These public investments are not enough. Particularly when it comes to equity investment. Thats what were going to talk about today. In particular, want to bring to light a set of investments from treasury through states, the state Small BusinessCredit Initiative. This is a unique opportunity with public funds to connect communities of color and other underserved communities with the highgrowth Equity Capital. How do we do it . We know that the pipelines are not there. We do that this market is not serving communities of color very well. You all know the statistics im sure the folks watching online show the statistics that black founders are getting 1. 2 of venture funding that latinx companies are getting 2. 1 and women founders 2 . Of that 2 , only 1. 8 of that went to women of color. Keep in mind, Venture Capital is just a small slice of the Equity Capital that is available yet we know that these early infusions particularly from low wealth communities that are already starting from behind, its challenging for them to jumpstart their businesses and moved to scale without this kind of investment. Here to solve it all today is this amazing panel. That im very happy to work with. I want to start with David Clooney ceo of the black Economic Alliance and if you could just help set the context for us. What do you see are the biggest very years facing entrepreneurs of color when they are facing how long do we have . Thank you for having me and for this unprecedented focus on Racial Equity with a laser focus on the that if it to the entire economy of getting it right and closing the gaps. To put it mildly, i think we have the right backdrop of the freedmens bank and thinking about the objective. But the legacy that that has had on the reality of our financial system. Previously, you had primarily white men making decisions about where capital was going. Then even after in the mid70s, the equal credit opportunity act, student Credit Scores supposed to do away, you cant make decisions based on race, all of factors that impact credit and worthiness of a company and its ability to grow are still impacted by the systemic or the legacy of racism that has left black and latinx communities with less wealth without homeownership, without collateral. Thats the easy traditional answer. Um, so, you know, those are the, thats the easy answer and traditional answer. But i think we also learned some of the mechanical challenges from the Paycheck Protection Program around, you know, not having traditional relationships with banks, not having the capacity of, you know, many employees or accountants and lawyers to fill out really complicated paperwork. So there are, um, kind of macro and micro reasons, but, but it is very clear that the system is broken. Um, and and if we are going to unlock the potential of communities of color, we really have to be very intentional about going to um really the mechanical as well as the institutional reasons that communities of color have not been invested in uh, and and are still not today. Right. Um so let me come to uh, carlos and to scott, we, we often hear this challenge. We have a set of entrepreneurs that are raising their hand, theyre ready for capital. They have a hard time connecting with that capital. We maybe dont always hear as much from the challenge that investors have, not just of finding the pipeline, but you face a different set of barriers when trying to match the the capital and the products that you have to the needs of the entrepreneur from the perspective of the chief Investment Officer and the head of the California Investment and economic bank. Tell us a little bit about, im sorry, infrastructure and economic. Thanks sorry about that. Um tell us a little bit from your perspective, the the challenges that you see investors face and then well get in a little bit into solutions. Well, thank you for having me here today. So lets lets start by taking stock on where we are today. Right. So as you mentioned of venture backed startups, 1 are black founders and 2 latino founders. And part of the reason for that is if you look at the Decision Makers in the Venture Capital firms themselves. Only 3 of Investment Partners in the venture industry are black, 2 are latino. A study came out two weeks ago written by my former professor, josh lerner as a co author uh, called racial diversity in private capital. And it took a deep dive into the Asset Management industry and found that 1. 4 of assets in america are controlled by diverse owned firms and Decision Makers. And so thats part of the problem. Right . And so they also found that the diverse owned firms and funds have a much harder time raising initial capital and that investors in their funds have much less tolerance for anything less than strong performance. And so theres a lot behind that. And and so why are we here where we are . And part of that is you look at historical vestiges and and there there are a lot of systemic and deliberate racist policies in the finance industry. But today its very different. Its much more subtle and subconscious with implicit biases, right . And really fixing the prior start lines. And so one of the things that that we think about is that we need to change behaviors. Its its no longer about just the systems, the laws we need to change behaviors because its these inherent behaviors that are causing this. And when you talk to investors in the venture industry, they often talk about trust in their Decision Making based on their network of relationships. These networks of relationships are quite close. Theyre confined to a handful of elite universities, country clubs, social clubs, dining clubs, boarding schools and their their insular as at the same time, you always hear about your capitalist. Talk about making their decisions based on, you know, pattern recognition. And those patterns are established by what might work in the past with people that they look to emulate in the future. Well, i its tough to follow the Vice President and also in uh the previous two remarks can borrow on some of the remarks i had prepared in terms of the statistics janice. Thank you very much to u. N. Secretary yellen for the invitation today. Its an honor for me to join you in this panel and to be with all of you remembering the aspirations of the freedmans bank and living seeing how we can live up to that aspiration today. So if we look at our history and very fitting with the event today, theres a we have a history of systemic biases that have created inequities that were trying to solve for today. And i do believe that during the span of our careers we have an opportunity to make meaningful change to those inequities that have been ingrained into our system as you mentioned. Got on the on that nine foundation, only 1 of all broadly defined investment investable assets are managed by diverse owned firms. So the diversity of the Decision Makers and the Decision Makers in Venture Capital with 3 . As you said, that leads to a certain level of decisions. We talked about the low level of funding to Venture Capital funders. One thing to remember as well is that for every dollar of savings, median savings for a white household, um theres only about 10 cents of saving for a black or hispanic household, which means that early friends and family investment round for a real estate project or a company doesnt happen. So how do we start providing some supplementary capital . That early ideation stage for early businesses is one of the challenges were trying to solve for. Um another thing is if you look at vendor spend only if fortune 500 companies and only 5 of their spend goes to diverse vendors. And if you translate that to human interaction, an example that i have for you were meeting in 2019 with a one of the top tier Venture Capital firms and the example they gave us as they said, we look at our investment funnel. Right . So at the top of the funnel is how many ideas are coming in and then the Decision Making process and theyre coming to us and this was based on gender because they had no experience around investments with founders that were diverse by race and ethnicity and they said, well, weve invested in two female founded companies, but weve looked at our Decision Making and its not biased. The problem are women, theyre just not creating companies. And that was 2,019. That conversation has changed from where we were in 2019, thankfully. And i see that level of progression also externally. And part of what were doing is weve done 31 million in grants to support the ecosystem for nonprofits and Small Businesses and as well as investing with diverse managers that have the local expertise to start providing the capital that we can now also act as a bridge. Theres that last Mile Delivery challenge, right . How can we all be bridge makers between the Decision Makers that are still perhaps functioning under an old system to the new entrepreneurs that are diverse by nature and are looking for that funding. So one of the reasons why im so excited by about the state Small BusinessCredit Initiative is uh, its one of our few programs that really allows us to invest Equity Capital uh, into the entrepreneurial ecosystem. Uh, and theres, theres this huge opportunity, i think in doing so to really reshape the way that capital is flowing to entrepreneurs of color. Like how can we seize this moment where we have public funds going out for equity to kind of remake the way that equity flows to entrepreneurs of color and to other um, disadvantaged communities. So scott id like to come back to you, tell us a little bit more about what youre doing now and how working with sbc i dollars are going to allow you to um to change your approach or add something new. Sbc i is a fantastic opportunity for the state of california to usher in new approaches to Decision Making to allocation of capital. It enables, we can sit around and wait for the markets to self correct in an appropriate time frame. Thats become quite obvious. And so we have to be explicit and deliberative. We have to use our funds to break open those closed networks to broader representation of californias. We need to use our funds to really think about creating new patterns for success. I mean, the Venture Capital industry, right . That thats the tip of the scale for innovation in the financial world. And theyre largely headquartered in the bay area, one of the most progressive areas in the nation. And and they havent been able to figure this out. So we have to help, we have to step in. Weve been able to use rss bc i funds to launch a state Venture Capital program entirely focused on including more underrepresented uh venture investors, to support more underrepresented founders and Small Business owners and to serve more of the underserved regions of california. And so, but we also have to start by looking inward. Right . Because at my bank, a majority of our staff is female or minority and majority of our executive team is female or minority. We work in our Loan GuaranteeProgram Throughout the state with seven nonprofit financial develop development corporations. Their staff is comprised of 73 minorities and s. S. P. C. I. Has a very strong requirement for something called cd right, socially and economically disadvantaged, individually owned businesses. And so for the state of california, youve set a target of 49 of our funds have to be used to support cityowned businesses. Thats an incredibly ambitious target. But ill tell you right now that if at the end of the day we dont exceed 75 , i will be extremely disappointed. Im happy to hear about this target. That is really exciting. And we know other states are, are similarly stretching beyond what theyve done before. Um but they need some help there creating products, theyre connecting with pipelines of of diverse entrepreneurs and carlos. Id love for you to talk a little bit about the announcement that was made this morning partnership between you and the Jpmorgan Chase foundation of Kellogg Foundation and the Jpmorgan Chase foundation to create the fund for inclusive entrepreneurship. Can you tell us a little bit about that and how its going to work with s. S. B. C. I. And and programs like what were hearing in california. Absolutely. So were thrilled to be part of this initiative. We do think its a historic once in a Generation Opportunity to drive change and impact to the communities that we serve. We think that the fund will have the opportunity to leverage over 10 billion of federal funding into community. And we have decades of work trying to integrate disadvantaged communities into the economic system. So the us economy works for all. Um and in this moment we believe that it is an investment team. Weve traveled, i used to travel 200,000 miles a year eight times around the globe looking for opportunities with several people on my team doing the same. This is the moment to unleash that type of potential inside our own domestic markets. We have that opportunity at the moment and think that private resources will absolutely follow federal dollars here because the opportunity is enormous. So, david, i want to come back to you because hopefully what were doing here is setting this setting the table with uh really excellent opportunities to to redesign the flow of capital, prime it up for entrepreneurs of color. But we need to make sure that weve got the pipelines and the entrepreneurs both are ready and know how to connect to that capital. Can you talk to us a little bit about what b. A. Is doing in this regard. Absolutely. So let me first um break a bit of a myth which is that there just is no pipeline and and we hear this so frequently that there just arent enough investible, ready to scale businesses from communities of color that we can invest in. We have all this capital ready if only they were there. And and we heard from from carlos, we just cant find enough women, right . We know that we know that this is not the case, we hear the same and and the the sprinkling of fact there most of that is fiction is that um it is true that you know, businesses of color, particularly black businesses for example, over 95 of black businesses are Sole Proprietorships um and they have trouble scaling because of a lack of access to capital and because of a lack of access to friends and family money because of, you know, lack of generational wealth. And because we are as the Vice President talked about dinner for loans at a significantly disproportionately higher rate, but with all that aside, there are absolutely businesses that are ready to invest in in in scale and you know, this is something we heard at the black Economic Alliance during the pandemic days after george floyd, not, you know, not coincidentally where folks would reach out to us from the alternative investment community, say we want to invest in more black entrepreneurs, we just cant find them, please help us and we cant create them out of thin air. We say there there you need better proximity, you need to get out of the bay area and get off of the west coast. But um also, you know, you absolutely can create them out of thin air, you create companies out of thin air all the time. You invest in them, you incubate them, you give them the resources they need to grow. So you know, some examples of programs that we have stood up that that are, you know, examples of things that particularly private sector can be doing are the center for black entrepreneurship that black Economic Alliance started in partnership with spelman and Morehouse College is, and weve recently brought in Clark Atlanta university to go to, you know, a target rich environment of h. B c. U. S, particularly in atlanta, the second largest collection of black folks in america, one of the, you know, hubs of black business in america and invest create, you know, an ecosystem of exposure opportunity and ultimately investment in black entrepreneurs in a way that is meant to create a Multiplier Effect of investment in other black communities and in black invest in black businesses and then the b. E. A Entrepreneurs Fund as well as a 50 million Venture Capital fund. We stood up um to not only provide the, the seed and start up capital that businesses need, but particularly the support they need to grow and thats both capital, but also the post investment support mentorship and entrepreneurship kind of examples that they need and i give an example of, you know, one of our board members, richelieu dennis, the founder of shea moisture and the deal that he brokered with unilever to acquire shea moisture. Part of it was creating the new voices fund, 100 million fund to invest in black, particularly black Women Entrepreneurs and through that fund just in the last two years it created over 30 black millionaires and you think about, you know, the Multiplier Effect of those entrepreneurs that investing in other black businesses than mentoring other black businesses and reinvesting in their community. That is what were trying to unlock and theres absolutely so much potential there. If we, you know, help Companies Get out of their own way and, and investors get out of their own way and invest in black and brown companies. So can you, im gonna have you pick up this a little bit more. Uh, uh, not only do we have um, two really important colleagues on stage, but we have a room full of folks that are investors or, have the resources to help us think about the driving Investment Capital to black and brown owned businesses. What do you need from investors and one of the things that im thing think about that. Id love to hear you comment on is the experience with these funds. One of the things that i often hear about is like we, we tend to default to venture venture is a very specific kind of equity when really, what our Community Needs are different kinds of equity can be market rate, its sort of like the assumption that if youre not venture than your talking about concessionary, were not talking about concessionary, but theres a wide range of, of ways to invest in businesses that are really going to set them up for success. Can you just say a little bit more about that experience and maybe what you need from investors . Absolutely. So let me be very clear, the, the first and foremost thing we need is capital and our fund was launched with an anchor investment of 20 million from wells fargo, that was transformational and really sparked other investment from others. So that is the starting place, but you also need, i talked about post investment support that is creating um that is creating an ecosystem of support and exposure, but also um Technical Assistance to investors so that theyre getting the resources they need, that, that theyre not reinventing the wheel. Um, so a lot of the, you know, what is needed for, particularly first time, entrepreneurs and founders is examples of how people have done this before is access to, you know, john rogers talked about this at, at our breakfast this morning, which was you know, even better than capital is access to customers and access to a sustainable flow of income that will, you know, help the Business Scale grow and be sustainable over time. So it is it is that entire ecosystem of of support and opportunity and capital, not only the initial investment, but also the kind of post investment, um Technical Assistance uh introducing folks to your network and then creating sustainable opportunities for business growth. So scott and carlos, i wanna come back to you in the, in the few moments that we have left and reflecting on some of what youve heard from david, the kind of innovation that you expect to see amongst investors based on the work that youre doing and maybe answers some of what david is calling for in the market. Well, there there needs to be innovation all around. We need to better apply technology to originate and reach the customer to provide, you know, language support and Technical Assistance. We need to better use secure ization to draw more capital into the marketplace for these products. And we need to leverage potentially Artificial Intelligence to help reduce the biases in underwriting and investment decisions. And so we need to do this all together. Its not just the industry that the Financial Markets are actually quite dynamic and ever evolving. They react very quickly to everyday information and, and new insights and and so we need to evolve with them. You know, we cant as a public entity. Just think we could take a couple of years to draft up very rigid rules and then sit on them for the next 10 years and for to be applicable to marketplace. We need to be adaptable. We need to evolve with whats happening on the ground. And unfortunately, ssb ci enables that for us. And so let me give you a quick example, you know, in march of 2020 when covid lockdowns started, no furiously, we sat down and within days on april 2nd we launched a covid micro Loan GuaranteeProgram Targeting the smallest of Small Businesses. Those that have an average of under five employees for loans under 50,000 on average. And weve served several 1000 of those entities in the height of that pandemic because we were able to draw in private sector investors who were willing to go outside their comfort zone. We had to go outside our comfort zone and do something new and innovative. They had to as well. And they met us and provided those thousands of loans and and we reached 86 female owned minority owned and businesses and loaded moderate income tracks. And so that led to a couple months later we realized what those c. D. F. I. S didnt have enough access to capital. And so i work closely with my california colleagues at the time who are now secretary yellen, uh deputy secretary, assistant secretary boris, uh administrator guzman and also laura tyson, we all sat down and strategize about how we could coalesce a Public Private partnership to bring all the entities we need involved to address and tackle the scale of that problem. And that became something called the california rebuilding fund. And so it brought in corporations and banks, it brought in philanthropists and Public Sector entities and municipalities to draw in more capital. And so those are the type of innovations that you have to be prepared to move on and act quickly. So i see an opportunity here on Capacity Building. Treasury issue announced that theyre committing 300 million to do Capacity Building to make the most of s. S. B. C. I. And and also that opportunity to provide Equity Capital, i think is is huge. That will thats the scarcest of capital. It should have enormous returns, both socially and economically. Three quick examples of where we see innovation and the general things will be around partnerships between public, nonprofit and corporate. So that gives you a lot more dollars around a single idea. And then different structures of capital like scott said around securitization. So jpmorgan started a new share class on their money market called empower. So you you youre facing Jpmorgan Chase, they have the capacity to sort very large amounts of capital. So were sitting usually in 100 and 50 million of cash. Now, if we were to give that to jpmorgan that actually gets dispersed to select in the eyes that we pre select through the program. It doesnt create the Regulatory Burden of deposits, but it does provide operating budget to m. D. I. S. We think thats very helpful to those organizations. The second one and were very focused on the transmission mechanism. I mean theres a deluge of dollars coming in the transmission mechanisms that we have in our system today. The plumbing, if i would be so crwasnt designed for this amount of money so therell be some pain points in there that i think private sector could be really helpful and non profits as well. Second project, theres a group called navajo power. Its a they do utility scale Solar Projects. So we ended up working in new mexico in the project with them. It involved grand Capital Program related investments as well as commercial investments through securitization that funded a Solar Project that that had a commercial partner with a local utility. So you have nonprofit dollars and then you have tribal communities working to together to have a very large scale project with a commercial player providing cash as well as providing expertise. And part of those proceeds will go back to help local tribal communities. And finally were investors in the fund called sore, which is the southern opportunity and resilience fund. And thats doing a lot of work back in c. D. F. I. S. To amplify their ability to lend, right . So they have the capacity and the proximity. Were just helping amplify that capital through a structure thats regulatory friendly for c. D. F. I. S. You mentioned the technicalistance and i want to quickly give our colleagues at the department of commerce a shout out because they are leading a 100 million of the commitment to Technical Assistance and theyre going to be great great partners i think on this equity piece in particular. So were at time im gonna ask us to wrap with 15 seconds each one thing that you can ask this crowd for. How how can they help you or what can you mentioned the Technical Assistance i want to give our colleagues at the department of commerce a shout out because they are leading 100 million of the commitment to the Technical Assistance and they will be great partners i think on this equity piece in particular. So, we are at time it. I will ask us to wrap with 15 seconds each. One thing you can ask the crowd four. How can they help you what the what can they be doing in their work to advance supporting entrepreneurs of color and getting access to capital . I will go first and say it again get outside of your comfort zone and talk to people youve not worked with for work with organizations youve not worked with four. With before. You need to go to new places to drive better results. I would say come join us there is the room for all of us because we need to Work Together area we are well designed and it requires a high level of leverage. I will point to as pci 1. 00 since 2013 its supported 1. 8 billion of loans. We led the nation in the number of jobs created on the sbc i 1. 0. We have financings to diverse own is this is. This time around with 2. 0 with 1. 2 million we have plans to put out 18 million of iva capital we need your partnership to do that. Your Technical Assistance, marketing, and resolve. Thank you. I will quote the poet pit bull. [applause] in one of his songs he says lets take this moment and turn it into a movement we have a onceinalifetime moment to impact history. It is an impact innovation give us a call want to partner and theres a lot of topics where we can make a difference together. Thats an excellent call to action the next thing this crowd will do together is divided into a series of Small Group Conversations where we can take many of the things we heard about today and break them down. And figure out how we translate them into action steps and how we commit to each other and partners not in the room how will we do all the work forward . I want to thank my esteemed analyst i want to thank all of you that have joined us in the room. Stay flexible with us throughout this schedule we have more to come thank you so much. [applause] [indiscernible] there are a lot of places to get political information but only at the span do you get its at cspan do you get it straight from the source. No matter where you are from or where you stand on the issues