On this episode, we talk to two trailblazers from GroundBreak Coalition (GBC), a group of over 40 corporate, civic and philanthropy leaders who are trying to make a case that within our resources, a racially equitable and climate-ready future is possible. GBC is building a platform to mobilize and aggregate capital, and provide pathways for corporations, financial institutions, government, philanthropy, and even individuals to equitably and efficiently invest in Minneapolis-St. Paul, Minnesota. What's interesting about this coalition is not just what they're trying to do, but also how they're doing it. Tonya Allen is President of the McKnight Foundation, and the Founder and orchestrator of GBC. Alex West Steinman is CEO and Co-founder of The Coven, a network of radical spaces for changemakers to connect, learn, and grow. She is a member of GBC's working group on BIPOC entrepreneurship. GBC deploys its capital in four areas: BIPOC homeownership; stable & affordable rental housing; community-led commercial development; and BIPOC entrepreneurship. Their goals are ambitious and wide ranging to launch 11,000 BIPOC owned businesses,, enabling 45,000 new BIPOC homeowners and so on. While they're starting out in Minnesota, they hope to inspire action across the country. In this two part conversation, Tanya and Alex talk about: - the formation of the GroundBreak Coalition, and what it takes to bring together this vast network of stakeholders - GBC's vision for creating racial and economic justice, and what it means to create wealth for BIPOC communities - the role of philanthropy and other forms of blended finance capital in driving systemic change - how the goals of the Coalition have evolved over the past year Learn more about the Reimagining the Economy project: http://reimagining-the-economy.hks.harvard.edu
On this episode, we talk to two trailblazers from GroundBreak Coalition (GBC), a group of over 40 corporate, civic and philanthropy leaders who are trying to make a case that within our resources, a racially equitable and climate-ready future is possible. GBC is building a platform to mobilize and aggregate capital, and provide pathways for corporations, financial institutions, government, philanthropy, and even individuals to equitably and efficiently invest in Minneapolis-St. Paul, Minnesota. What's interesting about this coalition is not just what they're trying to do, but also how they're doing it.
Tonya Allen is President of the McKnight Foundation, and the Founder and orchestrator of GBC. Alex West Steinman is CEO and Co-founder of The Coven, a network of radical spaces for changemakers to connect, learn, and grow. She is a member of GBC's working group on BIPOC entrepreneurship.
GBC deploys its capital in four areas: BIPOC homeownership; stable & affordable rental housing; community-led commercial development; and BIPOC entrepreneurship. Their goals are ambitious and wide ranging to launch 11,000 BIPOC owned businesses,, enabling 45,000 new BIPOC homeowners and so on. While they're starting out in Minnesota, they hope to inspire action across the country.
In this two part conversation, Tanya and Alex talk about:
- the formation of the GroundBreak Coalition, and what it takes to bring together this vast network of stakeholders
- GBC's vision for creating racial and economic justice, and what it means to create wealth for BIPOC communities
- the role of philanthropy and other forms of blended finance capital in driving systemic change
- how the goals of the Coalition have evolved over the past year
Learn more about the Reimagining the Economy project: http://reimagining-the-economy.hks.harvard.edu
Policy Works | Episode #008: Tonya Allen & Alex West Steinman – The GroundBreak Coalition
Episode Transcript
Part 1: Tonya Allen (President, McKnight Foundation; Founder of GroundBreak Coalition)
Rohan: Tonya, welcome to the podcast.
Tonya: Thank you for having me, Rohan. Really appreciate it.
Rohan: So Tonya, the history of the Ground Break Coalition is rooted in the murder of George Floyd as a very critical turning point. So let's start with that summer of 2020. What were the conversations that occurred within the McKnight Foundation and your larger network, and how did the idea of the Ground Break Coalition take shape?
Tonya: Yeah, so I didn't get to the McKnight Foundation until 2021. So it was post George Floyd's murder and post the uprisings that we saw all across the city. When I arrived, one of the first things I started to do was to ask, what is our role? How do we need to show up as an institution in these communities, in these particular neighborhoods across the twin cities?
And so as I ask that question, I often say like, there was a person who said to me, you know, we're going to repair, we're going to rebuild, and we need to reimagine. And they said, you know, we're working on the repair and the rebuild, but what we haven't done is the reimagine work. And so I said, if you could do that, that would be amazing.
So our team went to talk with community members and spent and invested time in rethinking what would it look like. What would these cultural corridors where we had lots of businesses, that were owned by really diverse people, but who didn't own those buildings, who may not have had insurance.
And that they just were really devastated. And then it also devastated the kind of economic nexus of many of the cultural neighborhoods. And so, as we asked them to spend time to rethink that, they did just that. And they had visions of ownership, visions of thriving districts that really drove culture and community.
And as they spent that time talking about it, Rohan, the first thing they said was like, this is what kind of capital we need to have access to. And when they brought that number back to me, I thought to myself, this is a setup.
And this is what I mean by that. We were setting communities up. They always ask us for access to capital. And so instead of trying to look at this long request of extraordinary capital that they needed, we'd say, we only can do this part because we only have enough grant money to do this. Why don't we delve into this question about how do we actually unlock capital and not turn it off? So don't unlock it and put it off to the side into a fund that will eventually get expended. Then you have to re-raise. But it was not a system, it was like a project.
So we started to delve into this question and that was really the impetus of GroundBreak, trying to figure out how do we not set the community up by asking them what they need, and never delivering it.
Rohan: So I want to get into the mechanics of bringing together these range of stakeholders. But before I do that, something you point out is a very fundamental shift in the role of philanthropy as a catalyst. You've had a long career in philanthropy. How have these last two or three years with the GroundBreak Coalition changed your thinking about the role of philanthropy in addressing systemic inequities?
Perhaps to make this more concrete, what were the types of interventions that were directed at racial equity, both at McKnight, but also organizations that you have been part of prior to this? And how has your approached change now?
Tonya: Well, I would say the difference is that before, when I would do coalition work or catalyzing work, it was really around how do we get someone else to change something. So like in Detroit, I spent a lot of time thinking about how do we get the state to change the way that they fund education? How do we get the school system to show up and to do something different? How do we get the city or employers to do this.
So it was always to get other people to do something different. I think the difference here with Groundbreak, it's really about how do the people who control capital change their own behaviors? And that's different, right? I often say that power, my favorite definition of power is the ability to rewrite the rules. And I think that most people who have power don't think they have it, nor do they actually use it. And so what I think GroundBreak is actually asking its partners and coalition members to do is to use its own power to rewrite their own rules, so that we actually produce capital that will be equitable and help invest in a clean energy economy for people who will need those kinds of investments the most. So it's inward focus more than it is outward focus.
Rohan: That's very helpful. Let's go back to the coalition building process. Tell me a little bit about how these range of players got involved over time, and based on where you sit today, how do you view the role of the various players in the coalition? And how does McKnight power this coalition?
Tonya: Yeah, so I alluded to that I had just come to the Twin Cities. I lived in Detroit. Detroit is my hometown. I experienced the decline of Detroit. And then I also started to see a bit of the rebirth of Detroit. And so one of the things that was striking to me when I came to the Twin Cities was that we had a group of people who were deeply committed and hurt by what has happened in the Twin Cities, not just with George Floyd's death, but with so many others, Jamar and Philando, who also were killed here.
So this was a long history. And so what I think I saw was what I would call is an incremental approach. And I don't critique that because I don't know if many of us really know how to fundamentally change big things. And I also noticed that we had a lot of resources here. It's a very rich community.
And coming from a place where I used to call, I would jokingly say about Detroit is like, we're poor but we're sexy, right? We have this city that has so much resource, so much goodwill. So how do we galvanize that to go get beyond these little small pilots to get to something that's scalable?
So that was really what was driving me, was like, we have catalyzed the world to rethink about race. And that means for us, we have a greater responsibility to rethink how race shows up in systems. And so that was really the impetus behind ground break.
And so when I started to talk with people, it was basically saying like, look, we are the place that I think is ripe to be able to do this work. I think people would be interested in this work nationally, but it would require us showing up dramatically differently. So when I started to talk to some of the capital players about this, they had just brought in a black bank into the market which was many of the financial institutions had done that together. So many of the banks had done it together. They had just practiced doing something that was uncomfortable and hard for them. So this felt like, I think, a natural kind of progression. I don't think they knew how hard we were going to push when they said yes.
But that was basically it. Going to some of the big banking institutions. I went nationally, I went locally, I went to the foundations. Anybody that was a capital deployer, that's what we said. Corporations, foundations, government and the financial institutions. And said, do you think we could wrestle with this question together, and we're going to wrestle with it not at a small scale.
And I think what was most attractive to people was that the vision was something that none of us could accomplish together, right? Initially our vision was, we think we can move $2 billion worth of capital; if we move this $2 billion worth of capital, that it could, at minimum, close some of the racial gaps. Or put a pretty significant down payment in terms of progressing to move those numbers.
So that was really what was striking about it, was that everybody felt the gravity of the moment. And everyone also felt the possibilities of the moment, that we could, instead of just focusing on closing gaps, actually focusing on aspirations.
There are people who want to be home buyers. There are people who want to build wealth. There are people who want to own businesses and they don't have an opportunity to do that. And if we see them as assets in our community and invest in them like they're assets, then we grow the pie, right?
Like, one of the things that we've noticed even in our region, economically, is that we have not necessarily grown economically, but we've gotten more diverse. So if we really want to both grow and keep that diversity, then we have to grow the pie. We can start, we can't divvy it up in smaller pieces. And so that's what the focus of the GroundBreak Coalition was and why I think people were willing to sign on.
Rohan: You mentioned that some of these stakeholders may not have known how hard you were going to push. So now that this Coalition gets underway, what have been some of challenges getting all these different players together? Have there been different assumptions, different operating models, that the Coalition has needed to overcome?
Tonya: Yeah, absolutely. So I think that everybody felt like we could just keep doing what we're doing now, and that if we could figure out how to just align what we're currently doing, that would make a huge difference. And I do think that's true, but I think what GroundBreak is trying to do is actually get beyond the goodwill of the partners that we are aligning, but actually how do we go create more systemic change? And talking about what a system is. You can reliably expect that you're going to get the same set of outcomes, right? And so that meant that we have to change our behavior. So we went to talking about like, well, that means that for foundations and for corporations we may not give people grants in the way that we gave them before.
It means that there have been some really successful models in our region that have developed, what I would call, a workaround of the system. The system didn't work for people of color, so they built a workaround and that model or program was really successful. And so you're saying we shouldn't fund that anymore? Yes, that's what we're saying - that we shouldn't fund that workaround anymore.
It meant that we had to have conversations up and through our organization and to challenge not, you know some, national companies had a challenge up. There sometimes there were conflict inside of it because they'd say, well, the company's mandate is this, and this coalition is asking us to do something different. Do we even want to spend political capital on having that debate inside our company? And the answer was yes. They ended up spending that time in energy. So I think that the different assumptions, the different operating models we had to come through that process. And part of what I would say the big model, when we designed and developed work groups, was that we put the home buyer, the wealth builder, the black entrepreneur, in the center of it. And we said, instead of making them jump through hoops, what would it look like if we jumped through hoops?
And actually made the process for them streamlined, simple and easy. So for example, when we think about people who are trying to get capital, particularly think commercial development, right? You go get 60% of a traditional loan from a banking institution, you need to bring about between 5 and 10%, which is your own equity. And then you got about 30%, which is this mezzanine funding, we always talk about the capital stack, right? So you’ve got to go find 5-10 different people to give you different pieces of money, and if the timing works out just perfectly right, and if you can get the interest rates just right, you might make a little money off of this deal, right?
But the onus is on that person who is doing the development deal to go and get that capital stack and to figure out the timing. And it's far riskier money because you can't stack the money fast enough in an alignment. And so part of what we have challenged is, what would it look like if we didn't ask the developer to have to go do all of that work? Maybe they'd have to do 25% of that work versus a hundred percent of it. And what would it look like if the financial institutions or people who might have low cost patient capital - like insurance companies or donor advised funds and many of our community foundations - if we actually organized the money in a different way so that people didn't have to spend that time on it spend a significant time trying to figure this equation out.
So it was really about how do you make it convenient, or how do you make it a clear pathway? So convenient doesn't mean less hard work for that Black capital seeker. It just means that it doesn't require them to go through so many challenges. To access it, it means that the people who have the capital, it should be our responsibility to do the hard work to reorganize our systems so that they can have access to it and not have to go to so many multiple institutions to find what they need, which reduces their likelihood of their success.
Rohan: So then I'm assuming that this led to one of your primary solutions, which is the shared regional financial platform. Help me understand what the implementation of this platform will look like.
Tonya: So we're still in the throes of it. We don't know exactly how all of the mechanisms are going to work. We're all working to try and design them to work for the people who are seeking capital.
And I think one of the most important things we have agreed to do, or trying to work out how to do, is this special purpose credit program. So we basically asked all of the financial institutions to develop special purpose credit programs and that they would all have the same terms. And that's really important because we're looking at that first mortgage for homeowners. We're looking at what would the senior debt look like for commercial development? And then what would early stage loans and growth stage loans look for entrepreneurs?
Now, if we can get the same rules for each of these banking institution, that means that if I'm a Black capital seeker, I can go into any of these banks that are “GroundBreak” banks, and I should be able to get the same deal no matter what, right? And these deals are going to be more liberal - in terms of interest rates being low, the length of the capital being a lot longer, a lot more patient.
If you could do those things, then what ends up happening is that this shared platform actually allows you to use and bring in additional shared platforms, for example, the guarantee facility. If we could organize a regional guarantee pool, we're basically syndicating guarantees across multiple institutions, which actually could be deployed through this special purpose credit program. Then all of a sudden, you can actually access capital that you weren't able to.
For example, if I am a business owner, I don't have to put up my house. I have a pool of guarantees that I can access. The way that this would work is, if there were a hundred people who used the passive side of their balance sheet to say, hey, we're going to put up this amount of money for guarantees, and somebody had to take out a $100,000 dollars loan - if they failed at that $100,000 loan, all of us who have put up our money, we are going to lose a thousand dollars versus any of us individually losing a hundred thousand dollars. And we believe that if we could show that this system works, then you start to see banking institutions can change their rules to reduce the level of guarantee that they need because they see the deal as less risky.
So you start to see these different platforms work together, and that's the same thing with low cost patient capital. Can we get institutions who have long-term investment profiles, like insurance companies and the like, and people who put their money in donor advised funds in these facilities, like in the private banks, inside of the companies, as well as in community foundations – if you are already trying to put your money towards good, why not actually make it a hundred percent to good? Instead of investing in your traditional 70-20-10 profile for your investment return on your DAF, you could put those resources, you might get a smaller return on that, but it's for good, right? You can start to see that showing up in that 30% mezzanine capital that developers will need in terms of their capital profile. Or you could put it into helping homeowners have down payment assistance that they could hold it. So it could be like a really low cost loan where they could pay you back once they sell the house, or once the sell house has some equity gained in it. So having equity and deeper ownership in their facilities.
And we know that there's a shortage of housing in the Twin Cities, so that becomes really important. But we also know that we have 11,000 Black households who are ready to purchase homes. They don't have the down payment assistance. So starting to begin to use and put these systems together so that they begin to work in a way that becomes systemized and reliable, and people don't have to go to each individual program trying to seek the capital.
How do we start to make sure that we're developing access to that capital and pull it down, versus you know the capital seeker or the homeowner, the home buyer, going to find the capital and figure out how to make it all work.
Rohan: So what I'm hearing is that there really is a systemized understanding of how to improve capital availability on the demand side, in terms of making it easily accessible, both in terms of removing the constraints and the requirements and guarantees. But from the supply side, it's also about mitigating the risk traditionally involved in making such capital available.
Now, if you move from finance a little. You've worked on education and workforce development. The Twin Cities have significant racial gaps in education attainment. How much is developing workforce a part of the strategy as well. And what are the steps you are taking to address racial gaps in workforce training and making workforce more easily available?
Tonya: Yeah. So with GroundBreak, it is not addressing that. And I often say it's not a like silver bullet. It's not solving everything. We're just trying to figure out like how do we create this, what we believe is an extraordinarily important enabling environment that actually will allow everything else to work in alignment with it.
So, for example McKnight does work on workforce development. We work on trying to create different conditions for workers in general across the state. And we know that there are so many others who are making investments in those things. But once they get into those jobs, they get stabilized.
They may be on, you know, working at those positions for 10 years, but because of the way that those jobs are structured, they may never get the $50,000 that they need to be able to purchase a home, right? Or if you buy a home at, let's say $300,000, you need $60,000. So families might not have access to that.
What we believe is that once those programs work, they're handing them off to the capital system so that the capital system actually works. What I love about the ground break models is that we have what we call platforms, which are these systems that we're trying to build. And then we have the prototypes, which are really these very specific interventions that we believe will close the wealth gap and actually help people fulfill their aspirations.
And part of that is equity investments. How do you give down payment assistance? How do you actually help build equity for that home buyer for commercial development? How do you help a Black developer actually have equity in the project that they're building? And we believe that that has to be an investment tool here in the Twin Cities. And the same thing with entrepreneurs. How do you help them get a jumpstart for new businesses where they have a $50,000 investment in their business? Because we believe that equity is going to be so important in this wealth building journey.
So that's how we are coming at this, is trying to think through how do you have access to traditional capital? But knowing that, because we've had the such significant wealth gaps that have really been because we've had racialized systems that have supported certain people and excluded other people, that we have to actually repair that harm. And that's why we think equity is a deep part of that.
And when I'm saying equity, I mean actually ownership. That people have more ownership in their home, more ownership in their business, more ownership in any development that they create.
Rohan: So now I have to ask you to situate all of this in the larger social and cultural context within which this work exists. Heather McGee in her book "The Sum of Us" writes about how there is an incorrect but popular narrative, often stoked by politics, about how about a zero sum game - that an attempt to achieve racial inequity imposes costs on white people. How do you address something like this the work you are doing?
Tonya: So I love this book. I think that Heather McGee does a wonderful job really explaining how we have actually harmed ourselves. Because we're very worried about like what Black people might get, what indigenous people may get, that we, that we actually see the majority of Americans who only for a short time are white right now have prevented themselves from access to good things because they feel like somebody who is “unworthy” is getting something.
And I would just say that like what we are seeing across Minnesota is this. That urban centers all across greater Minnesota are becoming more diverse. They actually are preventing these places from losing population, from allowing their businesses to thrive in these particular places because people are willing to come and work there.
They're only going to be willing to come and work there if they actually get a part of a piece of the American pie. I think what they feel like is that we're carving up the American pie in smaller slices. I actually think if you give people access to ownership, that they will contribute more to the pie. And they actually might, instead of bringing a pumpkin pie, they might bring a sweet potato pie, right? Like, just so many different versions of things that we can contribute.
And so part of what we think about it is how does this grow our GDP, right? And we know that this will grow our GDP pretty significantly. When people have more access to wealth, the more that they create when they have more ownership, the more things that they want to own which creates more economic development and activity, more commerce. And we just need that. I mean, I think people who support a society that where people get to earn and contribute, that GrounBreak break is fully about helping people earn and contribute and to prove to people that if they were not cut out of this, that they would've had even more at this time.
Rohan: Tonya, what would success look like for the Coalition in the near term and even longer term. And what are some of the obstacles you anticipate that keep you up at night?
Tonya: I think in short term, I would love to see these platforms, like a a guaranteed facility, the special purpose credit programs, I would love to see some organized platform where we can get low cost and patient capital where that can flow pretty freely into the system. If we can get those things up and running in the next year, then we think that we will see capital begin to flow pretty freely.
And of course, you know, there will be different timings on that based on what people have. But based on the different models and prototypes, getting that system part of it is the most important in my mind. So if we can get that accomplished in a year, get it accomplished in 18 months - I'm a pretty impatient person so 18 months feels like a really long time. But I also know that if we can take 18 months to rewrite this system, that capital will flow hopefully for 20, 30, 40, 50 years. And it'll just get smarter and smarter in the way that we deploy it.
And then I think the long-term goal here is that we want to make sure that we close the gaps. One of the things that has been is so remarkable about Minnesota is that it has some of the highest indicators for the quality of life for the people that live here. And what people say here is, you can have a great quality of life here if you're white. If you're not white , then you have really struggled because you see these gaps. They're so stubborn and they're so deep. And we believe that we, if we do 11,000 black homeowners in the next 10 years, we could close the gap around home ownership. Or no, we would halve it, right? So it means that we still need another11,000. We need 22,000 to close the gap, but we believe that there's another about 15,000 Latinx families that if we help them get homes, that they could close the gaps too.
So we actually want to just show that progress, significant progress, can be made. And I would love it for us to be a model for the country, not because we want everybody to do it the way that we are doing it, but we want people to know it can be done. That if we change, then actually the systems change and the outcomes change. Like there is a chain reaction here. And so I think that's the biggest proof point.
And then we want to be able to contribute. We want to make sure that this is not only working in the Twin Cities, but we want it to work across the entire state of Minnesota. So we want to make sure that what we're doing, we're documenting it, that people are learning and that the people can replicate it if it is something that they so desire. But we just want to be a proof point that yes, we were once or we currently are, depending on how you want to describe us, is the epicenter of racial inequity and we want to become the epicenter of racial opportunity. That's what success looks like to me.
Rohan: Tonya, on that very optimistic note, that you can be an inspiration to the rest of the country, thank you so much for your time.
Tonya: Thank you Rohan. Really appreciate you talking with me today.
Part 2: Alex West Steinman (CEO & Co-Founder, The Coven; member of GroundBreak Coalition’s working group on BIPOC entrepreneurship)
Rohan: Alex, welcome to the podcast.
Alex: Thanks for having me.
Rohan: So Alex, in a TEDx talk a few years ago, you talked about your relationship to the fine tooth comb, and your subsequent learning about how you couldn't use something that everyone else could because of the color of your skin, your hair, et cetera. Now, let's use this as a metaphor. How does this example apply to the relationship of entrepreneurs of color, to the institutions that are designed to support entrepreneurship?
Alex: So to give some context and background, that talk that I gave was really around my relationship to my hair, and how growing up in a primarily White community, being one of the very few Black folks in that elementary school, all they had for picture day was a fine tooth comb to straighten up our hair.
And you can imagine what that did to my tight curls. Made me look like an absolute crazy person. But I think, I love how you're making this connection, because my relationship with my hair has evolved over the course of my career. And it kind of brings me to the point of all of the entrepreneurial ecosystems that are out there where, you know, they have a one size fits all for all entrepreneurs, whether that be a loan program or a grant program.
And all of those things are great resources if you know how to use them, if you've grown up talking about money, if you've grown up with an entrepreneur in your household, if you've grown up with finances and the ability to get a bank loan. And what I've found as becoming an entrepreneur and trying to get capital from banks, from VCs, from financial institutions and philanthropy, it's really challenging out there for communities of color, and particularly Black folks and Black women, who are seeking capital to grow their businesses.
And so when you approach kind of a one size fits all, like a fine tooth comb for finance, you miss a lot of people. And a lot of people have now, you know, come up with the “let me start over”. And a lot of people have now no trust in financial institutions because they have traditionally been turned away or have been, you know, duped by financial institutions.
And so now they're no longer even approaching you know, banks or places where they might be able to get a grant. And so our work now in economic development is to build new relationships and trust with communities of color to make sure that they have the access and resources they need to be successful in their careers.
Rohan: I want to pivot at some point to how you're thinking about the GroundBreak Coalition doing that. But before I do that, help paint a picture for me on what that the current local economic development landscape looks like, the one that you engaged in. So for instance, to make this more concrete, what are your interactions with existing institutions like SPCs, local economic development organizations, community colleges, et cetera, look like? And how effective has this ecosystem been in supporting both entrepreneurship more especially Black entrepreneurship?
Alex: Sure. I'll start by sharing a little bit about my business. So I own a business called The Coven. We're a workspace for communities. We talk about ourselves as a space for radical change makers. We have entrepreneurs, freelancers, folks who have employers from all different sectors. We really prioritize the needs of women, non-binary and trans folks, but we're open to all. And what's been great about working in this space is that we are not only entrepreneurs building our business and growing our business, but we are a piece of the fabric of the entrepreneurial ecosystem here because we connect our members to a lot of the resources that are out there.
So CDFIs, non-profits, organizations giving out grants for entrepreneurs, as well as financial institutions and helping people navigate the banking system as they might need an SBA loan. And particularly during Covid when people needed PPP funding. And so we've been not only like recipients of support from the entrepreneurial ecosystem, but we are also supporting our community with access to the entrepreneurial ecosystem.
What I think is interesting about the Twin Cities in particular is we have a really robust system of nonprofits. We have one of the largest concentrations of nonprofits. I'm sure Tonya has talked about that a little bit. The “land of 10,000 nonprofits” is a famous language from her. And I think what's interesting about that is they serve a lot of different communities, but haven't traditionally served entrepreneurship. Or entrepreneurship hasn't traditionally been thought of as workforce development.
And I think now that we are starting to see that shift, we're starting to see the impact that can be made when an entrepreneur hires their first employee and expands their business, and is able to bring on five more people. I mean, that's job creation right there. And whether you're building and scaling a billion dollar tech business, or you're building, or scaling a multimillion dollar manufacturing plant, or you're, you know, starting a mom-and-pop shop or consulting firm, you are driving the community, you are driving the economy.
And I think it's important that we recognize the impact that Black and Brown businesses have within our community, and really stimulating the Black and Brown economy. Which is what's really exciting about the work that I do because I get to interact with entrepreneurs all the time and help them help support them by giving them access to those resources.
Rohan: You've obviously been doing that with The Coven and now you are expanding that engagement with the Ground Break Coalition. Tell me a little bit about how you got involved in the coalition and what was your initial understanding of it.
Alex: Well, I've been really impressed with the work so far that we've been able to do. And when I was first approached to be the subject matter expert in the BIPOC entrepreneurship work group, I was heads down building The Coven, and doing a lot of the on the ground entrepreneurial support work as an organization and as an individual who loves to connect people.
And so when they approached me about using those skillsets for supporting the Ground Break Coalition, it made a lot of sense and was really aligned with the work that we're already doing. It just kind of helped amplify or kind of take, you know, a 30,000 foot view of the entire ecosystem and how each of these work groups that we have – entrepreneurship, commercial development, housing and rental housing – all of those work groups are really interconnected, particularly as we think about race and socioeconomics and how they relate to one another. If you don't have a house to put up for a loan you will not be able to get a loan for your small business. And so there's a lot of connections there. And what I learned early on was that there was a lot of interest in getting more people together.
And so the power that Tonya has is to really connect all of the power players as well as community. What I think is really unique about this work group and about the coalition as a whole is that every subject matter expert is directly affected by the work that the work group is doing. So, I'm an entrepreneur and I am leading CEOs of banks through the process of building prototypes for capital deployment. We have people who have been homeless or have experienced being unhoused or needing rental assistance leading those types of things. We have people who are directly affected by racial disparities in commercial development who are leading that work group. And so I think that's really important and a little bit different than I've seen in other coalitions where it's typically a bunch of, you know, CEOs get together and decide we want to do something and we want to put out a statement. But there's no real work being done. And the work here is being done by both those folks at the top who are power brokers and the people who are directly affected by the work. And I think that's an important distinction to make between this coalition and a lot of the others that have been attempted.
Rohan: Let's go deeper into that. The group you are a part of includes members, some government, banks, philanthropy, and you're an entrepreneur. Walk me through the type of process you as a group followed and the nature of engagements between this diverse set of players, and perhaps what is one thing you learned about one of these other players’ mode of engagement, or their way of thinking about economic development that you were previously unfamiliar with, and what that taught you?
Alex: A few things. One, we really started with who our end user is and recognizing what type of business are we talking about? Because when you say entrepreneurship, that could mean a varying degree of things. That could mean a tech company, that could mean a barbershop, it could mean a consultant. All kinds of freelancers, designer and artist, all kinds of things.
And so we really needed to kind of home in on who we were talking about, and we defined it as a whole, after a lot of debate and a lot of listening sessions. We really figured that we were going to do it by how much money each group needed. Because this is a capital product that we were developing. We were solely focused on capital products. And we know that there is a need for technical assistance and there's a need for other types of support areas, which I think will become a part of Groundbreak Coalition. And it's not that we haven't left them, you know, we've put them kind of in a side bucket so we could really focus on capital deployment.
Because I think along the process what we've found is kind of old habits come up as you start to reimagine something that hasn't been in existence before, or hasn't been given the full capacity it needs to be successful. And those old habits are things like, let's choose the easy route, let's go technical assistance, which we know we have providers for, or let's pilot a small program in this and just see what we learn. And the reality is, and Ben Hect who's leading this work for the Groundbreak Coalition, he says this all the time that we study ourselves ad nauseum. We know enough about Minnesota and we know enough about Minneapolis and St. Paul to be dangerous.
So let's be dangerous and let's think about things that are really going to move the needle and really help us achieve our goals. And so I think one of the things that I've learned along the way is it's really taken a lot of trust building. There's definitely been a lot of skepticism. You know, when we throw out these big numbers, 11,000 new businesses, right? We're talking about businesses that can hire up to five or more people.
That's a big number and I think it's really audacious. But it's rooted in something. It's rooted in reality, which I think is a really strong piece of this puzzle, is that we are answering to the need, not necessarily we're answering to the input. The input would be like, let's just throw money at a thing . And the output is we need 11,000 new jobs to reach parity with white entrepreneurs. And that's the goal. And so I think with that at the forefront of the work that we're doing, that's really been the driving force for all of the decisions that we've made.
The other piece of this is that centering the end user is important, and centering the middle person is important. So the middle person would be like the bank, the intermediary. And what we're finding is that a lot of the issues with banking is in individuals at the bank. It's not just the products themselves, which can be problematic and have issues and can be inaccessible. But we're also finding that banks are having trouble hiring, they're having trouble retaining people. And so what are some things that they need to do internally so that they have the right loan officers, who can check their bias at the door and can answer challenging questions from entrepreneurs and find ways to move capital into black communities? And we really need them to do the work on the hiring piece and the training piece and the retention piece, so that we have those people at the forefront of the work.
And then the end user, right, is the entrepreneur themselves. And so along the way we've been doing a lot of panels and introducing our work group to the end user because, most of the people in our work group do work directly with entrepreneurs, but there are some who are kind of further down the line in the process of building products for the end user. So it's really important that we continue to center their voices.
We had one story in particular where we had an entrepreneur who's building an AI tech product, which if you would hear about this, you'd be like, oh, that's an easy investment. And they were struggling to raise $50,000. And the room, like the jaws in the room, they were like, is that $50 million? And the she was like, no, I just need $50,000 so I can hire a developer. And as a Black woman, she was saying that, look, I can't stay in this ecosystem. So she's actually leaving, she's moving out of Minnesota because she can't find her place here. Because there's just no investment in Black and Brown founders.
And so her story was so powerful and that, it's not a insignificant amount of money that she's looking for, but it's not like she's looking for $50 million. And you hear about these tech companies that have a napkin with an algorithm on it, and they're getting $50 million of investment on a billion dollar valuation without batting an eye. And you see this woman who's Been working on this product for, I've known her for five years working on this, and can't find $50,000. And so I think it's a real testament to the work that we're doing to be able to hear entrepreneurs stories like that, understand why people are opting out of this ecosystem, and find ways for us to retain our people so that they can continue to, to grow our economy here in Minnesota.
Rohan: You talked about banks, you've talked about entrepreneurs. Tell me a little bit about the role of government and policy and all of this. You did have representation from the Department of Employment and Economic Development in this group as well. So what is the role of a department such as this one?
Alex: I think what's interesting is how during Covid, government activated in a way that we haven't seen before. So the PPP funding came fast and furious. There were grants that were being deployed by city government, by a county government, that hadn't been there before. And of course those come from federal dollars that are released rather quickly.
But we had always been told that government moves slowly, and that wasn't the case during Covid. We saw things move very rapidly and now to varying degrees of messiness, right? There was a lot of things to clean up and figure out, but that's entrepreneurship, right? Entrepreneurship is messy, and so what I've loved about having government at the table is they're getting to exercise this muscle that they don't typically get to exercise, right? Entrepreneurship-like. Think big, think differently, build something new. Build something that doesn't exist, and start to tear away at some of the systems that are in place that are actively racist, that are actively leaving people out of the conversation. And so with government at the table, it's made a huge difference thinking about.
You know, where can we change policies and where can we move quickly like we did during covid relief? What I think is interesting is that that money that money came fast and furious in 2020 and 2021, but what I'll say is a lot of entrepreneurs who survived 2020 suffered in 2021 and 2022 because that capital was not sustainable and their customers were still not coming back in.
We still had, you know, many variants that, you know, if you have an in-person business like I do, like a co-working space, people weren't coming back until really late 2021 or late 2022, which was really challenging. So kind of that up and down of all of the variants, like Delta and Omicron, like that made it really hard and there wasn't additional funding for us.
So what we're trying to build here is sustainable funding and not just one-off programs that support a set group of people, and then they're done. They get to wash their hands and go home and say, we did a good job. We're really pushing people to think about what is sustainable funding that can be released on an annual basis to make sure that our entrepreneurs continue to have the resources that they need, that the CDFIs and our technical assistance providers continue to have the resources that they need to serve this broad number of entrepreneurs and continue to grow the entrepreneurial ecosystem.
Rohan: Even before GroundBreak, there seem to have been a range of other efforts in this direction from the Minnesota Business Coalition for Racial Equity, the Governance's Council and Economic Expansion, the Minnesota Main Street Economic Revitalization Program. How do you assess the value out of all of these programs and how does GroundBreak either build on or divert from some of this previous?
Alex: Well, they all matter, right? I think they're all really important. And I think what's interesting about what Tonya has built is that this isn't about building all brand new things. This is about building on some of the things that already exist and identifying what's working and what's not working, and why so many programs that are out there kind of run out of capital, more likely run out of capacity to be able to maintain a lot of those systems. So I think that's really important.
I think most of those organizations doing great work and need capacity, and so my hope is that what we identify as capital products within the Groundbreak Coalition, because a lot of those people are at the table, right? They're having these conversations alongside us. So it's figuring out how do we continue to fund those people in a sustainable way so that their organizations can continue to serve those businesses.
And we can say like, that is a part of these 11,000 businesses. I don't think anybody within GroundBreak was like, we want to build a new type of technical assistance program or loan deployment program. We want to take the capital and move the capital into programs that are already doing these things.
And I think it's, one, identifying who's doing it really well and who needs capacity to grow? And are there other mechanisms or capital mechanisms that we can put in place that live in existing banks so that we can get people into the banks too, so that we can change the banking system as a whole. And we're not solely leaning on CDFIs to provide, you know, the full power of banking and loan deployment.
Rohan: Now you've stated previously that entrepreneurs of color don't need any more mentoring, they need finance help. Tell me a little more about this. What is the combination of inputs that you think entrepreneurs in general, but entrepreneurs of color specifically, benefit from the most?
Alex: Yeah, I mean, mentorship is important, but we are frequently over mentored and underfunded, and that is a statement that many, many Black folks before me have stated. It's important that we have the guides and we have people in our lives who can help us get to the next level, people who are opening doors for us. But it's more important that we just have the cash to do what we need, right?
So, I think philanthropy looks at this too, and there's a lot of conversation around philanthropy now around let's just get the cash to the people who know how to deploy it, right? The people who are directly affected at it. Why are we continually as philanthropists telling people how to spend their money? And I think things are changing and I've seen that quite frequently here in the Twin Cities where people are starting to change their grant processes. People are starting to change their investment processes, which I think are great changes.
But I think in the same way, we have to change the way that we interact with entrepreneurs. We constantly are thinking that they just need to know what to do. And so often the number one reason that entrepreneurs go out of business is because they run out of money. It's not because they run out of advice. We have plenty of advice from our parents, from people in our lives, from our spouses, from partners and friends. Everyone has an opinion about how you should run your business and take it with a grain of salt. I hope that somebody in your life has, you know, transformed the way that you think about your business and has made it better.
Because I think you know, having those networks and, you know, I call like a “badass board of directors” in your life, who can help steer you in when you need it most is important. But having capital is the thing, and so if you are from an underestimated community, if you are Black or Brown and don't have generational wealth, getting to the next level of your business or even getting your business off the ground is challenging because not having any kind of liquid assets to pay for rent, for a space or inventory if you make a thing. Or even just paying for things that are unrelated to entrepreneurship, but really directly affect you like childcare, like being able to leave your job to pursue your business full-time. I mean, those are all things that require money.
And to be able to have kind of unbridled capital that is flexible and allows you to spend it on things like a like childcare, like housing that would make a huge difference for entrepreneurs of color who are, you know, smart and fast and are ready to build. But just need the runway to do it.
Rohan: I do want to situate all of this in the larger statistics for Minnesota and for the Twin Cities in particular. So until 2020, Minnesota's black poverty rate was consistently higher than the national black poverty rate while the white poverty rate was lower than the national one. The Twin Cities also have one of the largest racial in income inequalities in the country. There are similar in inequalities in home ownership, in education achievement, in employment.
How do you situate the work of the GroundBreak Coalition against this backdrop? In light of this, what will success for the coalition look like? Of course, and not to say that the coalition should be responsible for all of this.
Alex: Well, I think we are in part responsible for all of this, right? This is the work that we've chosen to do, right? So we know that the four working groups that we've chosen to pursue right away directly affect those awful statistics. We know that we can move capital because we've done it, and now we just need sustainable capital to sustain that type of change that we're looking to see. This doesn't happen overnight.
That's why the coalition has been very clear about being in it and not, you know, as a one-off program or kind of a, a side thing. I mean, we're building new transformational systems using old systems, right? We have public policy at the table. That's an old system. The government is an old system, and it has a lot of policies in place that, that hold a lot of people back. And so to do real transformation, you have to be in it for the long haul.
And I think that's our role in this, is to continue to push the envelope and make sure that even when the CEO of Wells Fargo or the CEO of Huntington or all of these people leave those roles or pursue something else, that there is enough foundation in place to exist so that it's not just reliant on the people of this coalition, but it's reliant on the new system that we've created and it's reliant on the new funding pools that we've created.
And those things can live in perpetuity, which is why I think it's really important that we have philanthropy at the table because they're used to building endowments that last 150 years. They're used to building things that are sustainable and do have kind of a long shelf life now. Whether they've been putting the money in the right place for the last 150 years, like that's a good question. But I think what we're doing is kind of steering capital and new forms of capital in the right direction so that we can change those statistics that continue to hold black and brown folks back.
Rohan: And finally Alex what would success look like for the Ground Break Coalition specifically over the next year. What are you excited about seeing in terms of results?
Alex: We were able to build new prototypes this fall and into the winter, and what I'm most excited about now is seeing those put to work. And so our goal this year is to really maybe even test some of these products or get them into the market and have people sign up for them.
There's already leaders within the Groundbreak Coalition who are ready to put money down. And we just need to figure out what is the entity, what is the structure, where does it go? And I think that's the next step, I think. Tonya probably talked about this a little bit. We've identified the “what”, and now we have to figure out the “how”.
And that part is the hard part, right? We can all say we know what the problem is. And we've now identified what the solution is and now we have to figure out how we make it with so many players at the table. So I'll be interested to see how we continue to engage these partners and really put them to work.
The steering committee has been kind of reviewing the work that we've been doing and now the steering committee will be doing the work. And so I think that's the next kind of step in all of this. And it'll make it a really interesting year to have such amazing people at the table doing the work and driving this.
But that's who we need at the table because they're the ones –the CEOs of the banks and the leaders of philanthropy and leaders of public policy – those are the people who can make real change. And I think oftentimes they're at the table saying what the problem is and not doing the “how”. And so this will be a brand new thing for them and hopefully exciting for them to kind of stretch their own entrepreneurial muscles.
Rohan: Well, Alex, we are all looking forward unfolds. Thank you so much for your time.
Alex: Thank you, Rohan.