptima co-founder Rani Langer-Croager told Next City in 2016. “It basically becomes a way for entrepreneurs to invest in each other.”
Langer-Croager also chairs The Runway Project’s Bay Area credit committee, which screens the initiative’s loan applicants.
The Runway Project has made 13 loans over the past year, and so far has a 100 percent repayment rate, according to the Chronicle.
Oscar is editor of Next City. Before that, he was a Next City contributing writer and 2015-2016 Equitable Cities Fellow. Since 2011, Oscar has covered community development finance, community banking, impact investing, equitable and inclusive economies, affordable housing, fair housing and more for media outlets such as Shelterforce, B Magazine, Impact Alpha, and Fast Company.