Jacquise Purifoy wakes up every day to face the reality that in her city of Detroit, where 79 percent of the population is black, the average white-owned business makes $1.36 million in revenue a year, while the average black-owned business makes just $32,525 a year.
“Generational wealth gaps,” says Purifoy, a black woman. “I’ve had a white client tell me, basically, ‘Thank God Grandma died and gave me $250,000 from her will,’ and they opened a very lucrative business here in Detroit. Sadly when our grandmas die there’s no will, there’s no life insurance, we never get that kind of infusion. It’s the opposite. We end up on GoFundMe or selling fish dinners just to bury somebody.”
She wants people of color — especially women of color — to have access to what they need to grow their business. The policies and practices that have led to a national median net worth for white households of $171,000 versus just $17,600 for black households, are part of a system “that’s been designed for us to fail,” says Purifoy.
Purifoy is entrepreneur-in-residence at the Build Institute, which has just joined — along with 10 other organizations — the Urban Manufacturing Alliance’s new Pathways to Patient Capital program. It brings together a wide range of groups across the country who see manufacturing as a sector where people of color can potentially start and grow larger businesses. The groups in the program will receive training and networking opportunities to help them understand how to connect manufacturing businesses to the right kind of capital — debt, equity, or some kind of hybrid of the two — that will help them grow.
“Manufacturing was born here in Detroit,” Purifoy says. “Everything that you can think about being made, started here. And we want to say, ‘Hey, you don’t have to go to California, you don’t have to leave and go to New York or go anywhere. You can stay right here and do what we’ve been doing since 1800s here. And not only can you do that, but here’s the money to do it.’ Detroiters have the know-how, it’s the lack of funding that we’re missing.”
The Build Institute has graduated over 1,800 entrepreneurs and counting — 63 percent are people of color and 83 percent are women — from its core training program since 2012. Collectively, Purifoy says, those graduates earn about $53 million a year in revenue — with an average of $29,544 in revenue per business. Purifoy hopes that the Pathways to Patient Capital program will help the Build Institute provide even more effective support to entrepreneurs drawn to manufacturing.
The impetus for Pathways to Patient Capital goes back to the Urban Manufacturing Alliance’s 2017 State of Urban Manufacturing Report, which focused on six cities including Detroit. Researchers collected data on business size, age, recent and anticipated growth trajectory, owner demographics, and challenges including financing needs. The researchers discovered that despite the odds and despite other challenges like zoning and land use that they face in cities, manufacturers remain optimistic about future growth. But growing manufacturing businesses past a certain point requires capital.
For manufacturers that can find progressively larger spaces they can afford to rent or acquire as they grow, working capital is a huge challenge. According to the UMA report, growing manufacturers that want to shift from retail to wholesale need to adapt from being paid at the point of sale to issuing invoices that will be paid in 30, 60 or 90 days. Workers won’t wait that long to get paid, so lines of credit or other financing tools become even more necessary And in that situation, it is a particular challenge for people of color who don’t have access to intergenerational wealth to cover some of those costs in the meantime.
Some of the business support organizations in Pathways to Patient Capital have decades of experience already in lending to small businesses, like the Wisconsin Women’s Business Initiative Corporation (WWBIC), but are hoping through this program to better understand the specific needs and the lingo that manufacturers use to conduct business. Founded in 1987, WWBIC has made $67 million in loans to small businesses across the state of Wisconsin, helping more than 6,100 business owners start or grow their companies. Recently, more small manufacturers are coming to them for assistance, looking for loans or classes on how to run a business.
“We’ve had lots of creatives and makers and lots of those kinds of folks who are now seeing themselves more as business owners, and that’s who we’re trying to help more, to get our tools including business education as well as capital to folks who aren’t sure if they see themselves as business owners yet,” says Renee Lindner, outreach specialist at WWBIC.
UMA selected the organizations in Pathways to Patient Capital in part for their track record of reaching people of color through their work — or, if they’re new, their commitment to doing so, such as the Boston Ujima Project, which launched an investment fund at the end of 2018. Staff there have been working for years to build a democratic process to deploy that capital through which residents of Boston communities of color have a vote on all lending and investment decisions.
“We saw this really stark and troubling gap between the way business owners tap into capital from traditional sources, banks being the most obvious, but venture capital too clearly falls along similar trends,” says Lee Wellington, UMA’s executive director. “So we were looking for organizations that had a very expressed [racial or gender] equity orientation.”
Across Wisconsin, for example, 58 percent of WWBIC’s clients have been people of color; within the city of Milwaukee, where 55 percent of the population are people of color, 87 percent of WWBIC clients have been people of color. Two-thirds of WWBIC’s clients statewide have been women.
Organizations involved in Pathways to Patient Capital are eager to exchange stories and strategies for supporting manufacturers. In addition to assembling the 11-member cohort, UMA formed an advisory board of representatives, from more than 20 organizations, who will also be providing mentorship and guidance to the group.
Manufacturing in the U.S. may never be what it once was — the sector’s jobs peaked in 1979, with 19.4 million employed. However, thanks to automation and other technological advances, output in the U.S. grew even as employment fell to around 12 million and, after a dip during the Great Recession, U.S. manufacturing output today remains close to its highest levels ever.
Still, with a few notable exceptions like Madam C.J. Walker, the titans of industry in the U.S. have been a monotonous progression of white men. Changing that picture alone won’t be enough to go as far as say, closing the racial wealth gap. But, acknowledging that the racial wealth gap is a tremendous barrier, the groups in the UMA cohort want to figure out ways to support people of color to grow their manufacturing businesses and break into newer, larger markets.
“There were strategic ways people weren’t allowed in, so now there needs to be strategic ways that people are allowed in,” Lindner says.
This article is part of The Bottom Line, a series exploring scalable solutions for problems related to affordability, inclusive economic growth and access to capital. Click here to subscribe to our Bottom Line newsletter. The Bottom Line is made possible with support from Citi.
Oscar is Next City's senior economics correspondent. He previously served as Next City’s editor from 2018-2019, and was a Next City Equitable Cities Fellow from 2015-2016. Since 2011, Oscar has covered community development finance, community banking, impact investing, economic development, housing and more for media outlets such as Shelterforce, B Magazine, Impact Alpha, and Fast Company.