As we seek to move our Latinx- and Black-owned businesses past survival mode and seek to build a more equitable economy in the face of an unprecedented pandemic and ongoing systemic racism, a variety of supports are needed.
The challenges are daunting. In fact, it was these challenges that persuaded HIP to embark on developing a new strategy that centered racial and economic equity for Latinx businesses and founders. Beyond grant capital support, HIP saw an opportunity to catalyze philanthropic capital into an impact investing strategy.
Impact investing is a form of using capital to ensure environmental or social impact for communities and individuals, alongside financial returns. Through impact investing, groups such as local community development financial institutions (CDFIs) and national foundations, as well as socially motivated individuals, can direct their investments to place impact and equity at the forefront of returns. This type of investment brings the possibility of economic equity and can serve as an important source of support for often-overlooked small businesses and startups led by people of color.
For me, the PowerUp Fund at Hispanics in Philanthropy (HIP) has increased my knowledge of how investment vehicles can serve as tools that can begin to create a more equitable economy. This work has also magnified the many burdens that traditional banks and investors so often place on businesses owned by people of color.
As noted above, these are still very early days for the PowerUp fund, but here are a few preliminary takeaways from developing an impact-first investment fund aimed at building Latinx wealth so far.
- Trust and amplify leaders of color: Community-based solutions led by members of local communities are effective and create a deeper impact.
- Philanthropy can be leveraged: Data shows that Latinx entrepreneurs of color have been invested in at unequal rates. Philanthropic capital can support underestimated entrepreneurs and small businesses that traditional and institutional capital providers have overlooked.
- Multistakeholder collaboration is key to deepening impact: Equity for entrepreneurs of color requires more than financial support.
- Investing at an early stage requires conviction and flexibility: Investors and traditional banks need to look beyond credit scores, educational pedigree, market size, revenue, and traction to support underestimated founders.
- Stay curious: Reach out to your local impact investing ecosystem and learn about how other international networks like Global Impact Investing Network (GIIN) approach the field.
Read the full article about impact investing in Latinx businesses by Erick Guajardo at Nonprofit Quarterly.
Philanthropy is a complex topic, and others found these selections from the Impact Giving archive from Giving Compass to be good resources.
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