After the murder of Minneapolis man George Floyd while in police custody and the unrest that followed, Sandra M. Moore, the chief impact officer and managing director at investment adviser Advantage Capital, had an idea. Moore is the first and only woman partner as well as first and only Black partner at Advantage Capital. Across the country, businesses were making statements about the killing. Advantage Capital didn’t say anything. That didn’t bother Moore. But one Sunday morning, she sat down and wrote an email to her partners. She asked that the company not make any pronouncements. “The next thing I wanted to do is more of what we know how to do that will make a difference,” she remembers. “And that is to drive capital with intentionality into minority businesses that can grow in these communities where George Floyd was operating, that can hire workers from these communities, and thereby close the wealth gap.”
Courtesy of Advantage Capital
Sandra M. Moore of Advantage Capital
Data from the 2019 Survey of Consumer Finances shows that the average white family has eight times the wealth of the typical Black family, and that gap has a ripple effect—Black entrepreneurs have less capital and collateral, which makes it difficult to attract outside funding.
Within a week, each partner at Advantage Capital had cosigned Moore’s idea and launched the Empower the Change Fund, a new private growth fund in partnership with the National Minority Supplier Diversity Council Business Consortium Fund. The goal is to help close the wealth gap by investing in entrepreneurs of color. It expects to start deploying capital to 40–50 business owners soon.
This is not a new concept for Advantage Capital. Locally, it was an early investor in City Foundry STL, Stereotaxis, and Triad. But Moore says that over the past 30 years, it has pushed capital—more than $3 billion—into places where it’s been historically absent, with a focus on driving the creation of jobs with good wages and benefits. Ten percent of its investments have been with entrepreneurs of color. The data shows that for every dollar Advantage Capital invested in those businesses, the businesses were then able to attract $4 more in funding. This data point is important, Moore says, because it’s the pathway to sustainable change.
Advantage Capital has already received inquiries from businesses about the fund. But by working with the National Minority Supplier Diversity Council Business Consortium Fund, Advantage will have access to minority businesses across the country that have the opportunity to grow. Many can’t because they don’t have the access to the right capital. Moore says that one challenge is that banks are typically wary of lending money to a business that has an over-concentration in one or two customers—if a business loses one, they might not be able to pay on their loan. Empower the Change, Moore says, will take into account that this over-concentration is often a mark of a business’ great performance and a sign that a business lacks the capital to invest in resources that allow it to take on new customers.
Moore gives an example: Advantage Capital invested early in a minority-owned business called Best Harvest Bakeries, in Kansas City. “We invested in them because they couldn't get bank debt because banks said, ‘You’ve only got one customer,’” Moore says.
But that customer was McDonald’s.
“We had a small minority bakery that could satisfy the quality, volume, and demands of a McDonald’s," Moore says. "We see that as a real opportunity, not as a challenge. So we take a risk and invest. They have grown and grown and grown. They don’t need us anymore. They paid us off a long time ago.” This is an example, Moore says, of how some minority businesses might need capital structured differently.
For businesses and entrepreneurs who can’t access this type of financing, there’s the risk of going out of business, which Moore says can become cyclical: “Bankers or investors will say, ‘We don't want to invest in those businesses, because they fail at a higher rate.’” Empower the Change seeks to interrupt this cycle.
“When we finally looked in the mirror in America during the period of civil unrest and afterward, we said, ‘Wait a minute,’” Moore says. “There are some economic inequity issues that we need to attack more aggressively.”
