The Evolution of Detroit’s Entrepreneurs of Color Fund
In Detroit, Michigan, 86% of residents are people of color. Among them, 46% of entrepreneurs of color are denied financing vs. 16% of white entrepreneurs. To address this barrier in financing, W.K. Kellogg Foundation (WKKF) partnered with J.P. Morgan Chase in 2015 to each provide initial seed investments of $3.5 million to an Entrepreneurs of Color Fund (Detroit EoCF), run by the Detroit Development Fund, that provides capital and technical assistance to minority-owned small businesses in the Motor City.
Since then, the Detroit EoCF has continued to grow and demonstrate its success in a variety of ways. In 2018, JPMorgan Chase and the Kellogg Foundation each made new investments of $2 million and actively recruited new funders to significantly increase the size of the fund. New investors include The Ralph C. Wilson, Jr. Foundation ($2.5 million), Fifth Third Bank ($3 million) and the Kresge Foundation, which committed to providing a first loss guarantee up to $2 million. As a result of these efforts, Detroit Development Fund announced in 2018 that the Detoit EoCF had nearly tripled in size, raising more than $18 million. The EoCF has loaned more than $5.7MM to entrepreneurs throughout Detroit as of September 2018. This is comprised of 68 loans, where 98% of the borrowers are people of color and 57% are female. The default rate is 1.96% and, collectively, the loans have helped create and retain 642 jobs.
As of 2019, EoCF is a $20+MM fund, including $5.5MM in debt and grants from WKKF, that provides lending capital and customized pre- and post-loan technical assistance to Detroit entrepreneurs of color.
Entrepreneurs of Color Fund Expands to San Francisco and South Bronx
Capitalizing on the success of its Entrepreneurs of Color Fund in Detroit, JP Morgan Chase began bringing the model to San Francisco and the South Bronx in 2018, with two new funds investing in entrepreneurs of color. In San Francisco, JP Morgan Chase is partnering with Working Solutions, ICA Fund Good Jobs, and Pacific Community Ventures to help San Francisco entrepreneurs of color start, stay and grow in the city. Similar to the Detoir EoCF, the collaborative will provide loans and technical assistance, with loans starting from $5,000 for start-ups. Larger loans may also be available for more developed small businesses.
In the South Bronx, the bank’s partners are Excelsior Growth Fund and Accion. The Fund will provide flexible small loans and offer technical assistance and education to businesses.