Social Capital Collective

Hermione Malone serves as Executive Director of Good Work Network, a New-Orleans-based small business development and technical assistance provider serving women and minority entrepreneurs. Since its founding in 2001, Good Work Network (GWN) has helped start or sustain over 2,200 business, grow or sustain over 5,000 jobs, and connected clients to more than $70 million in contracts.

Prior to her arrival at GWN, Hermione served as Director of Supplier Diversity for Cleveland Clinic in Cleveland, OH. There, she created the corporate supplier diversity strategy, including metrics, policies, and protocols, ultimately attaining more than $100M in annual spend with diverse companies. Hermione has also worked as a professional journalist for The Boston Globe among others and is a German Marshall Memorial Fellow (2016). She holds an M.B.A. from Case Western Reserve University, a B.S. from Florida A&M University, and a Diversity Management Certificate from Cornell University. 

Black entrepreneurs in the U.S. have a legacy of success, innovation and wealth creation, amid which, barriers to sustained growth and success have mounted. Lack of capital, business acumen, mentoring, and diverse networks rank high in research on known barriers. Built on a model deployed to increase capacity for non-profit ventures, this concept is a membership-based national network of Partners who contribute money, mentorship, and expertise to black entrepreneurs. The dues paid by Partners contribute to a fund used to provide unrestricted non-equity contributions for selected businesses – or investees. Our hypothesis is that the combination of business advisory services from Good Work Network, mentorship and technical assistance from subject matter experts, financial advising, and unrestricted operating fund grants will be a catalytic driver of sustained business growth, an increase of generational wealth, and a reduction in the racial wealth gap.   

Black entrepreneurs, particularly black women, have created significant startup momentum over the last 15 years. The ProjectDiane 2018 Report finds that the number of startups created by Black women increased from 84 to 227 and funding raised by Black women entrepreneurs increased by 500% from $50M (in 2016) to $250M (in 2017). However, between 2007 and 2012, minority business average gross receipts decreased 2.5%, in sharp contrast with non-minority firm 13.9% increase in average gross receipts. Additionally, average minority firm gross receipts in 2012 were roughly one-third of that for non-minority firms. Data suggest that assuming current trends continue, it would take more than a century for minority firms to achieve statistical parity is gross receipt levels. Recommendations from studies on black ecosystem building, startups, and black business ownership suggest an intersection of approaches captured by our proposed model. The Federal Reserve Bank of Kansas City’s report, “Building Ecosystems in Communities of Color” recommends: Entrepreneurship and business education; Experienced mentorships from entrepreneurs who have succeeded and/or failed; Developing more early stage investors, which can be non-accredited investors using types of crowd or community-based funding or larger investors that can help entrepreneurs start and scale; Focus on racial wealth equity.

Social Capital Collective is a membership-based national network of Partners who contribute money, mentorship, and expertise to black entrepreneurs. The backbone of the individual Partners is Good Work Network, an organization with a near 20-year history of supporting minority entrepreneurs (based in New Orleans, LA).  GWN will recruit a diverse community of partners representing a mix of successful entrepreneurs and experts who will commit their time and dollars to the Collective. The tax-exempt dues paid by members contribute to a fund used to provide unrestricted, non-equity contributions for selected businesses – or investees. The Collective will make two types of investments annually: Mentorship/Expertise Only and Mentorship/Expertise + Funding. In year one, entrepreneurs will receive business advising and mentorship to help them address a critical growth barrier for their business. The general operating grant will be deployed in furtherance of the firm’s growth goals. In Year 2, they receive customized financial counseling ensuring firms are bankable and educated on debt as a growth vehicle to attain more substantive capital. Our hypothesis is the combination of services, mentoring and capital will be a catalytic driver of sustained business growth, an increase of generational wealth, and a reduction in the racial wealth gap. 

Our project serves existing black entrepreneurs with annual revenues of between $150,000 and $1 million. In the New Orleans, LA metro area where we are based, minorities represent roughly 43% of the population, 27% of firms, and just 2% of all business receipts. This shockingly low share of sales for minority businesses is mirrored nationally and is why our project exists. Our clients are 82% minority, 76% women, and cover a range of industries from education to hospitality, construction to marketing. Many cluster in lower profit margin industries, due to the lower barriers to entry. However, even in those industries, when compared to white firms, black entrepreneurs usually earn less. We know one glaring need is business management education – including increased financial acumen, which Good Work Network provides. The easy access to subject matter experts is also addressed in this project. While, minority entrepreneurs often recognize when they need specific professional help, they don’t always know how to find it. Lastly, our project will help address the limited access to capital for growth in 2 ways: providing grants tied to documented growth plans and advising to prepare firms to qualify for loans or to attract equity investment.

Since the early 1980s, median wealth among Black and Latino families has been stuck at less than $10,000. Meanwhile, White household median wealth grew from $105,300 to $140,500. According to the St. Louis Federal Reserve, business and financial assets provide higher average returns over time than tangible assets such as homes. Business ownership is associated with higher levels of wealth. In 2004, families in which the head of the household was self-employed had a median net worth five times that of households where the head worked for someone else. Entrepreneurship is a key component of closing the racial wealth gap. 

The framework for our model is based on Social Venture Partners, an international organization created to increase capacity for non-profit organizations utilizing the skill set and financial contribution of its partner network. I was a Partner with SVP Cleveland before relocating to New Orleans in 2016. As such I participated in the work to evaluate applicants for our investments of time and funding, participated on advisory-team direct support opportunities with investees, and contributed to a taskforce designed to identify ways to diversify membership. Realizing the limitations of both traditional debt tools and the equity market for smaller businesses, but also becoming aware of how even relatively small amounts of funding could become catalysts for business growth, I began to envision community-driven solutions to support black-owned businesses. I considered giving circles, employee-owned co-ops and more before recalling my experience as a Social Venture Partner. I then began designing a version of SVP that supported small businesses instead of non-profit organizations. I traveled to Cleveland to discuss the concept with the then-Executive Director of SVP and consider where I might make changes from the original model. I built out the rough framework before engaging a collaborator organization to refine the concept.

In New Orleans, the average white-owned business has a value of $487,748 while the average black-owned business has a value of $35,237. Similar disparities play out across the U.S. This gap isn't because white entrepreneurs start businesses at a higher rate. They don’t. It’s not because white business owners have better ideas or work harder. It is because study after study has shown that banks lend less to small businesses owned by minorities, bid opportunities are an old boys' network, and information is not equally shared across networks that would facilitate small business growth. Entrepreneurs are among the most optimistic, innovative, dedicated people I know. They see solutions where others are stopped by problems. Someone says “No” and they hear “Not yet”. Black entrepreneurs have always valuably contributed to the industry and economy of this country, generating $1.38 trillion in 2012 alone. And they’ve done it with one hand tied behind their backs. It is time that the scale of our solutions to level the playing field  match the innovation and dedication of these entrepreneurs. We are committed to work that builds new structures of support as we simultaneously dismantle those systems that would deny black entrepreneurs opportunity and access. 

Motivated by a desire to help minority- and women-owned businesses not just start, but grow and thrive, Good Work Network has focused its work over the last year on supporting existing businesses with the tools, guidance, and education necessary to build a sustainable small business sector. There are abundant resources in the market for start-up firms, but where do they go for assistance when they’ve moved past the incubators and cohort-based learning classes? There are local and national efforts to scale businesses of color from $1 million to $10 million in annual revenue. But how is the pipeline fueled to get firms to $1 million in annual revenue in the first place?

Good Work Network is a bridge between organizations working to support entrepreneurs of color at both the start-up and scale-up ends of the continuum. Focusing on entrepreneurs with annual revenues between $150,000 and $1 million, our programming builds on the strong foundation of our ecosystem’s start-up institutes and incubator programs. A key differentiator is our model of ongoing business counseling. A three-month intensive program is a great jumping off point for an entrepreneur, but they will absolutely need ongoing support. We don’t have traditional “alumni” clients because our doors are open for entrepreneurs to return to us when their business plans and growth necessitates it.

Since its founding in 2001, Good Work Network (GWN) has helped start or sustain over 2,200 business, grow or sustain over 5,000 jobs, and connected clients to more than $70 million in contracts.

When we initially created our concept, we were told it would be impossible to build out a base of support locally. Although our organization had only served Louisiana-based companies, we started thinking of non-local potential partners. 

Leveraging existing relationships, we began collaborating with an organization in Cleveland, OH. It is a much more philanthropic community and has a more diverse and robust corporate community. We spent months in dialogue, even traveling to our partner in Ohio last winter. We honed the concept to pitch to a friendly funder and were promptly met with word that the funder was rethinking their strategy.

Undeterred, we continued to look for a new funding opportunity to pilot the
concept – and one came in May. As I excitedly reached out to the Cleveland
collaborator, we found out she was leaving her organization and stepping into a role that wasn’t the same good fit. Undeterred, GWN applied for a federal grant in May and are hopeful the concept resonates. We know The Partnership is unconventional. As one funder prospect said, “I’ve never seen anyone try to address these barriers in one concept”. But, we also know many of the tried-and-true concepts have done little budge the needle

At my last company, I was in a role requiring leadership solely through influence for the first time in my career. The outcomes I was responsible for producing had to be completed by others– who had their own priorities and competing demands. I had no direct reports at the time and did not sit in a hierarchically superior role to that of my partners. 

I worked primarily with two teams, one of whom was a significant challenge. A key barrier was identified early on: I wasn’t in their process loop. As a result, I could never anticipate needs or get an adequate head’s up of opportunities warranting my expertise. 

To resolve this, I took an approach focusing on how partnership with me could help them. I made a business case for the work showing value, expectations from key external stakeholders, and linkage to our organization’s mission. 

The fruit of these efforts was the team’s creation of a solution to create more visibility and notice of projects I needed to be a part of. The results were amazing. A metric we had been trying to move from a very low initial rating improved seven-fold in the first year of implementation.

Typically, programs supporting entrepreneurs focus on the start up phase. The success of such efforts can be seen in the data on the explosive growth of new ventures started by black women in the U.S. The ProjectDiane 2018 Report finds that the number of startups created by Black women increased from 84 to 227 and funding raised by Black women entrepreneurs increased by 500% from $50M (in 2016) to $250M (in 2017). The Federal Reserve Bank of Kansas City reports, from 2002-2012, the number of businesses owned by black women increased 179% compared with 52% for all women-owned businesses and 20 percent for all businesses. However, these firms also have lower overall revenue and a higher reliance on personal funds to finance business growth and operations. Our model is unique in its multi-factorial approach. We are not just solving for access to capital. We are not solely matching firms with mentors. We won't alone provide entrepreneurship education and technical assistance. Our model provides them all. We will address the documented paucity of mentors for black entrepreneurs, along with a frequent lack of business management acumen. As well, friendly capital to address a need identified through coaching and mentoring will position the businesses to attain even more substantial funding for growth - be it debt or equity. The aggressiveness of our approach is warranted by the sobering reality that the racial wealth gap is now so great that the median Black family is on track to reach zero wealth by 2082.

This specific project is not yet operational. However, our organization, on average, serves 250 entrepreneurs each year. Once the platform for this project is built, our goal would be to serve 50 individuals in year one. In five years our hope would be to triple that number to 150 individuals.

Our ultimate goal is to provide the ingredients to a proven recipe for entrepreneurial success that have elude so many black owners. Our desired outcomes include increased profitability, number of employees, number of contracts obtained and increased revenue among black entrepreneurs. In the first year as we implement the concept, our goals include: 

• Complete planning phase project components
• Finalize models and recruit participants
• Select 2 cash investment investees and 10 time-only investees
• Complete initial investee needs assessments
• Evaluate subject matter expertise needed to facilitate business growth strategy
• Match investee with mentor partners to facilitate access to expertise
• Host partner advisory sessions for identified operational needs
• Evaluate progress of investees against strategy, timeline and goals Assess financial management acumen, capital needs
• Match investee with mentor partners to facilitate access to expertise
• Host partner advisory sessions for identified operational needs
• Evaluate progress of investees against strategy, timeline and goals
• Assess financial management acumen, capital needs

Our ability to exponentially grow the Partnership and realize greater outcomes for black entrepreneurs in the first 5 years will be dependent upon growing the network of participating Partners - who contribute time and money. We see tremendous potential to tap into many of the civic and social institutions whose work aligns with improved socio-economic conditions within the black community. And, much like the inspiration model, SVP, there is a strong possibility of creating a national and international network. 

The most significant barrier to success will be our ability to recruit and retain engaged partners committed to the success of black entrepreneurs and willing to devote both time and money to drive the above mentioned outcomes.

Our plan is to build a coalition of the willing by tapping into known individuals committed to the success of black businesses. The initial cohort of partners will act as ambassadors to engage more individuals with the right expertise and commitment to support the entrepreneurs. Engagement will be critical to the retention of Partners, and so communicating the collective impact at regular intervals, ensuring we are maximizing the attributes each Partner brings to the table, and providing mechanisms for Partners to build relationships with each other and offer feedback to the program will be critical. Ultimately, we see the need to have a dedicated person focused on Partner recruitment and retention.

We recognize the value of diverse business networks and create opportunities for women and minority entrepreneurs to grow their professional networks. Partners in this work include: New Orleans Chamber of Commerce, NOLAVATE Black, New Orleans Regional Black Chamber of Commerce, and JPMorgan Chase & Co.

We leverage local and regional partnerships to create increased access to contract opportunities for women and minority entrepreneurs. Partners in this work include: The Port of New Orleans, Ernest Morial Convention Center, Audubon Institute, New Orleans Business Alliance, and Louisiana Alliance for Economic Inclusion. Funders include JPMorgan Chase & Co. and the W.K. Kellogg Foundation.

We work in conjunction with lenders to increase financial acumen, management skills, and access to capital for business growth. Partners in this work include: Capital One, El Centro, and Hope Credit Union. Funding support comes from Capital One, Hancock Whitney Bank, JPMorgan Chase & Co., Wells Fargo and W.K. Kellogg Foundation.

Historically, we raise funds for our work predominantly through grants and individual donor support. We have submitted a two-year, $500,000 federal grant application for funding to support the launch of this concept and seed the grant pool. We expect to know whether that application was successful in Fall 2020. This specific model uses a membership fee structure to both create the pool of funds to be used as grants to entrepreneurs, and to minimal associated administrative costs (Partner engagement coordinator, technology platform, outreach/marketing tools).

We have already made some investments into a technology platform that could serve our needs for this project. Additional related costs for the balance of year one are largely made up of staff time and the development and implementation of a marketing strategy to reach our target market of Partners. We estimate this total to be roughly $55,000. 

Our model is unconventional in its approached when compared with existing strategies for helping black entrepreneurs start and grow businesses. Those include education, incubators, accelerators and pitch competitions. Given the unfamiliarity with our model that tries to account for multiple barriers at once, there is a significant awareness hurdle we'll need to get past with potential Partners to garner their support and participation. The Elevate Prize will help us to not only reach our desired target market, but create the messaging that will most compel them to join us as Partners. It also will help us facilitate the development of our membership model for Partners, application process for investees, and host relevant focus groups to finalize the target profile of entrepreneur and mentor matching system. We know from past organizational work how costly the development and implementation of a strategic engagement plan can be and getting proper guidance with a structured implementation will radically accelerate the time it takes us to fully launch the project.