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The entrepreneurial landscape is diverse and reflects the variety of our society. However, this diversity is hardly reflected within the financial sector. Let’s have a look at the revealing statistics: Minority-owned listed corporations represent only 0.2% of listed corporations. This severe underrepresentation underscores a broader problem of access to capital available on public capital markets.
In addition, initial public offerings (IPOs) play a crucial role in job creation. 92% of employment growth occurred after the IPOsaid the U.S. Treasury Department’s Task Force on IPOs. The decline in small and midsize company IPOs since 2000 has negatively impacted all entrepreneurs – and with the small variety of publicly traded minority corporations, minority entrepreneurs can hardly dream of going public, leaving many without the critical capital they should expand and succeed.
The demise of small public corporations and the underrepresentation of minority-owned businesses in public capital markets is greater than only a statistic; it reflects structural problems that require a change in the best way stock exchanges in our country create access to public capital. Although only a small portion of those corporations are listed on major exchanges, their potential to drive innovation and job creation through access to public capital is big. Historically, the financial sector has not effectively addressed the variety of the company landscape, often marginalizing those without established connections or significant startup capital.
Related: The challenges of financing women and minority-owned businesses and find out how to solve them
The impact of inclusive financing
Inclusive finance isn’t only an ethical imperative; additionally it is economically useful. When diverse businesses thrive, they stimulate local economies, create jobs, and foster a competitive market filled with progressive ideas and services. Private capital markets with a deal with underrepresented corporations have made significant strides toward a more inclusive investment landscape. Take Serena Williams, for instance, whose enterprise capital firm in 14 Unicorn corporationsNotably, her firm’s portfolio includes 79% founders from underrepresented groups, 54% female founders, 47% black founders, and 11% Latino founders.
These numbers aren’t just statistics; they are a testament to the untapped potential of those communities. Williams’ success in supporting these ventures demonstrates a cause-led approach to inclusive investing and has the potential to have a positive impact on the broader economy, driving innovation and growth in sectors which were missed prior to now.
Rethinking public markets
Rethinking how public markets work requires finding ways for all entrepreneurs, especially minority-owned businesses, to participate fully and fairly. This means rethinking the whole lot from the regulatory framework to the structure of the exchanges themselves. The traditional one-size-fits-all model of exchanges doesn’t address the unique challenges faced by smaller businesses, including many minority-owned businesses. There is a critical need for financial services firms that may offer customized financial services and products and supply the support mandatory to navigate the complexities of going public.
Understanding the challenges is barely step one; the true work begins with overcoming them. Dream ExchangeWe are committed to changing the landscape for smaller corporations, most of that are minority-owned, by offering an exchange philosophy that is best suited to their needs. The traditional exchange model has not only did not support these small businesses; it has actively excluded small businesses by focusing totally on large, established corporations that easily generate liquidity and achieve large trading volumes. Our mission is to level this playing field by specializing in solutions that address these specific challenges.
As a mandatory framework for the stock exchange, a brand new form of stock exchange is proposed, the so-called Venture Exchange, which is being discussed within the bipartisan Main Street Growth Act. This structural change is a glimmer of hope for small businesses. These exchanges are geared towards small and mid-sized corporations, offering them the liquidity, regulatory oversight and transparent reporting often reserved for his or her larger competitors. By tailoring our approach to the needs of those corporations, we aim to develop them from small, publicly traded corporations into thriving, established public corporations.
Related: 6 Ways to Offer Allies to Black Entrepreneurs
Why this matters: Economic inclusion and more
Launching a brand new stock market model is greater than a business initiative; it’s a critical step towards economic equality for all. By providing access to public capital markets, we’re opening the doors for a complete community of underserved market participants to construct wealth, create jobs, and contribute more to the economy. It’s not nearly correcting a market inefficiency; it’s about rewriting the narrative of economic power and creating equal opportunities for all.
More broadly, supporting minority-owned businesses through equal access to capital is important to fostering a various and resilient economy. Diversity in business is important to all of our lives. Diverse businesses are where a vision of our future can grow. Diverse leadership within the roles of director, founder, executive, and employee results in a proliferation of unique ideas and innovations that promote broader economic growth and stability for all people. It is high time that the general public financial market made a conscious effort to reflect the variety of our society and recognize the worth and potential of all entrepreneurs, no matter their background.
To make sure that raising public funds for minority-owned businesses isn’t any longer only a dream—and, more importantly, a nightmare—it would take a concerted effort to deal with the biases and structural inequalities that permeate the financial landscape for small businesses. By changing the best way we structure and support access to public funds, we are able to unlock the complete potential of each entrepreneur and help construct a successful economic future for all. Let’s not only wait for change, let’s be its creators.
