What Title III Means for West Louisville Development

In Uncategorized by Bill

My first introduction to the concept of Black owned business was in 1984 in a magazine named Black Enterprise. I was a soldier stationed in San Francisco and for the first time in my life fascinated with the new concept of entrepreneurship.  San Francisco was a hotbed for BioTech startups. These were all new terms to me, but as I listened to the valuations of these new companies I was hooked.  

Thanks Black Enterprise

As I read in Black Enterprise and  watched the growth of new businesses the articles constantly spoke of a new concept call lack of access to capital. The next decades as I studied business as an investor in both real estate and the stock market I noticed very few Black businesses that grew to the valuations of the companies I was investing my money.

Venture Capital

As America grew into the world leader in technology entrepreneurship in the 21st century the mantra is remained the same. According to CB Insights’  data from 2015 on VC investments in the U.S., only 1 percent of VC-funded startup founders are black, whereas black people make up over 12 percent of the U.S. population. Meanwhile, 87 percent of VC backed founders are white and 83 percent of all founding teams of these companies are all white. Black Businesses were not receiving a fair share of venture capital, but crowdfunding can change that dynamic.

Enter  Equity Crowdfunding

For the first time in 80 years, thanks to Regulation Crowdfunding, startups and small businesses can raise up to $1 million from friends, family, customers and non-accredited investors. Equity crowdfunding provides a means to create our own venture capital funds. As of May 16, 2016, the JOBS Act’s Title III Regulation Crowdfunding exemption enables capital-raising via Securities and Exchange Commission-registered websites.

New Choices for Access to Capital

Prior to this SEC provision, entrepreneurs’ financing options came down to personal savings, credit cards, banks (if you could qualify) and angels or VCs (if they were among the extremely lucky few).  While most media attention about this new opportunity has focused on an entrepreneur’s ability to sell shares (equity) in his or her high-growth-potential company, a real (and neglected) opportunity is for Main Street businesses to raise capital through crowdfunding.

Create Community Based Investment Funds

So, with all of the data and reporting on the lack of capital that African Americans, Latino Americans and women receive in angel and venture funding, what can we actually do about it? Well equity crowdfunding allows members of the Black community the opportunity to raise $1 million to invest in business creation and real estate development that leads to economic development in neighborhoods, but equity crowdfunding has the added value of allowing community members to invest and build wealth along with the business owners they fund.