THE LACK OF ACCESS TO CAPITAL IN OUR COMMUNITIES

(THE PROBLEM)

Throughout America, minority communities are being undermined by a problem that may, in some ways, be as pernicious as underfunded schools, inadequate housing, and a scarcity of public amenities like parks and libraries. It is a problem, moreover, that goes largely unnoticed and that is not fully understood, save for a few who are steeped in the issue or grapple with it daily. The problem — inadequate capital access for minority-owned businesses — is depriving minority communities of their own source of wealth and jobs.

Capital is the heart of businesses. Businesses, in turn, are the economic pillars of our communities, providing secure jobs and the opportunity to generate the kind of wealth that can be passed down through generations. Forty percent of the net new jobs created in the past two decades were the result of hiring by new businesses. For communities that suffer from high rates of unemployment and joblessness, minority-owned firms are economic life preservers, bringing a strong tax base and economic opportunity into these underserved communities.

A lack of capital access has ramifications beyond minority communities. Consider this: if the minority business community had reached economic parity in 2002, the Minority Business Development Agency (MBDA) estimates that "the minority business community would have employed more than 16 million workers, generated more than $2.5 trillion in gross receipts, and expanded the tax base by more than $100 billion."

Lack of capital is one of the primary reasons that small businesses flounder. For new businesses, working capital bridges the gap to keep operations running smoothly and the bills paid on time. For established businesses, capital is a lifeline for expansion, allowing businesses to hire new employees, open new stores, and upgrade technology and equipment.

Access to capital is even more critical in the technology sector. Here, the impact of early-stage financing on success is tremendous. Receiving a loan increases survival probability by 51 percent, according to researchers. Yet minority owned firms continue to be less likely than non-minority owned businesses to receive the funding they need.

When minority-owned firms do receive loans, the dollar value is often less, while the interest rates tend to be higher, according to research from the Minority Business Development Agency. The average loan amount for minority-owned businesses with gross receipts over $500,000 is $149,000, compared with $310,000 for their non-minority owned counterparts.

The United States has a long, enviable entrepreneurial culture. If we are to continue as a world leader in innovation, we must foster broad participation in economic growth. This starts with removing barriers to capital expansion and empowering more entrepreneurs with the skills and resources they need to succeed. We must develop strategies and policy recommendations for achieving economic parity. And we must strengthen partnerships across the government, business and financial services sectors.

Now is the time to advance America's promise of opportunity, prosperity, and growth for all.

We believe that while pattern recognition has enabled investors to mitigate risk, it has also limited their profit potential

Jason M. Fields is the Managing Director at Dark Night Capital Ventures, LLC a organization dedicated to advancing the global black community by developing VC Funding opportunities.

Our venture fund/company has a unique value proposition and it will be beneficial to you. By investing in underrepresented communities, minorities, women, veterans, etc. can generate positive returns on your investments, and it is also a good idea both economically and socially.

HOW PATTERN RECOGNITION HURTS AMERICA

(LACK OF DIVERSITY OF ENTREPRENEURS)

Why diversification is a big challenge for business owners

Business owners' greatest strengths are often their greatest weaknesses as well. The determination, willingness to take risks and relentless pursuit of a goal may be desirable characteristics for building a business, but not necessarily suited to sound investment planning.

Inevitably, business owners must take risks when they launch their companies. They may have sacrificed a secure income and taken on responsibility for both their own investment in the company and the wealth of others who have entrusted them with money as loans or investment. They are facing tough odds - while estimates vary, around 80% of new businesses fail within 18 months - and they usually have to surmount significant obstacles.

The qualities required make for great entrepreneurs, but may not be ideal for taking a balanced view of wealth planning. First is the focus on a single goal. Business owners tend to hold their wealth in just one or two assets - usually their business and their home(s). From one perspective, this makes sense. Why devote your life to your business if you're not willing to 'eat your own lunch'? Business owners often believe they can achieve a far better return on investment than any wealth manager.

Business owners may also be over-confident - after all, entrepreneurs defy the odds to build a business. This can lead them to underestimate risk and fail to see the value in diversification, whether in their business or in their portfolio of investments and assets.

These are valuable instincts without which entrepreneurs would be less successful in their primary activity, but it can be worth taking other steps to protect both the business and the owner's personal wealth. Part of this is just down to common sense. Businesses are always at the mercy of market conditions. Sectors can be cyclical, and even the strongest business may find itself subject to forces beyond its control, from central bank interest rate policy to disruptive technological innovation.

There are also liquidity considerations. A company owner that needs money at short notice cannot always sell a portion of the business rapidly. Bringing in new sources of funding takes time. It makes sense to have alternative options available through personal wealth planning to ensure that the business isn't liable to be compromised by personal financial considerations.

Lifestyle will also play a role. Company owners who have worked extremely long hours over several decades to build a sustainable business may feel that they want to start enjoying some of the wealth they have created. This will prompt a shift in focus from wealth creation to wealth preservation, which may necessitate a change in financial planning strategy.

Diversifying a business

A key aspect of protecting entrepreneurial wealth is found in good business practice. While many entrepreneurs may be seduced, to some extent, by the prospect of a multi-million-euro sale of their start-up to a big group with deep pockets, in reality this type of speedy realisation of the business's value is rare, and usually requires a remarkable proprietary technological innovation, or ideal timing. Even with a thriving business, exiting is unlikely to be this easy. To survive, businesses have to be built to last, rather than for short-term gains.

Building for the long term rather than that elusive rapid flip calls for diversity of clients, of revenues and of funding,...