Creating Economic Agency With Risk Capital

To execute on our mission of creating a robust and thriving ecosystem for entrepreneurs in Louisville and Southern Indiana, Render Capital leverages the deployment of risk capital. We assist local startups in overcoming the barriers they face in accessing traditional financing by creating new funding mechanisms right-sized to serve the unique needs of early-stage companies.

Our approach to creating local impact requires that we do more than just build the capital products that serve our market. To fully realize our mission, it’s essential that our capital programs also strategically foster an improved sense of economic agency for the entrepreneurs we support. A truly equitable and dynamic economy in our region is one in which entrepreneurs, especially those who have been historically excluded, are empowered by capital investments to improve their own economic condition on their own terms.

Defining Economic Agency

In economics, an “agent” is an actor that plays a role in an economic circuit through their actions and decisions. From a sociological perspective, “agency” is a broad term that defines the capacity of individuals to make their own decisions of their own free will. When we combine these concepts, we reach a definition of economic agency in which those with greater economic agency have more influence over their economy, and subsequently have increased control over their own individual economic position.

Societal Structures and Agency

In practice, the ability for each of us to manifest our own economic fate is substantially defined by the societal structures that bind us. Social status, race, geography, ethnicity, disability status, economic class, gender identity, and sexual orientation are all factors in how we interact with our larger society. Across the globe, inequitable and biased policies and norms cause entire groups in our communities to be excluded from equal participation in the mainstream economy, both historically and at present.

Historical discrimination has led not only to an unequal distribution of capital, but the economic inequalities that currently exist are further perpetuated because marginalized groups have a disadvantage in exerting their own economic influence over an oppressive system. The real-life implications of structural bias are far-reaching across our economy.

Entrepreneurship to Build Economic Agency

One actionable way to address economic equality is to intentionally break the barriers that excluded groups face in getting their hands on the capital for growing entrepreneurial endeavors. We can bolster the capacity for historically disadvantaged groups to fuel their own economic empowerment by reallocating resources to structures that support inclusive entrepreneurship.

Business ownership is a powerful tool to support wealth building. In The Tapestry of Black Business Ownership in America, AEO reports that Black business owners have 12 times the wealth of Black non-business owners, and it’s not because they started out wealthier. Business owners tend to start out less wealthy, while growing wealth faster than non-business owners.

But existing disparities in wealth accumulation impact who is able to become an entrepreneur, because startup funding is fundamental to ensuring business viability. When seeking outside capital, women are less likely to receive bank loans than men, even after accounting for objective venture characteristics, one study found that men were 60% more likely to secure funding than women when pitching the same business. Minority-owned businesses receive lower loan amounts on average than non-minority businesses of the same caliber. And the vast majority of venture capital dollars go to white male founders in the country’s largest cities: only 1% of US businesses ever raise venture capital, and of those, nearly 90% are male-led, 72% are white-led, and 78% come from the nation’s top 10 largest metropolitan areas. Less than 1% of venture deals go to startups led by LGBTQ+ founders.

Our Approach

Render Capital ignites funding mechanisms that address barriers to equitable capital access in a number of ways. The first is by creating products that provide capital to companies at the earliest stages, when capital is most impactful and most difficult to obtain.

For Black and brown entrepreneurs without wealthy personal networks, we collaborate with community partners to provide First Dollar grants to early-stage startups to overcome the friends-and-family funding gap. For tech-enabled, high-growth startups, we host the annual Render Competition to provide venture-style investments to companies before they see the traction most VC firms would require.

We also circumvent traditional lending practices that require significant personal wealth by providing character-based microloans to young businesses. A majority of funding sources require entrepreneurs to have substantial financial collateral or credit scores to qualify. While this style of lending effectively mitigates risk, it also excludes entrepreneurs who lack access to wealth and credit at no fault of their own. Our character-based Growth Loan lends to entrepreneurs based on their ability to provide “equitable collateral”, their reputation, their business acumen, their business model, and their future growth potential.

We also provide alternative capital products with more founder-friendly terms. An overwhelming majority of businesses don’t fit the steep return expectations of traditional venture models, and women and BIPOC entrepreneurs in particular are statistically more likely to start businesses in sectors that produce more moderate returns. Render Capital provides alternatives to equity investment, like crowdfunding and revenue-based solutions, that allow entrepreneurs to prioritize revenue and sustainability instead of lofty investor returns.

Lastly, we decentralize and democratize the flow of capital through crowdfunding and distributed decision-making. We decentralize our decision-making by entrusting community members to make decisions for how Render Capital funds are deployed. All lending decisions from our Growth Loan Fund are made by a committee of community representatives who meet face to face with each qualified applicant. Similarly, a community of more than 130 judges is entrusted to collectively select the eight Render Competition investment winners from a pool of over 300 applicants. In both cases, Render Capital has a seat at the table as just one voice among many, ensuring that a diverse pool of perspectives is taken into account.

Fostering economic agency for the individuals we serve is a guiding star for the work we do at Render Capital. We believe in the extraordinary power of entrepreneurship as a tool for individuals to improve their own economic condition, on their own terms. By redirecting the flow of capital, we have the potential to subvert the impact that biased structures have on our region, and build more inclusive opportunities for all.