Melissa Bradley is the managing director of Project 500, a public-private partnership program to help diverse businesses scale their companies. Bradley is also an adjunct professor at Georgetown University’s McDonough School of Business. This is the first installment of a new, monthly column.
As entrepreneurship declines across the country, there has been an intense focus in the D.C. area to spur innovation and business growth. From local universities to national philanthropy, D.C. is full of enterprising individuals who are seeking to create individual and community wealth, and most importantly jobs.
While there are many theories on how to help an entrepreneur, Professor Michael Verchot of the Foster School of Business has identified the 3Ms — money, management and markets. As minority communities, especially African American women, are the fastest growing segment of entrepreneurs across the United States, his work is quite relevant for D.C.
Last summer, his research was deployed in six cities, including the nation’s capital, with Project 500 serving as the lead local agency. Project 500 is an initiative designed to accelerate new minority entrepreneurs from high potential to high growth. Started in 2016, our focus is to scale historically marginalized businesses in the region to increase job creation, small business investment and asset development for low-income communities.
The goal of the 3Ms is to move minority entrepreneurs from operating in isolation to partnering with others, which can lead to a sustainable, high-impact system to meet the needs of inner cities. Since last summer, Project 500 has been leading this methodology in D.C. in partnership with Georgetown University and many others. To date, we have launched our first cohort of 10 high-growth entrepreneurs and in fewer than threw months, we have increased sales over $1.5 million, improved entrepreneur confidence and social capital, as well as provided a pathway to capital in the near future.
Professor Verchot has developed the 3Ms by first identifying the problem, then sharing his research findings as well as offering solutions that are being tried in each local market. Here’s how the 3Ms recipe intends to help jumpstart inner city businesses in D.C.:
With respect to management, he notes that on average minority owners have fewer years of industry experience than their non-minority peers. Research shows that owner education, management experience and industry expertise are positively related to firms’ performance. In order to fill the expertise gap amongst minority entrepreneurs, Verchot sees tremendous potential in leveraging business schools to improve local entrepreneurs’ management expertise.
For instance, Project 500, in partnership with the Georgetown University McDonough School of Business, offers an intensive nine-week training program for high growth entrepreneurs designed to provide skill-building in the areas of marketing and sales, finances and financing, talent capital and culture, as well as operations and systems development.
With respect to money, Verchot notes that regardless of education and experience, minority entrepreneurs start businesses with far less capital than their non-minority peers. Yet, research shows that the higher the amount of startup capital, the better the firm performance.
This problem is exacerbated by Kauffman Foundation researchers who have found higher loan denial rates for African American and Hispanic entrepreneurs compared to white owned businesses. It is recommended that entrepreneurs identify alternative sources of funding — whether from loan funds, online campaigns or the like — to secure much needed startup capital.
With this, Project 500 has identified local and national partners — from the Latino Economic Development Center to utilizing the Republic crowdfunding platform — to fill the capital gap that too many local entrepreneurs face on a daily basis.
Finally, with respect to market access, it is believed that minority entrepreneurs have lower access to corporate and government clients, often due to firm size and social capital. In the nation’s capital, this challenge is ironically exacerbated despite the presence of both the federal and local government due to onerous contracting processes and expensive licensing procedures.
Solutions include identifying high-growth clusters and creating training and support for increased contracting opportunities and supplier diversity programs. Project 500 is honored to be a partner in the D.C. Anchor Partnership program, which is designed to increase supplier diversity opportunities amongst local hospital and university partners.
I look forward to sharing specific examples of how the 3Ms work in practice in this regular, monthly column. From successful entrepreneurs with solid management skills, to investors interested in supporting inner city businesses, D.C. has a plethora of indicators that signal significant business and job growth in the city over the next few years.