Living Cities, in partnership with the Ewing Marion Kauffman Foundation, launched its $100 million Catalyst Fund III, an investment vehicle to confront and address underinvestment in BIPOC (Black, Indigenous, People of Color) communities.
The Kauffman Foundation committed to a $10 million anchor investment in the fund, which was announced at the annual Milken Institute Global Conference during a panel discussion on capital access. This investment follows Kauffman’s $1.67 million seed grant to Living Cities to better understand the root cause of the country’s racial disparities in income and wealth.
The fund will leverage a “Fund of Funds” approach to support the ecosystem for high-growth entrepreneurs and business owners of color, recognizing that business ownership is a proven pathway to closing the racial wealth gap.
“Entrepreneurship is fundamentally different for those who have access to capital,” said Philip Gaskin, Vice President, Entrepreneurship, at the Kauffman Foundation. “To increase capital access for Black and brown entrepreneurs, we need to ensure that capital decision-makers are knowledgeable about the history and root causes of the country’s racial wealth gaps. We must explore new ways of investing in fund managers of color.”
The fund seeks to increase investment in BIPOC communities by:
- providing emerging fund managers of color access to seed capital and technical support;
- reducing the time it typically takes for fund managers of color to raise initial capital; and
- enabling the emerging fund managers of color to establish a track record, gain credibility, and be positioned for future rounds of funding.
The Kauffman Foundation’s capital access research reports that 83 percent of entrepreneurs do not access bank loans or venture capital at the time of startup, which disproportionately impacts entrepreneurs from underrepresented communities. Living Cities’ research shows that U.S. entrepreneurs in underrepresented populations face greater challenges with building wealth.
Research also suggests that although total gross receipts at firms owned by people of color are growing faster than white-owned firms, at least 77 percent of venture capital is invested in college-educated white men while just 1 percent of venture-backed founders are Black. These stark racial disparities are deepened by the relatively low percentage of people of color in capital allocation decision making positions.
“The Catalyst Fund III draws on Living Cities’ more than 13 years of impact investing activity in financial intermediaries in both debt and equity capacities,” says Demetric Duckett, Managing Director at Living Cities. “Our approach applies proven strategies working with capital managers focused on BIPOC needs, and we have the investing know-how and operational support to effectively deploy capital to generate strong returns for investors while achieving substantial impact with BIPOC communities.”