Would You like a feature Interview?
All Interviews are 100% FREE of Charge
Opinions expressed by Entrepreneur contributors are their own.
The entrepreneurial environment is diverse and reflects the rich fabric of our society, but this diversity is largely not reflected in the financial sector. Consider the following statistics: Publicly-listed companies owned by minority shareholders Representing just 0.2% of listed companies, this significant undervaluation highlights a broader issue of access to capital available in the public capital markets.
Moreover, the important role that initial public offerings (IPOs) play in job creation is crucial, with 92% of job gains coming from Post-IPOAccording to the U.S. Treasury Department’s IPO Task Force, the decline in small and mid-size IPOs since 2000 has negatively impacted all entrepreneurs. And the low number of publicly traded minority companies has denied minority entrepreneurs the dream of going public, leaving many companies without the critical capital they need to expand and thrive.
The disappearance of small publicly listed companies and the underrepresentation of minority-owned businesses in public capital markets is not just a statistic. It reflects a structural issue that requires a change in the way stock exchanges create access to public capital across the country. While only a small fraction of such companies are listed on major stock exchanges, the potential to foster innovation and job creation through access to public capital is enormous. Historically, the financial sector has not responded effectively to the diversity of the business environment, often sidelining companies without established connections or sufficient initial capital.
Related: Challenges to Raising Capital for Women and Minority-Owned Businesses and How to Solve Them
The impact of blanket funding
Inclusive funding is not just a moral imperative, it also makes economic sense. When diverse businesses thrive, it boosts local economies, creates jobs, and creates a competitive marketplace full of innovative ideas and services. Private capital markets focused on underrepresented businesses are making great strides toward a more inclusive investment environment. For example, Serena Williams’ venture capital firm 14 unicorn companiesNotably, her portfolio of companies includes 79% founders from underrepresented groups, 54% female founders, 47% Black founders, and 11% Latino founders.
“These figures are more than just statistics; they are proof of the untapped potential of these communities. Williams’ successful support of these ventures demonstrates a proactive approach to inclusive investing, which has the potential to positively impact the broader economy and drive innovation and growth in historically overlooked sectors.”
Rethinking Public Markets
Reimagining how stock markets operate requires creating a pathway for full and equitable participation for all entrepreneurs, especially minority-owned businesses. This means rethinking everything from the regulatory framework to the structure of the exchange itself. The one-size-fits-all model of traditional stock exchanges does not address the unique challenges faced by small and medium-sized businesses, including many minority-led businesses. There is an urgent need for financial services firms that can provide the support needed to navigate the complexities of going public and offer customized financial products and services.
Understanding the challenge is only the first step; addressing it is where the real work begins. Dream ExchangeAt , we are committed to changing the landscape for small business by providing an exchange philosophy tailored to their needs, many of which are minority-owned. The traditional stock exchange model has not only failed to support these small businesses, it has actively excluded them by catering primarily to the large, established companies that easily generate liquidity and generate high volumes of trading. Our mission is to level this playing field by focusing on solutions that address these specific challenges.
A new type of stock exchange, known as a venture exchange, is proposed as the necessary stock exchange framework, which is fully outlined in the bipartisan bill. Main Street Growth ActThis structural change is a ray of hope for small and medium-sized businesses. These exchanges are designed to serve their needs, providing the liquidity, regulatory oversight, and transparent reporting typically reserved for larger companies. By tailoring our approach to the needs of these companies, we aim to help grow them from small, fledgling public companies into thriving, established public companies.
Related: 6 Ways to Provide Support to Black Entrepreneurs
Why this matters: Financial inclusion and beyond
Introducing a new trading model is not just a business move; it is a critical step toward economic equality for all. By enabling access to public capital markets, we are opening the door to an entire community of underserved market participants to build wealth, create jobs, and contribute significantly to our economy. This is not just about correcting market inefficiencies; it is about rewriting the narrative of economic power and creating equal opportunity for all.
More broadly, supporting minority-owned businesses through equal access to capital is essential to fostering a diverse and resilient economy. Diversity in business is essential to all of our lives. Diverse businesses are where we can nurture our imaginations for the future. Diverse leadership in board, founder, executive and employment roles leads to an explosion of unique ideas and innovation, stimulating broader economic growth and stability for all. It is time for public financial markets to recognize the value and potential of all entrepreneurs, regardless of background, and make an intentional effort to reflect the diversity of society.
To ensure that raising public capital is no longer just a dream, let alone a nightmare, we need a concerted effort to address the biases and structural inequalities that permeate the small business finance environment. Transforming the structure and support of access to public capital will unlock the full potential of all entrepreneurs and build a prosperous economic future for all. Don’t wait for change, be an agent of change.