Frederick Melo | Pioneer Press
June 11, 2018 at 6:21 pm
Entrepreneurs of color, start your engines. An economic development association is giving away $1 million in startup funds in a “Shark Tank”-style competition this fall, and four finalists of color will share in the financial awards.
The “Million Dollar Challenge for Minority Entrepreneurs” — which is open to racial minorities across the state — is being organized by the Metropolitan Economic Development Association, which provides business consulting, marketing and capital for minority business owners. St. Paul Mayor Melvin Carter, whose office is assisting with the contest, announced the competition at Meda’s 47th annual meeting, which was held Monday at the Walker Art Center in Minneapolis.
“St. Paul will be ground zero for the pitch competition,” said MEDA executive director Gary Cunningham. “We haven’t announced where yet. … Melvin Carter found out about it and he called me up and said, ‘Hey, I’d like to do that in St. Paul.’ I said, ‘I’d like to do that in St. Paul.’ St. Paul is becoming pretty known for startups.”
Details about the challenge will be released this August, but contestants can expect to make speed pitches to judges during Twin Cities Startup Week, Oct. 8 -14. Four finalists will compete for cash awards in December. Meda will provide 7-8 weeks of coaching to 10 qualified finalists.
The awards are funded in part through a grant from the NEXT Fund for Innovation, a Philadelphia-based association of community development institutions.
The goal is to help prospective business owners overcome a major barrier-to-entry in business development — limited access to start-up capital — by helping them refine their pitches and business plans, and by linking them to potential funders.
“Entrepreneurship is the No. 1 way to address racial economic inequalities,” Cunningham said. “If you add an entrepreneur to a black family, that family’s assets grow 600 percent.”
Minority-owned startups, however, tend to face even more challenges than what’s typical for their industry.
“A lot of times, what happens with minority entrepreneurs is they end up carrying a large amount of debt, if they can get the capital to begin with,” Cunningham said. “And when you’re carrying a large amount of debt, you can’t accelerate your company, because you’ve got to make that payment every month.”
According to a 2017 report by the Minority Business Development Agency, some 42 percent of minority-owned firms with gross receipts under $500,000 are denied loans, about three times the rate as non-minority owned firms (16 percent). Even among high-sales firms, loan denials were twice as high for minority firms than non-minority firms. And for the minority firms, average loan awards were smaller and interest rates were higher.
The Million Dollar Challenge is one of several start-up competitions and “accelerators,” or entrepreneurial mentorship programs, that have gravitated to the Twin Cities. The University of Minnesota’s Carlson School of Management hosts MN Cup, the largest statewide startup competition and business mentoring program in the country, which drew more than 1,660 applicants this year.
“The Carlson school has been helpful throughout this whole process,” said Cunningham, who helps fund the “Minority Cup” division of the MN Cup with JP Morgan Chase and the state of Minnesota.
On May 30, MN Cup announced 90 semi-finalists in nine divisions. Later this year, division winners will receive $30,000, and one grand-prize winner this October will win $50,000. The semifinalists began the mentoring phase of their competition June 6 at the Carlson School.
Additional accelerators include St. Paul-based Lunar Startups, the new Techstars Farm to Fork accelerator (for digital and tech-based startups in food and agriculture), and Techstars Retail, which is being coordinated in conjunction with Target.
Read the full article from the Pioneer Press here.