Small Business Ecosystem Assessment Building a More Inclusive, Resilient New York City
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New York City Small Business Ecosystem Assessment Building a more inclusive, resilient New York City FALL 2020 Table of Contents Executive Summary .................................................................................................................................3 Introduction and Context ......................................................................................................................6 How We Approached the Research ...................................................................................................8 What We Found ........................................................................................................................................11 Historical Context of New York City ........................................................................................11 Small Business Landscape ........................................................................................................12 Capital Support Landscape .......................................................................................................15 Business Services Landscape ..................................................................................................18 Gaps in the Ecosystem ..............................................................................................................21 Emerging Solutions .................................................................................................................................22 Holistic Service Delivery .............................................................................................................22 Continuum of Capital...................................................................................................................23 Enabling Infrastructure ................................................................................................................23 Citywide Collaboration ...............................................................................................................23 Conclusion and Call to Action .............................................................................................................26 Acknowledgements .................................................................................................................................27 Appendix .....................................................................................................................................................28 Executive Summary New York City, birthplace of the Harlem Renaissance and Nuyorican movement and home of Broadway and Wall Street, is a vanguard of American culture and commerce. With over eight million residents who speak more than 200 different languages, the Empire City is an engine of economic vitality and ingenuity fueled by the city’s rich cultural and ethnic diversity. However, the city’s prosperity and economic opportunities are not shared equitably among all New Yorkers. Across the city’s five boroughs, deep socioeconomic disparities persist by racial and ethnic lines. Addressing these disparities requires solutions that build wealth across all communities in the city, among which are solutions that present equitable avenues to entrepreneurship and business ownership. Confronted by a long history of discrimination and racism, The advent of the COVID-19 pandemic and mounting civil communities of color face growing segregation, income unrest in response to acts of racial injustice have dramatically inequality, and systemic barriers hindering their ability to build worsened these existing inequities and financial distress among wealth through business ownership. As a result, Black and small businesses owned by people of color (POC).3 Since the Latino(a) Americans possess only one tenth of the wealth of start of the pandemic, Black-, Latino(a)-, and Asian-owned their White counterparts, and a far smaller percentage of Black businesses have had higher closure rates than that of non- and Latino(a) household assets are in business or financial Latino(a), White-owned businesses nationwide.4 Over the same assets compared to that of White households.1 Meanwhile, while time period, POC-owned firms have faced larger cash balance having higher median incomes than that of other communities and revenue declines than that of non-Latino(a), White-owned of color, Asian Americans have become the most economically firms, with the impact of the crisis particularly severe among divided racial or ethnic group in the U.S.2 Black- and Asian-owned businesses.5 At this critical moment, this report examines New York City’s unique historical context and the current state of play of the city’s small business communities and supporting ecosystem, with a specific lens on businesses owned by people of color and the COVID-19 response and recovery. This assessment culminates in a set of recommendations and a proposed path forward aimed at narrowing racial gaps across several dimensions – including business ownership, revenue, and employment – across all of New York City in the next five years. 1 Source: Aspen Institute, 2015 2 Source: Pew Research Center, 2018 3 Note: In this report, ‘people of color’ refers to demographics outside of non-Latino(a), White populations, with a focus on Black, Latino(a), and Asian populations 4 Source: National Bureau of Economic Research, 2020 5 Source: JPMorgan Chase Institute, 2020 EXECUTIVE SUMMARY NEW YORK CITY 3 This report highlights the barriers that entrepreneurs and small business owners of color in New York City face and the additional support they and those serving these entrepreneurs need to succeed, as gathered from data analysis, interviews, and local stakeholder convenings. MAJOR TAKEAWAYS INCLUDE: Disparities for small business ownership in New There has been a historic unmet demand York City persist for people of color. of approximately $45B7 in capital for small 1 While Black and Latino(a) residents make up 24% and 29% 3 businesses in New York City annually, with of the population, respectively, they only own 3% and 7% pronounced gaps of traditional and alternative lending of all employer small businesses.6 Furthermore, Black-, in areas – such as eastern Brooklyn and the Bronx - with Latino(a)-, and Asian- owned businesses employ fewer high concentrations of Black and Latino(a) residents.8 staff and on average generate less than half the revenue This unmet demand was magnified through the COVID-19 generated by White-owned businesses.6 Specifically, New crisis, as illustrated by the rapid depletion of the Payment York City’s Black- and Latino(a)-owned small businesses Protection Program’s first tranche of funding.9 generate average annual revenues of $0.7 million and Asian-owned small businesses generate $1.0 million, compared to White-owned businesses that generate an The New York City small business ecosystem lacks average of $2.4 million. coordination within and across all five boroughs 4 needed to best serve the city’s small businesses. There is no central coordinator or resource to help Industries hardest hit by COVID-19 are small businesses navigate offerings from BSOs, capital overrepresented by Black-, Asian- and Latino(a)- providers, anchor institutions, philanthropy, and other 2 owned businesses. stakeholders. As a result, small businesses spend valuable Black-, Asian-, and Latino(a)-owned businesses in time and resources just to access the support they need, New York City were overrepresented in deeply and and ecosystem stakeholders do not effectively work immediately impacted industries such as food services and together to support entrepreneurs. entertainment places, beauty and personal care, laundry services, and retail.6 While Black and Latino(a) residents make up 24% and 29% of the population, respectively, they only own 3% and 7% of all employer small businesses.6 6 Source: U.S. Census Survey of Business Owners and Self Employed Persons (2012) 7 Note: Unmet demand in 2017; detailed capital demand and supply methodology can be found in the appendix, p. [28] 8 Sources: Freedom of Information Act (FOIA) to the Small Business Administration; CDFI Fund; PwC / CB Insights MoneyTree Report; U.S. Census County Business Patterns; U.S. Survey of Non-Employer Statistics; U.S. Annual Survey of Entrepreneurs; Federal Reserve Small Business Credit Survey 9 Source: SBA Paycheck Protection Program Report, 2020 EXECUTIVE SUMMARY NEW YORK CITY 4 The research identified critical needs in equitable access to capital and customers and gaps in the business support landscape that were reaffirmed by local stakeholders. The small business ecosystem must meet small businesses owned by people of color where they are, provide them with services that have a transformational impact on their businesses, and create wealth and vibrancy in their communities. To do this, the small business ecosystem will need to focus on the following pillars: Holistic service delivery: Provide holistic services over longer periods to transform small business owners of color and create resiliency programming Continuum of capital: Increase availability of free, low-cost, and equity capital products to better finance and strengthen businesses, as well as community development financial institutions (CDFIs) and other responsible lenders Enabling infrastructure: Create digital platforms to connect small businesses to resources and revenue opportunities; advocate for small business-friendly policies Citywide collaboration: Create citywide and borough-specific networks