Earlier this year, US Treasury Secretary Janet Yellen noted that economic crises typically “hit people of color harder and longer” and intensify economic inequality. “I am worried the current crisis will do this again,” she added, according to the New York Times. “In fact, I know it will, unless we act.”
There are, of course, many components to the dynamic Yellen describes. The solutions, likewise, will be multifaceted. But one promising new initiative that may help to address economic inequality is the Community Navigator Pilot Program.
Housed at the US Small Business Administration and contained with the coronavirus recovery plan that Congress passed in March, the Community Navigator program aims to connect businesses support systems in cities across the country to better serve the needs of BIPOC (Black, Indigenous, and People of Color)-owned and veteran-owned businesses.
The idea in a nutshell is to create an ombudsman-type function that enables BIPOC businesses to better navigate small business support services for access to capital, markets, and technical assistance. The initial pilot program, at $100 million, is modest—enough to support grants of $1 million to $5 million in up to 50 cities. But it is a promising approach that merits greater attention, and could, if expanded upon, revolutionize business support systems.
The Importance of a Strong Ecosystem
Connectivity is critical in helping businesses thrive throughout the business lifecycle—from launch, to sustained growth, to potentially selling the business down the line. A strong ecosystem builds connections, closes gaps to access, strengthens businesses, and builds sustainable wealth in communities.
This is especially true for BIPOC entrepreneurs, many of whom face significant barriers to growth and scale. A recent federal report found that even though the number of firms they own has grown by 35 percent, the average gross receipts for those firms dropped by 16 percent.
This lack of growth limits wealth building opportunities and harms the US economy as a whole. It is well documented that diversifying business ownership can help to close the racial wealth gap, and national plans for economic recovery post-COVID and beyond must include solutions for BIPOC entrepreneurs at every stage of the business lifecycle.
Building the Ecosystem: The Community Navigator Solution
Despite the many barriers that entrepreneurs of color face, BIPOC businesses comprise a significant portion of our economy and often act as the economic lifeblood of their communities. They need support to come out stronger on the other side of the pandemic. The Community Navigators pilot program is a systems-level solution that is long overdue and could create lasting benefits for these entrepreneurs.
Based on a proposal initially laid out in the Big Ideas for Small Business report authored by 10 colleagues and myself and published by Yale and Drexel University, the Community Navigators pilot program will act as a large-scale, federally backed ecosystem demonstration project. Its purpose is to “catalyze and evaluate new ways of driving transformative small-business outcomes through integrated systems of business support, capital access, business district regeneration, and anchor demand.”
What does this entail? Specifically, the program will use a hub-and-spoke model in cities to better connect BIPOC business owners to service providers. This model features a lead nonprofit—a “hub”—at the center of a network of “spoke” organizations “that deploy trusted messengers to work with businesses in targeted communities.” This enables one entity to serve as the epicenter for planning, strategy development, and coordination across a community’s entire business ecosystem.
As with most federal initiatives, the idea builds on local efforts already under way, including in Memphis and Portland, Oregon. Both cities—and many others around the country—have developed communities of practice focused on existing BIPOC business support organizations. What Portland and Memphis have demonstrated is that by bringing BIPOC business support organizations into hubs that work together rather than compete for scarce and limited resources, outcomes for BIPOC entrepreneurs improve. In many cases, individual business support organizations working alone lack the capacity and infrastructure to improve capital access, technical assistance, and access to markets—services that BIPOC businesses need to succeed and grow on their own.
By increasing incentives for BIPOC business support organizations to work together and map the support services offered, both cities’ interventions have seen exponential results in improving the sustainability and longevity of BIPOC businesses in their communities. For example, in 2020, Prosper Portland, working with six nonprofit partners, provided $13,510,000 in relief funds to more than 1,200 businesses, with an estimated 89 percent of awards going to BIPOC-owned businesses. In Memphis, the nonprofit hub Epicenter is seeking to raise $100 million to help Black entrepreneurs thrive in their respective industries. An article published last year in AfroTech noted, “Memphis is laying the foundation for how other cities across the country should support Black entrepreneurs and businesses.”
The community navigator hub approach does not try to position a single organization to do everything. Rather, it seeks to strengthen products and services available at each stage of the business lifecycle, thereby creating culturally specific targeted approaches to meeting BIPOC entrepreneurs’ needs. In short, community navigator hubs create a more efficient system of business support service delivery. In addition, once trust is built (which can take some time and effort), the hub organizations can learn from each other. For example, some may be better at providing capital access, others may be better technical assistance, and so on. The goal is for hubs to become learning communities focused on meeting the needs of BIPOC businesses.
The hubs fill a critical role many communities lack—that of a convener with proven expertise to create and maintain a cohesive network. While many separate elements of strong ecosystems do currently exist in cities across the country, they are often disparate, uncoordinated, and operate as “frenemies” as opposed to collaborators. This leads to needless duplication of effort and programs and limits the ability of BIPOC business owners to access the services they need. The hub-and-spoke model aims to connect disparate business support services and strategically coordinate the activities of the ecosystem through regular meetings, planning, communication, information sharing, and performance tracking of the network.
In practical terms, it could look something like this: A national or local nonprofit with proven experience in administering technical assistance, peer learning, and network building would act as the “hub” for a five-city region. Within these five cities, the hub coordinates groups of its five “spoke” partners—in other words, well-established and trusted business support organizations with a track record of providing high quality and culturally competent services to business owners seeking support.
Spoke partners could include a Black or Latinx Chamber of Commerce, a community development financial institution (CDFI), an accounting firm, a college or university, a small business incubator/accelerator, or any other type of business support entity. These spoke organizations act as “boots on the ground,” providing one-on-one loan/capital assistance, personalized management education and services, and opportunities for network building and market access. Through the connection made possible by support from the Community Navigator pilot program, each of these spoke partners can more effectively collaborate to serve entrepreneurs and utilize each other as partners rather than competitors—with the singular goal of growing and sustaining BIPOC businesses in their community.
The hub is also responsible for working with spoke partners to set ambitious targets and measure progress for business creation and growth within the network to report back to the SBA. This data tracking will be critical. As my coauthors and I noted in that Big Ideas report, “The scaling of Business Ecosystems will depend on the rapid codification and sharing of successful models as they emerge.”
The potential benefits are numerous. Through more intentional coordination and collaboration, entrepreneurs stand a much better chance of receiving the support they need when they need it—regardless of business size or stage. Not only will individual business support ecosystems become stronger, but each city or jurisdiction in the program becomes part of a larger network that can work collaboratively to share, collect, and disseminate information and successes. And, for the first time ever, the federal government will be able to closely track on-the-ground impact to build the case for further investment.
The need for urgent intervention is clear, and the time is ripe for developing a robust national program of supports for local ecosystems to support BIPOC businesses. A federally backed solution for BIPOC entrepreneurs will help inject the support that BIPOC small business owners simply haven’t had access to in the past.
If implemented correctly—at the right intersections with the right practitioners—the Community Navigator pilot program will directly meet the needs of BIPOC businesses across the country, offering a holistic solution that could spark a wave of community wealth building. Although the national pilot only incorporates at most 50 communities, the pilot could inform similar efforts in hundreds of regions across the country.
We know that local support ecosystems can set businesses up for greater success in both the near and long term and bring tangible benefits and wealth to communities, while failure to do so can often hobble efforts at business development. The Community Navigator pilot program offers an unprecedented opportunity to change the odds for BIPOC business success by fostering strong ecosystems, and in the process, build stronger and more equitable communities.