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How Black-Owned Restaurants Seek Non-Traditional Seed Funding

Starting a business can come with many challenges, and even more so when you are a person of color.

the The most recent assessment of businesses by the US Census Bureau in 2018 found that black Americans owned 124,004 employer businesses, which is 2.2% of the country’s 5.7 million businesses, even though they are 13.4% of the US population.

Research conducted at Yale University in 2003, found that an “unexplained” disadvantage of black-owned businesses compared to their white counterparts was the limited opportunities to access capital due to lending discrimination and consumer discrimination against consumers. black-owned businesses.

Tynesia Boyea-Robinson, owner of Dallas-based investment and advisory firm CapEQ, believes that redlining is one of the main reasons black business owners cannot qualify for the loans they need. Redlining is a discriminatory practice in which banks and other lending institutions refuse or limit loans to people in specific regions.

“Black businesses tend to be over-indexed and low-growth because high-growth industries require more capital and they are less likely to access it,” says Boyea-Robinson. Over-indexing means giving an attribute – in this case, race – too much importance in a discussion or analysis.

Boyea-Robinson adds that it is difficult for minority and black owners to secure the large upfront investments required for high-growth industries because they require more patience and confidence in business models. “As a result, many black business owners tend to go into low-growth industries, like restaurants, coffee shops, and hair salons,” she explains.

Mia Moss owns Black Coffee in Fort Worth.
Mia Moss owns Black Coffee in Fort Worth.(Cordraycreative / Cordraycreative)

Mia Moss, founder of Black Coffee, opened her café in 2019 in the eastern part of Fort Worth, where she grew up.

“I really just wanted a coffee for the community,” says Moss. “It was a bit difficult because I wanted to work with other cafe owners. And I think initially they didn’t take it seriously because that’s not an area you’d think someone would put a coffee in.

After hearing about other black business owners and their struggles with getting seed funding, Moss decided to raise money by reaching out to his community. She worked on Black Coffee’s business plan in 2017 and started talking to friends and family about investing soon after. Moss says the costs of starting a cafe can range from $ 50,000 to $ 300,000, depending on the location. For Moss, it wasn’t difficult to raise funds, as she appealed to investors she knew and who believed in her, rather than investors who didn’t know her vision.

“What we found is that other business owners have found it difficult to trust their bank that they have been using for years,” says Moss. “It’s probably best to try and pull people around you, with Kickstarters [a crowdfunding platform] and different donors and things like that, instead of going the normal way. “

Store owner Akwete Tyehimba (left) shows Bridget Gurly a new George Floyd “I Can't Breathe” t-shirt at Pan-African Connection in Dallas on Thursday, July 2, 2020 (Tom Fox / The Dallas Morning News )
Café Bar evening
Café Bar evening(Small Rice)

Tara McDaniel, owner of Soirée Coffee Bar on Singleton Boulevard with Clive and LaFree Ryan, decided to self-fund the jazz-themed cafe instead of going through a bank. After finding the funding, they had to find a location.

“When we were scouting, we definitely had an eye on Trinity Groves, just because it’s a gentrified, predominantly black neighborhood,” McDaniel says. “So we thought it was a way to buy into the block and bring that presence back from a property perspective.”

McDaniel was inspired by the birth of jazz in the 1900s when she sought to blend coffee and jazz music in one cafe. Historically, jazz culture has brought people together during tumultuous times, and that’s what McDaniel aims to do with Soirée.

“That’s exactly what coffee does; People come together to talk, ”McDaniel says. “We felt like in the midst of social injustice and all that was going on in our climate, we also wanted to be a beacon of light.”

The Black Lives Matter movement and other social justice initiatives have opened a dialogue about what it means to be black in America and shed light on black and minority-owned businesses.

“I’ve seen black-owned businesses… come out of nowhere,” McDaniel says. “I think what this climate did was give black people a little more fire to do the things we wanted and we kind of realized that we could have built tables that we didn’t. never been able to sit down. And it’s time to build tables and sit down.

Mackenzie Hall, owner of Hall's Honey Fried Chicken in the Medical District, opened his own restaurant after following in the footsteps of his father, left, who founded the business.
Tara McDaniel of Soiree Coffee Bar
Tara McDaniel of Soiree Coffee Bar(Dominica from Galaxy Media Pro)