A Public and Private Partnership For Economic Growth

Yesterday, the Congressional Black Caucus, Axia Partners, the Howard University Small Business Development Center and the Washington D.C. Office of Banking and Finance announced a unique partnership dedicated to helping minority businesses obtain access to equity financing. The one of a kind collaboration is a highlight of this week's Congressional Black Caucus Annual Legislative Conference and could potentially represent a paradigm shift in the relationship between the Black political establishment, the Black financial community and Black entrepreneurs.

The effort centers around the creation of a "Deal Room" - a formal venue established during this week's CBC conference, where entrepreneurs will be able to present their business plans and investment opportunities to venture capitalists and angel investors, and right on the spot, begin discussions and negotiations that may result in financial investments and the formation of strategic partnerships.

The effort hopes to "take away the excuses" offered by both minority-owned businesses and the financial community as to why minority-owned businesses do not receive capital to fund their start-up and established enterprises.

Yesterday, CBC members Rep. Eddie Bernice Johnson (D-TX), Rep. Albert Wynn (D-Md), Rep. William Jefferson (D-La.) and Rep. Earl Hilliard (D-Al.) all voiced their support and involvement in the effort.

The New York-based Axia Partners are a brokerage and investment advisory firm specializing in the early-stage venture market. The firm spearheaded the effort out of its concern and interest in minority and female-owned enterprises that are seeking access to capital. Axia will bring as many as 75-100 angel investors and venture capitalists together, from across the country, to examine, discuss and consider opportunities for investment.

"The deal room is unique because it focuses on bringing entrepreneurs and investors into the same space and really stimulating a dialogue and discussion - ultimately hoping to get deals closed." Axia Partners Director Keba Gordon told those gathered at the U.S. Capitol for yesterday's press conference announcing the event.

"Our goal is to inform, to discuss and to connect the various pieces to the puzzle of women and minority access to venture capital" Mr. Gordon emphasized.

Black Caucus members and Axia Partners frequently referred to findings contained in a 1999 study by the Milken Institute, which concluded that minority businesses are underserved by capital markets for four reasons:

1. A lack of credit information and resulting misperceptions of minority businesses as small, unprofitable, and unfavorably located

2. Minority firms' over dependence on commercial bank lending due to low levels of net worth and net financial assets among minority entrepreneurs and a lack of access to alternative forms of finance

3. Government policies that have focused on bank lending, while increased regulation, capital restrictions, and consolidation have made commercial bank lending to small business less attractive

4. Small Business (SBA) financing rules that have constrained equity financing in small minority businesses and that have focused policy on the least-profitable industry sectors and firm sizes.

The effort hopes to address these challenges as described in the Milken Institute study, particularly the excessive dependence that Black and minority-owned firms have upon debt financing. During yesterday's press conference, Rep. Wynn was particularly critical of government-led efforts to provide loans to minority-owned businesses.

Axia Partners, the Congressional Black Caucus, Washington D.C. Mayor Anthony Williams and Howard University should all be commended by their efforts to address a historical imbalance in a most creative way.

Hopefully, other members of the private and public sector will follow their lead and example.

Cedric Muhammad

Wednesday, September 13, 2000