Minority Entrepreneurship = Economic Inclusion

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In this article, Dr. Melvin Gravely, Managing Director for the Institute of Entrepreneurial Thinking and author of When Black and White Make Green, has done an excellent job of outlining the crucial link between minority business development and economic empowerment within minority communities. He articulately explains how this country was grown through entrepreneurship and how those same principles, if applied strategically and effectively, can produce powerful results within areas of our society that generationally have been under the oppressive weight of poverty.


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Supplier Diversity Innovations

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Over the past 3 to 5 years P&G has had one of the more successful supplier diversity programs. In fact, earlier this year they were inducted into the prestigious Billion Dollar Roundtable for those companies who have spent more than $1B in a year with diverse business enterprises. This was a great feat for which they should be highly commended.

This type of accomplishment cannot be achieved by accident. There must be a significant commitment and investment, starting with the CEO on down throughout the entire organization, to reach an incredible milestone that only a handful of companies have done. This also takes an innovative approach to supplier diversity that focuses on the supplier's long-term success.

One of those innovative practices involves helping their minority business enterprises (MBEs) to facilitate mergers and acquisitions. Here's two examples:

1.) Film Fabricators, Inc. (MBE) and Johnson-Bryce Corp. (MBE)
Proctor & Gamble helped facilitate the joint venture between these two MBE’s that resulted in them moving from Tier 3 suppliers to Tier 1 suppliers and a $100 million, three-year contract to produce packaging for five P&G brands. P&G recognized these companies potential, but that they had technical and financial limitations to be top tier suppliers.

2.) BBA Fiberweb and Amantea Nonwovens, LLC (MBE)
A $30 million commitment from P&G created the first nonwovens minority-owned supplier. Amantea will provide specialty nonwovens to P&G's North American diapers and global tampon businesses via a distribution agreement with BBA Fiberweb, an existing strategic P&G nonwovens supplier.

Amantea will be responsible for managing all logistics in the new contract. BBA Fiberweb will continue to be the manufacturer of this material for the period of the contract. During the 18 month distribution agreement, Amantea will build internal capability and construct a new nonwovens line to produce nonwovens materials for P&G. Plans are being finalized for a longer term supply agreement between Amantea and P&G that includes a new plant in Ohio.

As long as P&G continues to keep the long-term success of their suppliers as a top priority, them and their suppliers will enjoy long-term prosperity with one another.

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Minorities and Venture Capital: A New Wave in American Business

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Back in 2003, the Kauffman Foundation published a report that detailed a growing interest by venture capitalists to fund minority-owned businesses. Here is an excert from the web site:

The report MINORITIES AND VENTURE CAPITAL: A New Wave in American Business, based on a study by Dr. Timothy Bates of Wayne State University and Dr. William Bradford of the University of Washington, finds investments in minority business enterprises (MBEs) resulted in healthy returns equal to, if not slightly higher than, traditional investments by mainstream venture capitalists.

"We set out to find out if minority-oriented venture capital investing was solid," said study co-author Dr. Timothy Bates, distinguished professor at Wayne State University. "We found strong, preliminary evidence of a robust minority venture capital industry."

Key Findings

  • Minority enterprise venture capital investing is quite profitable. The average investment per firm was $562,000; the average gross yield per firm was $1,623,900, generating an average net return of $1,061,500.
  • Minority-oriented venture capital funds did not concentrate in high tech. Unlike the broader industry, which invested heavily in high-tech ventures, a more diverse portfolio kept funds focused on MBEs from their colleagues' steep slump.

It would be interesting to see how the data may have changed over the past couple of years. More venture capital is still needed to be invested in minority owned businesses in order for many of these high-potential companies to expand to a level where they can be viable, competitive enterprises. Investments in minority-owned businesses are no more or less risky than any other business entity that a venture capitalist might be investingating. The opportunity is right and the time is now to make this a reality that provides positive benefits not just to the venture capitalist and the business owners, but also to the business's customers, employees, and the communities in which they reside.

You can read the full report at Enjoy!

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Real Economic Development

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This week Wal-Mart announced that they have launched an investment fund specifically targeted to minority and women-owned businesses. This innovative solution will help these types of companies grow through mergers and acquisitions. "Even though small businesses are one of the fastest growing sectors of the economy, access to capital remains a key barrier to growth for women and minority-owned businesses," said Jay Fitzsimmons, senior vice president of finance and treasurer, Wal-Mart Stores, Inc. "By creating this fund we help fill a significant void and can have a positive impact on those businesses that are ready and able to move to that next level of national and international distribution for retailers."

Although Wal-Mart has taken their hits in the PR department over the past couple of years due to the
debatable impact of some of their business practices (even as it relates to the impact on local small businesses), they may have hit a homerun with this one - at least as it relates to small business development. Key tenants of community and economic development includes business development and job growth. If there are no mechanisms and financing to make this happen, economic empowerment for the lower class will just be a pipedream.

According to
NAIC, although minorities account for 30 percent of the U.S. population, less than 2 percent of all venture and private equity funds are invested in minority companies. There are many quality small businesses out there that could expand much further beyond their current capacity and capabilities - if they had access to capital. This scenario has to change dramatically if we as a society are truly committed to seeing communities come out of poverty and everyone having an opportunity to be economically empowered. Those with the means to do so must put their money where their mouth is and make these kind of investments the norm and not the exception.

What should incent investors is the fact that investing in these companies is not like they are just blindly throwing money away. The investments must be prudent and strategic so that they can earn a return like they would with any other investment target. What should create even more of an attractive investment environment is the fact that minorities are starting businesses faster than any other segment of the population. Over the past several years, the growth rate for minority firms has exceeded those of all U.S. firms, both in the number of firms and revenues. Between 1992 and 1997, the number of minority-owned firms increased 29.6 percent, as compared to 3.9 percent for all U.S. firms. In 1997, there were more than 3 million minority firms. Of these, 84,000 have revenues in excess of $1 million and many are in high-growth industries, such as technology and health services. Businesses of this size, representing 55 percent of the jobs and 65 percent of the revenues of minority firms, are an important component of local and regional economies and of overall U.S. economy (Source: Minority Business Development Agency).

This could be a gold mine for many investment and venture capital firms, as well as corporations that are looking to bolster their supply chains and impact their communities through their supplier diversity programs.

Wal-Mart has shown some leadership in this area. Now the question is will other major corporations follow their lead?

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This is not my grandfather’s America

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This was an excellent post on the Detroit Free Press web site that I ran across as it relates to personal empowerment and shedding the "victim mentality." Enjoy!

Posted by Jamaal Michaels Oct 20, 2005 5:52:57 PM
When my grandfather grew up, white people told him he wasn’t good enough, but black people said he was. When my father grew up, white people told him he couldn’t compete, but black people said he could. So imagine my confusion when I saw blacks celebrating the Supreme Court’s 5-4 decision affirming that blacks are indeed not good enough to get into the University of Michigan Law School.

It’s ironic. Forty years after the Civil Rights Act was proposed in Congress, liberals insist blacks are incapable of meeting the same standards as whites. It’s conservatives who believe in the limitless potential of blacks.

Today, blacks are the CEOs of American Express, AOL/Time Warner and Merrill Lynch. Oprah Winfrey is a billionaire and Colin Powell was Secretary of State. This is not my grandfather’s America.

Too many blacks do remain oppressed, but not by white Americans. Rather, it is by blacks who relish a perverse sub-culture of low standards and perpetual victimization. No longer do white racists tell black children books are for white people. Today, black people do this. Every day, black children suffer ridicule and disgrace for doing their homework, behaving in class, striving for excellence — in short, “acting white.”

And within the perimeters of this black sub-culture, success is exalted only when it is earned in sports, music, dance, and in the Democratic Party. Should a black person succeed in other arenas, for example becoming secretary of state, Supreme Court justice or national security advisor, he or she is exiled from the race, his or her racial identity revoked.

Within this sub-culture, blacks have narrowly defined the path to success and equate “black” with “victim.” Condoleezza Rice? Not a victim, ergo not black. President Bill Clinton played the victim and was declared “the first black president.”

Other communities suffer systematic discrimination: Koreans, Chinese, Latinos and Jews, to name a few. But within these communities people encourage each other to go to school, get good grades and go to college. In some communities not earning a graduate degree is shameful. Only within the black community is academic or entrepreneurial success openly chastised.

Liberal black elites should stop preaching the rhetoric of perpetual oppression and encouraging all black people to be victims. Black leaders have done in 40 years what white people could not do in 400; they’ve made us accept inferior status.

It is time they told the truth about which blacks affirmative action helps. Affirmative action helps the children and the grandchildren of Jesse Jackson, John Conyers and Al Sharpton who have the money for the SAT prep courses, private schools and the clout to call the deans of admission should something go awry. Moreover, they all have the alumni status to get their children into their colleges and universities. Ironically, they all are able to do for their children what they complain that many white Americans have done routinely and systemically for generations.

It is time for liberal black leaders to stop hiding behind racism and admit that our priorities as a community have become our greatest hurdle to achieving long-term success. They must stop dismissing successful blacks, regardless of party affiliation, as exceptions in an otherwise victim-rich race. They must stop blaming white Americans for the sins of the past and set goals for the future. Most white Americans live in the 21st century; it is time more black Americans joined them.

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