Pathways to Progress: How RUNWAY is driving capital to connect Black businesses and communities

June 28, 2023

Frontline Solutions is a Black founded and led consulting firm dedicated to advancing freedom and justice for Black, Indigenous, and other communities of color. Our commitment to this north star result informs and influences every aspect of the firm—from our culture to our approaches and methods to who we choose to partner with.

As we approach our second decade, we’ve been reflecting on factors that have contributed to some of our most successful projects—the ones our team were excited about and that helped clients to move the needle on their missions and goals. We’ve found that we make our best contributions when we’re charged with partnering deeply on iterative processes with clients who are ready to take bold action. That kind of work requires trust, risk-taking, radical imagination, and co-creation.

Over the next year, we’ll be highlighting some of those projects here on our blog. Up first: Our partnership with RUNWAY.

Who is RUNWAY?

RUNWAY is a social enterprise whose mission is to end the racial wealth gap for good by investing in Black entrepreneurs and strengthening the ecosystem and infrastructure that supports their businesses. RUNWAY provides holistic and repair-centered financing to their national portfolio of entrepreneurs while simultaneously shifting the practices of financial institutions and investors to create more equitable outcomes for Black communities across the United States.

What Problem is RUNWAY Seeking to Address?

The United States–led by plantation owners in the South and bankers and merchants in the North—built its wealth by stealing land from Indigenous nations and extracting free labor from enslaved Africans. Even after the Civil War, racialized labor extraction and exploitation persisted. Black communities have experienced the ongoing legacy of slavery and racism through blatant discrimination by financial institutions whose inequitable lending practices (think “redlining”) have prevented Black families from building wealth and limited Black entrepreneurs from attracting early critical investments.

On average, early-stage entrepreneurs need about $30,000 in capital to get their initiatives off the ground with friends and family investing $60 billion a year into these businesses. However, in 2019, the median white family in the US had $184,000 in wealth compared to just $38,000 and $23,000 for the median Hispanic and Black families. Capital from friends and family typically has more flexible lending terms and is not tied to a person’s credit score; rather, it is based on the level of trust people have in the preparation of the business owner. These relationships and informal networks also provide other non-financial resources such as business advising, referrals and support systems. For many Black entrepreneurs, particularly women, racial wealth inequality is the leading factor why their great ideas don’t leave the napkin.

RUNWAY believes giving every Black entrepreneur access to the “friends and family” round of investing will be transformational for Black communities. The key to this process is trust. Their goal is to get financial, political and community institutions to provide trust-based investments the way that friends and family do. By infusing trust into historically exploitative and extractive systems, RUNWAY facilitates pivotal early-stage investments along with wrap-around entrepreneurial ecosystem support like business coaching and advising.

Our Partnership

Over the last five years, RUNWAY has launched work in Oakland, Boston, and Chicago. This year, they embarked on a ten-year initiative to expand into the American South, which is home to the largest Black population in the country.

Although the South is rich in culture, community and civil rights leadership, due to the history of slavery and ongoing structural racism, the potential of its people has yet to be fulfilled. To support their Southern Expansion, RUNWAY is seeking integrated capital investments for the rollout across 5 cities beginning in the region of Lower Alabama.

We were inspired by RUNWAY’s vision and partnered with them on research and crafting a working paper laying out the scope of their expansion plan, including a needs assessment, programmatic activities, budgets, and approaches to measurement and evaluation.

Key Takeaways
1. Black business owners in the South face greater barriers and restrictions to loan and capital investment. Many of these barriers and restrictions stem from mainstream entrepreneurial support organizations who employ a deficit-based approach when engaging entrepreneurs of color and don’t indict financial institutions for racist lending practices. As a result, many interventions look to “fix” the entrepreneurs instead of the economic system and financial institutions.

2. The banks who do recognize the harm they have caused prefer to support communities via their charitable foundations rather than make their policies and practices more just. Whether harm is recognized or not, most infrastructure to support Black entrepreneurs in the South provides fewer resources and does little to address the legacy of slavery and ongoing structural racism. Philanthropic support for the region is also underperforming. The philanthropic funding rate is only $41 per person in the Alabama Black Belt and Mississippi Delta regions compared to the national average of $451 per person.

3. In many parts of the South, the built environment doesn’t reflect the existence and potential of viable businesses. There is a need for physical infrastructure and buildings to provide retail storefronts and pop-up commercial space. Inconsistent access to reliable internet, technological advances, and design also limit support to the built environment and restrict viable businesses from succeeding. As a result, Black entrepreneurs are prevented from expanding their operations in a timely manner. Given the dearth of infrastructure, financing and deeply entrenched systemic racism, achieving the vital goals of RUNWAY’s Southern Expansion will require sustained support and engaged local and national partnership.

4. There is an opportunity for national and local philanthropic organizations to engage in high-impact investments in the region by working with RUNWAY and other partners to understand local and regional contexts and build authentic relationships with a commitment to establishing community transformation over time and on community terms.

Learn more about RUNWAY’s vital work in the South and how you can get involved here.