N.J. Considering Diversity Fund To Boost Minority-Owned Businesses
Minority-led start-ups can face several hurdles to stay alive let alone thrive — even in one of the most diverse states in the nation.
In an effort to improve access to funds for Black- and Latinx-owned enterprises, the state Economic Development Authority will announce Thursday it’s considering building a fund allocated to minority entrepreneurs, NJ Advance Media has learned.
“We have not seen nearly enough minority-led start-ups grow in scale around New Jersey,” EDA CEO Tim Sullivan told NJ Advance Media.
“It doesn’t reflect the state’s diversity and we have to do more than just wish it’s going to change. We have to put some resources on the table to bring that reality forward," he said.
Before building a potential fund for minority enterprises, the agency will release a request for information to firms and people with perspectives on obstacles and disparities Black and Latinx entrepreneurs face. The RFI will be available in English and Spanish.
“Diversity is one of New Jersey’s greatest strengths, and it is time that our start-up sector reflects that,” Gov. Phil Murphy said in a statement.
“The information we receive through this RFI will be critical to understanding Black and Latinx entrepreneurs’ needs and to ensuring we craft the effective tools to move us toward our goal of building the most diverse, inclusive innovation ecosystem in the nation.”
The questionnaire asks what obstacles in securing public and private capital businesses have faced, the optimal size for an initial seed fund, and if any previous attempts to obtain financing from the state and EDA have been unsuccessful, according to a copy obtained by NJ Advance Media.
“It’s pretty fair to say the state hasn’t done enough historically to encourage diversity in its entrepreneurial startup ecosystem. This is a big first step around communities of color,” Sullivan said.
And while venture capital tends to lean on tech companies and life sciences, Sullivan said the EDA will seek a broader array of wealth opportunities, such as consumer and beauty products that cater to specific ethnic markets.
The EDA, which historically has primarily catered to large corporations, said the diversity seed fund for Black and Latinx business owners would be the first of its kind in the state. The agency has been mired in controversy since a Murphy-appointed task force found it was awarding large tax incentives to politically connected companies and insiders.
The fund stemmed from a diversity summit last September, where Sullivan and minority entrepreneurs discussed how to bridge the wealth gap, as well as creating jobs for minorities.
“One of the things we heard is, ‘Is this just another conversations or are we actually going to do something?’” Sullivan recalled of the forum. “And we’re trying to do something here.”
Murphy, a former Goldman Sachs executive, has made diversity a top issue since taking office in 2017. The Democratic governor previously laid out goals to boost economic growth in underserved communities and grown the Angel Investors tax-credit program, boosting the tax break from 10 percent to 20 percent. An additional five percent is tacked on for businesses owned by women or minorities.
He touted four woman he recently appointed to the EDA in his State of the State address in January, saying they “mirror our state in its diversity and breadth of experiences, and they recognize that economic development isn’t one-size-fits-all, but that the unique needs of each business, and each community, must be given full consideration.”
EDA officials said it would be premature to estimate the size of the fund, but expect it could be in the millions. The agency wouldn’t be the only provider of capital — investors and philanthropic groups will also have the opportunity to join.
“If there’s a fund created, it could shine a light on an under-appreciated and underinvested marketplace,” Sullivan said. “We have a national marketplace and want to encourage the growth and development of those communities as well. I think people are going to be excited about this.”
The EDA is accepting RFI responses through April 23.