Miami Tech & Startup News

Miami should set the pace nationally for diversifying access to capital

Miami should set the pace nationally for diversifying access to capital

By Jeanine Suah – Guest Contributor

While Miami has become a global center for entrepreneurship, despite – or even perhaps because of – the COVID-19 pandemic, access to capital remains a looming hurdle for small businesses and minority tech founders. With all eyes on South Florida, Miami’s leadership can become legendary, if it truly sets the pace nationally for diversifying access to capital.

“Access to capital for small businesses is one of the biggest policy issues in the United States today,”  according to the US Small Business Administration, even though new businesses create virtually all job growth in America. A recent national survey commissioned by Small Business Majority revealed that “roughly four in 10 small business owners have not obtained any capital like loans or lines of credit from any lending institution, or even from friends or family.”

When it comes to a lack of access to capital, BIack and Latinx business owners are disadvantaged even more stunningly. In pursuing new financing relationships from a variety of sources, including banks, Black business owners were often twice as likely (or more) to not receive the full amount requested, compared to White counterparts, according to the US Small Business Administration. In terms of startup capital, Black and Latinx founders were about twice as likely to start their businesses with less than $10,000 in financial capital, compared with White and Asian founders.

With 70.6% of Black entrepreneurs relying on personal and family savings for financing, according to the US Chamber of Commerce, lower family wealth for Black families overall drives more of a divide in access to capital. On top of that, counties with a higher share of African American residents have lost nearly half of their small community banks since 2006 – a significantly steeper decline than other counties experienced, according to the Institute for Local Self-Reliance.

That’s the national environment in which Miami finds itself. But, in true Miami fashion, we can be different. We have the power and leadership to set the tone. Miami can create a competitive advantage, if we set a national pace for overcoming lack of access.

Miami may well be the only major US city whose momentum as a center for business has grown amid COVID-19. As New York magazine reports, “The flood of new Miamians who have arrived, full or part time, during the pandemic includes tech investors (Peter Thiel, David Sacks), cryptocurrency bulls (Anthony Pompliano, Ari Paul), new-media tycoons (Bryan Goldberg, Dave Portnoy), start-up founders (Alexandra Wilkis Wilson, Steven Galanis), and many more who aren’t yet billionaires but think the Magic City will give them their best shot.”

Yet, that infusion of talent and money does not address the broader challenge of access to capital. In my experience – as a Black female founder, who works in venture capital and is in very close contact with the Miami startup ecosystem – lack of access to capital remains by far the greatest challenge for startup founders, small businesses, and emerging nonprofit organizations. Addressing it provides a remarkable chance for Miami to distinguish itself even further nationally.

Based on my conversations with founders and operators in Miami, raising capital remains extraordinarily difficult. Historically, BIPOC founders in Miami do not have access to family and friends who can back them financially in a pre-seed/seed round, and the national institutional biases described above are evident here as well. 

Initiatives like Florida Funders and Wefunder, with whom I work, provide non-traditional funding options. Equity crowdfunding, for example, aims to democratize fundraising by filling the void of that “family and friends” round. But Miami should have a broader and clearly evident commitment to facilitating access to capital for small businesses. What Miami should do is this:

First, understand better the barriers to access facing small business owners, especially minority group members, in Miami. In my experience, there are three primary barriers: lack of knowledge about what makes a company “investment-ready”; lack of social capital or the ability to be seen and recognized by those who make investment decisions; and lack of opportunities that get founders to the next level. All these barriers can be conquered. A “Field Guide for Policymakers” created by national nonprofit Right to Start is a valuable resource in this regard.

Second, develop ways to bring the venture capital community and the minority business community together. Facilitate conversations to illuminate the challenges and needs of both. We, as an ecosystem, are just getting started on this, and it will be exciting to see what happens.

Third, ensure that local initiatives are properly executed with a thorough understanding of how targeted communities can best be reached. Some initiatives have become set in their ways and are not adapting sufficiently to changing needs.

Fourth, make transforming access to capital for small businesses a top civic priority. Miami has proven capacity to achieve its highest priorities. This should definitely be one of them. 

If Miami seizes this opportunity, it will advance even further in its national and global leadership of entrepreneurship. The benefits will accrue to all, not just a select few, here and far beyond.


The author is a Miami-based EdTech founder, venture partner, and advocate for nonprofit Right to Start, which champions entrepreneurship as a community priority.

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