Capital Connector

New and growing businesses are a critical driver of job creation and economic growth.  Yet in our experience, too often there is a disconnect between available capital and businesses that need it. In simple terms, we want to provide air-traffic control for the local capital ecosystem by creating a community role called the Capital Connector.  That person will have three distinct responsibilities at the nexus between capital allocators and entrepreneurs:  First, they will be responsible for evaluating the spectrum of capital (both debt and equity) that is available to businesses, and for working with investors and other capital providers to ensure that we address any gaps in that continuum.  Second, they will help develop programming and other resources to ensure that entrepreneurs are effectively ‘capital ready’; that they possess the knowledge and information necessary to make their businesses investible or bankable.  And third, the Capital Connector will use our proprietary technology platform (Captinuum), along with other available technologies, to ensure that those entrepreneurs can access the right capital, at the right time.  It is our hope that through the application of this technology, the Capital Connector will help facilitate the increased flow of capital to new and growing businesses in our community, and in particular, to entrepreneurs from disadvantaged backgrounds.  Ultimately, we believe that the combination of greater preparedness, and better access to capital, will help ensure more, and more successful, businesses serving our region.

Captinuum is a software tool that reduces founders’ efforts in identifying, planning, and implementing a capital strategy. Captinuum breaks the capital strategy process into its parts and manages the interactions between those parts to offer a more efficient and systematic approach to developing a capital strategy. The tool provides entrepreneurs a capital strategy report as a starting point for coaching from an entrepreneurial service organization and mentors.

Captinuum works by allowing entrepreneurs to address five orienting and prioritizing questions:

1.              Where is your company in its maturity and activities, and what risks are indicated to a capital provider?  The company answers ‘Yes’ or ‘No’ to whether the company has achieved 72 company phase or business goals milestones to indicate maturity of the company or activities toward the business’s mission to develop an overall ‘risk ranking’.

2.              What areas of your business’s financial situation would your company be willing to impact? The company answers ‘Yes’ or ‘No’ to 19 financial impact areas to indicate whether they are open to impacting that aspect of the business with a possible capital transaction. Focusing on areas of financial impact that an entrepreneur is open to allows for prioritization of pain points of the business model where capital can be useful to meet milestones. This also sets apart areas of the business model where there are inherent weaknesses that outside capital will not address.

3.              What next maturity indicators and mission activities would your company need to use capital to address? The company narrows the list of calculated capital uses by answering ‘Yes’ or ‘No’ to a calculated list of less than 20 options. By building the capital strategy around capital uses, we focus entrepreneurs on actions around maturity and mission that help show capital providers that the company is progressing in the growth phases and driving toward business goals.

4.              What transaction types are of interest to your company based on their features and uses? The company narrows the list of calculated transaction types.. By comparing a broad sampling of transaction types to capital uses entrepreneurs can focus their capital search on capital providers that are offering transaction types and terms that are mutually beneficial and ask for exactly what they need now and, in the future, to grow their company.

5.              Which capital providers make sense for your company to engage with based on your company’s choices above? The company prioritizes the list of calculated capital providers by ranking the calculated list of 10 to 20 options to research. This makes seeking a connection a connection with these capital providers a more efficient process.

Once the entrepreneur has completed all 5 sets of the Captinuum capital strategy process, they can format and print their capital strategy report. Of course, all capital strategies are unique to each company, but Captinuum provides a good starting point to begin to build an intentional strategy, saving founders’ efforts for the pressing work of running the company.

We are designing this program to serve any entrepreneur, regardless of their demography.  However, we believe that it will be particularly significant for women-owned and minority-owned businesses, and those in rural communities, all of whom have traditionally been (and continue to be) disproportionately impacted by the challenges associated with capitalizing a business.  The Federal Reserve's Small Business Credit Survey, for example, consistently finds that women-owned businesses and minority-owned businesses are more likely to experience challenges in obtaining credit from banks and financial institutions.  Indeed, in the most recent survey, Black-owned businesses were nearly three times more likely to be denied lending than white-owned firms (50% v. 18%).  Discriminatory lending practices and biases can exacerbate these disparities.  Similarly, the Angel Capital Association, Pitchbook, and other sources reporting on venture financing have chronicled a substantial disparity between startups founded by white males and women or minority-owned startups.  Last year, women-led teams received only 2% of venture funding, and Black founders received just over 1% of that capital.  Knoxville Entrepreneur Center has developed programming that specifically addresses the needs of these communities, including 100Knoxville (Black-owned businesses), Women in Entrepreneurship, Let Her Speak, and Small Town Entrepreneurship.  Those programs have allowed us to interact with a broad cross-section of the entrepreneurial community, and have provided insight into the challenges they face.  Those insights have substantially informed the development of this initiative.  As mentioned above, the combined responsibilities of the Capital Connector, paired with the increased efficiency of the Captinuum platform, should significantly increase the quality of businesses seeking funding, improve the availability of that funding, and better target those efforts toward the type of funding most appropriate for the business.

In recent testimony, Small Business Administrator Isabella Guzman warned that minority-owned small businesses’ lack of access to capital is costing the U.S. economy hundreds of billions of dollars in economic output.  The same can be said of women-owned businesses, and many of those trying to start or grow businesses in small or rural communities.  Through a combination of programming and technology, our proposed solution directly addresses the frequent disconnect between capital providers and business owners trying to access needed capital.  It will help ensure that adequate capital sources exist in the community; that business owners are sufficiently prepared to receive that capital; and that they are able to access it in a more intentional way.

On the dimension of improved financial preparedness, our solution will increase the availability of programmatic support and other resources to help entrepreneurs understand the needs and requirements of capital allocators.  Moreover, Captinuum will help them understand the precise type of capital that best suits their situation.

With respect to increased data optimization/display for business intelligence, impact evaluation, and/or improved decision making for resource allocation, Captinuum will deliver a report based on their data input that will highlight the types of leverage they have available, gaps in their business model, and potential uses of funds, allowing them to make more informed decisions about what types of capital to pursue.

Access to capital is a critical determinant of entrepreneurial success, especially for individuals hailing from disadvantaged populations.  Providing more entrepreneurs with the tools needed to obtain adequate capital will foster job creation, economic empowerment, social mobility, and overall community development.

“There’s too much capital available,” said no entrepreneur, ever.  But entrepreneurs from disadvantaged populations face additional, often systemic barriers, including limited financial resources, lack of collateral, and limited access to traditional financing options. These barriers hinder their ability to start or expand businesses, stifling economic growth and perpetuating inequalities. Facilitating better access to capital for these entrepreneurs addresses some of the initial barriers they face. With financial resources, they can invest in business operations, product development, marketing, and human resources, thereby increasing their competitiveness and growth potential.

Injected capital allows entrepreneurs to scale their businesses, resulting in increased production, job creation, and revenue generation, contributing to local economic development, spurring additional economic activity and potentially revitalizing marginalized communities. Successful businesses also generate profits and develop assets, helping build personal and community wealth that creates financial stability for themselves, their families, and future generations.

Thriving businesses led by entrepreneurs from disadvantaged backgrounds become sources of inspiration and role models within their communities. Their success challenges stereotypes, fosters a culture of entrepreneurship, and encourages other aspiring individuals to pursue their dreams, creating a positive feedback loop of empowerment.

As more entrepreneurs from disadvantaged populations succeed, a collective economic uplift occurs. This can lead to the revitalization of neighborhoods, increased community services, and improved living standards. Additionally, successful entrepreneurs often reinvest in their communities through philanthropy, further enhancing local development.

The collective success of entrepreneurs from disadvantaged populations can lead to increased advocacy for policy changes that address systemic barriers, such as improved access to affordable credit, business support services, and equitable market opportunities, creating a more conducive environment for future entrepreneurs.

Over time, increased access to capital for entrepreneurs from disadvantaged populations contributes to a more inclusive and equitable economy. The cycle of poverty is disrupted, leading to reduced income inequality and a broader distribution of wealth.

We are still in the prototyping phase, so while we have had several entrepreneurs Beta test the solution, we do not have anyone currently being served by it.  In one year, we hope to have finalized the platform, and have had at least 10 entrepreneurs use it to assess their capital needs and opportunities.  In five years, we hope to have scaled to a point where 200 businesses have used it.  As importantly, the role of the Capital Connector will have helped identify additional capital needs in the community; and worked to create new sources of capital, and new programming to ensure even more entrepreneurs are able to find the capital they need.

KEC was founded to help entrepreneurs of all different backgrounds, skill sets, and passions change lives. Those entrepreneurs are the key stakeholders who define our strategy.  Our entire team is empowered through intentional, tailored leadership development to grow to better serve our communities.

Of course, we cannot do that alone. KEC is a collaborative part of the entrepreneurial support ecosystem, acting as connective tissue and catalyst among a number of organizations that seek to provide assistance to entrepreneurs in our region. We fully embrace our role as the "center of gravity, not the center of attention" for a robust entrepreneurial ecosystem that includes institutions, support organizations, local government, and the private sector. 

By working closely with those organizations, and with the private sector, we aspire to develop a continuum of programs and services that helps ALL entrepreneurs at every stage of their evolution.

Being trusted requires listening to the communities we serve, and responding with the most relevant programming, mentorship, and community opportunities.

Whether in person, through our newsletter, frequent emails, or social channels, KEC is deeply connected to our ecosystem.  That outreach is designed to meet entrepreneurs where they are, and to facilitate an ongoing dialogue that informs our work.  

Our engagement, mentorship, and programming are being regularly re-evaluated to ensure that our services continue to align with our purpose, mission, vision, and values - and each team member is encouraged to speak up and act accordingly to better serve our community.

As mentioned above, specifically for Captinuum, in one year, we hope to have finalized the platform, and have had at least 10 entrepreneurs use it to assess their capital needs and opportunities.  In five years, we hope to have scaled to a point where 200 businesses have used it.  If the Captinuum tool proves to be effective for our local environment, it could be easily extended to other communities, and made available either to entrepreneurs or practitioners nationwide.

Looking at the broader capital landscape, over that time, we would expect to see the amount of capital available increased.  In particular, for our region, we would like to see additional lending capacity for very small loans - those between $5,000 and $25,000; and at least $10M in new private capital being deployed, either through angel groups or the creation of local seed and Series A funds.  If successful, we would see an increase in funding to the entrepreneurs we serve of at least 25% over that time.  If this model is adopted more broadly, we would hope to see similar results in other regions.

Partnering with Truist Foundation and MIT Solve will help KEC better serve our community through improved operational capacity and the ability to fully develop and deploy the Capital Connector program.  In particular, we will be grateful for help developing the technology, and delivering on the promise to make more capital available and accessible.  The participation of Truist and other capital providers will be critical to both.  Truist has the subject matter and domain expertise needed to better understand the various ways that capital is allocated.  We would hope to work with Truist to ensure that the Captinuum tool accurately reflects that allocation process, and that it is designed to optimize the chances of connecting entrepreneurs with the right type of capital, at the appropriate time in their business' life.  Truist's expertise will help us find and correct any deficiencies in our program, and identify gaps or inaccuracies in the way we have represented the capital continuum.  On an organizational level, Truist' support will be invaluable in helping develop a sustainability strategy so that we can continue offering this program, and to help expand the reach of the platform beyond our region.  Finally, working with Truist and Solve will help bring added awareness to the problem we seek to address, and greater adoption of our solution when it proves successful.

In short, MIT has the technical expertise to help develop the platform further; Truist has the industry expertise to help inform its evolution and deployment. As mentioned above, we would be looking to partner with Trusit for access to their subject matter expertise and deep understanding of the ways that capital is deployed.  Moreover, we want to work with Truist to ensure that sufficient and appropriate capital exists to support all types of businesses.  And while we understand that this is not directly a part of Solve's mission, if there were technical resources available from MIT to help develop the platform, that would certainly be a bonus!