The Maryland Technology Development Corporation and The Harbor Bank of Maryland Community Development Corporation have launched a pilot program to provide pre-seed capital and mentor minority tech entrepreneurs in the state.
The Minority Business Pre-Seed Fund will give 10 African-American entrepreneurs up to $40,000 each to test initial business assumptions and build a prototype.
“The Minority Business Pre-Seed Fund is designed to be TEDCO’s initial attempt to grow entrepreneurship in underrepresented communities with the goal of fueling innovation and economic development in Maryland,” said TEDCO President and COO John Wasilisin, adding that the program is an initial effort aimed at broadening the resources available to African-American tech entrepreneurs.
TEDCO has invested in more than 400 seed investments in the past 14 years through eight funding programs and six mentoring and education programs. TEDCO’s $22 million awarded to start-ups led to $1 billion in follow-on funding, the organization said.
Harbor Bank began in 1982 to serve urban communities, particularly African-Americans. A 2016 TEDCO study found that the African-American community lacks access to early pre-seed funds, traditionally known as the “friends and family round.”
Studies show that minority-owned firms are much less likely to receive business loans than non-minority firms. For example, when comparing firms with gross receipts of more than $500,000, 52 percent of non-minority firms received loans compared to 41 percent of minority businesses, according to data from the Minority Business Development Agency at the U.S. Chamber of Commerce. On average, minority business owners pay 32 percent higher interest rates on loans than non-minorities, figures from the Federal Reserve show.
“This pre-seed funding partnership with TEDCO is a continuation of Harbor Bank’s work to address an unmet need in the community,” said Joseph Haskins Jr, chairman, president and CEO of the Harbor Bankshares Corp.
Harbor Bank held a showcase in November for African-American entrepreneurs to pitch their business to potential investors. The showcase featured more than a dozen startups based in Maryland or looking to set up shop in the state. The participating companies pitched their businesses to potential investors at a showcase organized by the bank’s Community Development Corp.
The showcase resulted in close to $1 million dollars in early-stage commitments for companies involved in the event, Harbor Bank said. The bank is also working on creating a co-working space at its Baltimore headquarters to support underserved entrepreneurs.
TEDCO will begin accepting applications for the new program on March 1.