‘Level up’: Equity investors boost Pa.’s entrepreneurs of color during pandemic

“My job is to try and go in and convince construction companies that I, a brown woman, can do the job as well, if not better than, another individual in the industry,” said Brown, 50. “It is always an uphill battle.”

• By Miles Bryan/Keystone Crossroads

(Philadelphia) — Shariah Brown is used to skeptical looks when she shows up to bid on construction clean-up projects for her Harrisburg-based cleaning company, Personal Touch Cleaning Service.

She’s often the only woman and only person of color at the table.

“My job is to try and go in and convince construction companies that I, a brown woman, can do the job as well, if not better than, another individual in the industry,” said Brown, 50. “It is always an uphill battle.”

Still, before last spring, Brown won more battles than she lost: building a company she started with her sister in the mid-2000s into an organization with five part-time employees and roughly $200,000 in annual revenue.

The pandemic reversed that momentum. When the commonwealth paused construction projects in March, Brown’s work dried up. A construction company manager who regularly passed leads on to Brown lost his job. For weeks, her company had nothing under contract and no prospects.

“It got stressful, and scary,” Brown said. COVID-19 hit business owners of color particularly hard. In Philadelphia, for example, in the first few months of the pandemic, the number of Black-owned businesses decreased at a rate one and a half times faster than the number of white-owned businesses.

But Personal Touch is not part of any of those grim tallies. The business survived and is now thriving thanks to training and contracts provided by the Disinfect-US coalition, a new partnership between Philadelphia-area social impact investors and The Enterprise Center, a West Philly nonprofit that primarily serves business owners of color.

Its goal is to use training, financial aid, and networking to help cleaning company owners of color across the state weather the pandemic and compete for contracts from government agencies and other large anchor institutions — contracts that historically have gone largely to white-owned companies.

Making in-roads with ‘anchor institutions’

Soon after the pandemic began, Blessy Thomas saw an opportunity.

Thomas, who works with businesses affected by COVID-19 at the Enterprise Center, realized that the coronavirus was creating a new market for cleaning and disinfecting services.

“We have a base of commercial cleaning businesses,” Thomas said. “And we knew that — given the right investment tools and support — they can really optimize this time and have the potential for success.”

The biggest challenge? Access to capital.

Before the pandemic, Black and Latino business owners across the country were more than 1.5 times likely as white owners to have applications for business financing rejected, according to a report from the Federal Reserve Bank of Atlanta. It also found about 30% of Black and Latino business owners relied on personal funds or credit to pay for business expenses, compared to only 16% of white owners.

The Disinfect-US coalition is aiming to close that gap by providing low- or no-interest loans of $55,000 on average, as well as grants, to cleaning business owners of color. It has raised $500,000 since getting off the ground over the summer, and provided assistance to seven businesses so far.

The coalition is hoping to raise another half million dollars by the end of February, with a goal of doubling the number of businesses it assists within the next few months.

Companies involved have to commit to raising the hourly salary of their employees to at least $15 an hour. In return, in addition to the financial support, they get training on pandemic cleaning strategies, and, crucially, help obtaining cleaning contracts with large institutions like universities or government.

Business owners of color don’t often get those types of contract with so-called “anchor institutions.”

The nonprofit Philadelphia-based economic advocacy group The Economy League analyzed the 2019 spending of seven anchor institutions in the city — including The University of Pennsylvania, Temple University, Independence Blue Cross Health Insurance, and the Children’s Hospital of Philadelphia. Those institutions spent $2 billion on services contracted out such as catering, construction, and janitorial services. About 11% of that spending went to businesses owned by people of color.

After A Personal Touch joined the coalition in August, The Enterprise Center helped it obtain a part of a large contract issued by the Commonwealth of Pennsylvania to clean dozens of government offices, museums, and other state buildings in Harrisburg.

The contract has doubled the businesses’ pre-pandemic revenue, Brown said. She now has ten-full time employees, and has invested in new equipment and a human resources system.

The influx of cash has not only kept her afloat, Brown said — it will make her more competitive for big contracts in the future.

“It’s a game-changer,” she said. “It’s a level-up.”

Protests for racial justice spark action from Philly investors

The funding for the Dinfect-US coalition comes from a group of equity-minded investors based in Philadelphia who are affiliated with the national impact investment network “Social Venture Circle.”

Social Venture Circle Philadelphia Network Manager John Moore says the seeds of his interest in investing in Black and Latino businesses were sown after the police killing of George Floyd this summer, and the subsequent growth of the Black Lives Matter movement.

“In my mind, things were improving, and it was just a matter of time for things to change,” said Moore, who is white. “With what happened to George Floyd and just digging into it more… It just became clear that this isn’t something that is necessarily going to change.”

By July, Moore and prominent Philadelphia investor Peter Leone had gathered about twenty local investors and were casting about for ways they could assist business owners of color in the region.

“One thing we definitely did know: We are not connected to this world,” Moore said. “There is a disconnect between the world of capital, in some cases, and Black-owned companies.”

Fairly quickly the group made contact with The Enterprise Center, who suggested an initial focus on cleaning companies.

But the Disinfect-US coalition is just the beginning, Moore said. The investor group he put together is working with the Economy League to develop similar industry-specific models of investing in Black and Latino-owned businesses to help them obtain contracts from large institutions.

“The cleaning program… was a little bit of a warmup,” Moore said. “Now we want to take that experience and grow from there.”

Keystone Crossroads is a statewide reporting collaborative of WITF, WPSU and WESA, led by WHYY. This story originally appeared at https://whyy.org/programs/keystone-crossroads.