Dr. Zakiya Smith Ellis serves as Chief Policy Advisor to New Jersey Governor Phil Murphy and is a former Obama Administration Senior Official. Tim Sullivan is the Chief Executive Officer of the New Jersey Economic Development Authority (NJEDA), the state’s primary economic development agency.
In 2020, despite the COVID-19 pandemic, American companies raised a record-setting $150 billion in venture capital funding, but less than 1% of this funding went to Black-owned companies, according to Crunchbase. The numbers are even direr for Black and Latina women. According to digitalundivided’s ProjectDiane, Black and Latina women received just 0.64% of total venture capital investment between 2018 and 2019.
Nationwide there is an equity crisis in access to capital that must be addressed with intentional government action like New Jersey Gov. Phil Murphy’s proposed $10 million Black and Latino Seed Fund. The New Jersey Seed Fund will be the first state-created public investment specifically targeting Black and Latino entrepreneurs.
Crafted with input from Black and Latino founders, investors, and policy experts, this seed fund is an important step toward tearing down the institutional barriers that hold Black and Latino entrepreneurs back. Moreover, we believe that it will serve as a blueprint for other states as they work to ensure equity in their entrepreneurial ecosystems. Google, Apple, and other private-sector leaders have already deployed similar funds, but the private sector cannot solve these problems alone. We know from history that transformative change has overwhelmingly been the result of government policy and action.
The ongoing underinvestment in women and minorities is a product of systemic racism and misogyny and it holds all of us back by creating massive opportunity costs. Companies that start small and grow are among the most effective drivers of long-term economic growth and job creation, and when only a certain subset of the population has access to the resources and support required to launch a successful startup, we all lose out on these broad economic benefits as well as an unknown number of great ideas and new technologies. Fostering diverse entrepreneurial ecosystems is also critical to closing the racial wealth gap, which will grow the economy by increasing consumption and investment.
Still, one program – no matter how effective – can only do so much. That is why it is so important that states provide complementary resources for Black and Latino innovators. In New Jersey, programs such as the recently created New Jersey Innovation Evergreen Fund (NJIEF), an innovative financing tool that leverages public and private resources to support New Jersey startups; NJ Ignite, which provides free rent to startups that locate in participating New Jersey collaborative workspaces, and the New Jersey Angel Investor Tax Credit Program all include bonuses for Black- and Latino-owned companies as well as diversity and inclusion targets to ensure ongoing progress toward the Governor’s diversity goals. This complimentary suite of resources ensures entrepreneurs have access to the comprehensive support they need to succeed.
The administration’s commitment to diversity in economic development also includes supporting diversity in the state’s largest infrastructure projects, such as the New Jersey Wind Port, which was recently highlighted by President Joe Biden, has set a goal of awarding 15% of the total construction contract’s value to minority-, women-, or veteran-owned businesses to help build the United States’ first purpose-built offshore wind port.
States cannot afford to wait to make these changes. As our economy continues to struggle with the impact of the COVID-19 pandemic, it can sometimes feel as if the world is paused, but the sad reality is that lockdowns and social distancing have rapidly widened inequalities, with a particularly severe impact on Black and Latino communities. As we move toward recovery, it is important that we work to not just return to the pre-pandemic normal, but use this moment to build a better, more equitable society.
Fostering a diverse and inclusive innovation economy is vital to achieving this goal, and New Jersey is developing the blueprint that other states can follow. The Black and Latino Seed Fund is a unique, forward-thinking investment in building an innovation economy that reflects America’s diverse population. This fund, in combination with the many other equity-focused programs Governor Murphy has implemented, will help us not only recover from the pandemic but also drive sustainable and equitable economic growth over the long term. We encourage other states to consider a similar approach.
Dr. Zakiya Smith Ellis and Tim Sullivan are Co-Chairs of New Jersey Governor Phil Murphy’s Jobs and Economic Opportunity Council.