A 2019 Kauffman Foundation research report stated that 83% of entrepreneurs have no access to bank loans or venture capital at the time of startup. Almost 65% rely on personal and family savings for startup capital, and close to 10% carry balances on their personal credit cards. The report found that the lack of access to capital is often cited as one of the primary barriers facing entrepreneurship.
The data supported the Foundation’s effort to design and seed new financing mechanisms aimed at expanding access to venture capital and bank loans. The national initiative was called Capital Access Lab, and the Foundation invested $3 million to explore innovative solutions to make funding the start and growth of a business more equitable and accessible at scale.
Living Cities & capital access
Living Cities is a multi-decade funder collaborative focused on creating an investment vehicle to confront and address underinvestment and disparity. It created a “fund of funds” to invest in expanded access for emerging fund managers of color to seed capital and technical support; reduce the time it typically takes for fund managers of color to raise initial capital; and enable emerging fund managers of color to establish a track record, gain credibility, and be positioned for future rounds of funding.
The Foundation contributed a $10 million anchor investment to the $100 million Living Cities Catalyst fund, which followed a $1.67 million seed grant to Living Cities to better understand the root cause of the country’s racial disparities in income and wealth.
This initiative with Living Cities began at the Kauffman ESHIP Summit in 2017 where key players working to overcome barriers to capital connected and committed to dive deeper into the racial wealth gap. The role of collaborative funding and innovative convening illustrates the Foundation’s directive from its founder to dig deep and get at the roots of issues to fundamentally change outcomes in people’s lives.