From the Advocate

By Tara Lynn Gray 

November 2024

Empowering California’s Diverse Entrepreneurs to SCALE

Democratizing Access to Capital

California is home to more than 4.1 million small businesses, making it the most diverse and economically powerful small business community in the nation. These small businesses provide nearly half of all private-sector jobs, creating economic opportunities and contributing to our state’s thriving economy.

I remind people of that in just about every speech I give.

I also like to remind people that about half of those small businesses are owned and operated by people of color, people we refer to at CalOSBA as “diverse small business-owners”.

What I don’t always say out loud is the fact that among these diverse-owned businesses, an overwhelming percentage are non-employer firms.

Some are solopreneurs by design. That’s great: these people created their own jobs and we thank them.

But for too many, their revenue is capped by their workforce capacity.

The question is: Why aren’t they able to scale? And the answer is, most frequently, access to capital. Whether you are trying to build your business to meet demand, or you have won and are trying to deliver on a contract, you need access to capital beyond what you can borrow from friends and family.

Big businesses are not using their own money to scale. They are getting favorable loans and maintaining their cash so that it can grow, while they use other people’s cash to invest in their new business ideas.

We want everyone to be able to do that. This is what we at CalOSBA call “democratizing access to capital”.

As the Director of the California Office of the Small Business Advocate, I believe that no city, region, or state can truly thrive without putting small businesses at the core of every economic strategy. And study after study shows that supporting businesses run by underserved entrepreneurs is where we can gain the most as an economy and secure our place as the fourth largest economy in the world.

This is the reason why we recently rebranded our small business support center network as SCALE. SCALE stands for Success, Capital Access, and Leadership for Entrepreneurs and it encompasses all the centers, both state- and federally funded, that are part of California’s entrepreneurship and small business support ecosystem. You find it by going to Calosba.ca.gov and clicking on the yellow button at the top: Get Help for Your Business

SCALE aims to break down the barriers that have long prevented marginalized entrepreneurs from scaling their businesses and achieving their dreams. By providing not only access to capital but also mentorship, coaching and leadership development, SCALE is creating the necessary conditions for entrepreneurs to succeed and thrive.

This network has expanded this year thanks to an infusion of funds from the federal government, adding more business advisors and lenders to ensure that entrepreneurs not only receive the most favorable rates possible but get the advice they need to calculate how much of a loan they should really be going for, or if they afford a loan at all. If there are credit or collateral issues, we have advisors that can help you get Loan-Ready.

Our approach fosters collaboration among all the providers in the network as well as capital providers and community organizations. We want to make sure that there is no wrong door for entrepreneurs and potential entrepreneurs: no matter who they approach first, they will end up with the advisor and the lender that they need.

Just last month, we got more good news: U.S. Treasury approved our application for $10 million more in funding to expand SCALE even further.

The Procurement & Innovation Capital Leadership for Entrepreneurs program (PINNACLE) will allow us to target services to businesses looking for what we’re calling “mature capital” and address two major market opportunities where California is uniquely positioned.

#1 State procurement contracts, most especially for the infrastructure construction in which the Governor has made a historic investment.

#2 High-growth, high-wage innovation sectors where California leads the nation

One aspect of the program will target businesses competing for state contracts and assist them with obtaining the bonding, insurance, and loan capital needed to secure contracts with local, state and federal jurisdictions as well as with private entities.

This funding will also help us better address the disparities and gaps in the venture capital dollars spent on diverse business founders in high-growth, high-wage innovation sectors by strengthening existing pathways and creating new ones.

CalOSBA also plans to use this funding to provide 5,000 additional business-owners with 1:1 counseling and training. Our office anticipates developing at least 200 training events and supporting eligible beneficiaries to obtain a capital infusion of $250M in total capital through a combination of non-dilutive capital, bonding capital, debt capital, as well as angel and venture capital.

PINNACLE is an extension of the SCALE program, designed to further empower small businesses by providing targeted support for procurement opportunities and specialized capital. We are building a California where every small business—regardless of its size, background, or starting point—has the opportunity to reach the “pinnacle” of success. Get it?

I see California at the forefront of inclusive economic growth. With SCALE and the extension through PINNACLE, our focus is not only on providing capital but also on ensuring that small businesses are ready to seize large-scale opportunities.