Expand Equity and Economic Opportunity/ Field Note

Here’s Why Mentorship can Help Close the Racial Wealth Gap

The statistics were shocking. The median net worth of white Bostonians came to $247,500, while Latinx residents landed at $1,907, and Blacks fell to $8.

That is not a typo. Eight singles—not enough to get most families through one visit to the grocery store. The 2015 data from Duke University, the New School and the Federal Reserve Bank of Boston, in a report titled The Color of Wealth in Boston, developed the data by beginning with assets such as bank accounts, homes and stocks, and then subtracting debt including medical, credit cards and loans.

“This study caused many in the community to understand the impact that hundreds of years of inequities have had for communities of color,” says Glynn Lloyd, Executive Director for the Foundation for Business Equity (FBE).

In response, the Foundation for Business Equity and its signature program, the Business Equity Initiative (BEI), were born. The goal? Addressing persistent structural barriers that prevent Black- and Latinx-owned businesses from reaching their full potential in Greater Boston. “We’re addressing it, and successfully,” Lloyd says, “though changing hundreds of years of precedent takes time and sustained effort, with solutions that dig deep below the surface to reach the systemic structures that create inequities in the first place.”

Since 2017, BEI has provided strategic mentoring over nine to 12 months to more than 50 Black- and Latinx-owned businesses in Greater Boston, including programs to open up new sources of capital, capacity and connections while undoing the systemic barriers that have created historic injustice and the racial wealth gap. And this year, The Rockefeller Foundation contributed funds to help additional businesses over the next two years.

  • Mentoring is critical for Black- and Latinx-founders, who face unique barriers in accessing capital or credit to start, grow, and sustain a business.
    Gregory Johnson
    Managing Director of The Rockefeller Foundation’s U.S. Equity and Economic Opportunity Initiative
 

Statistics Reveal the Width of the Gap

Greater Boston, the area covered by the report, is home to about 4.875 million residents, accounting for almost one-third of New England’s population. Although the starkness of the report data surprised the city, it did not stand out as an anomaly, on either the local or the national stage. Other indicators were, and remain, equally disturbing.

Nationally, the loan denial rate for Black- and Latinx-owned businesses came in at two times the denial rate for white-owned businesses, and when awarded, loans typically carried higher interest rates (7.8 percent versus 6.4 percent for white-owned businesses,) according to the Brookings Institute. Less than 1 percent of venture capital goes to Black entrepreneurs, Brookings has found.

 

But greater access to capital alone is not enough, and this conviction led to the FBE model of sustained, in-depth strategic guidance. FBE’s leadership team, many of whom are entrepreneurs themselves, forms relationships with former CEOs and successful business owners who work with established Black- and Latinx-owned companies that have annual revenues of at least $500,000. The dedicated advisors work with the business owner to create and implement a customized growth plan.

“Business owners tend to say ‘we need money,’ and the advisors say ‘you need a business plan too,’” says Diana Ubiñas, Program Manager for FBE and a native Bostonian with a career-long commitment to serving multicultural communities. “They ask tough questions and develop a targeted growth plan with business owners. The relationships that form are our secret sauce. With a trusted advisor and business plan in place, the business owner develops a new level of confidence in themselves and their business and the resulting changes they make are transformational for them, their employees and the communities their business serves.”

And it’s working. The first 30 participating businesses have generated an additional $53 million in growth revenue while creating the combined equivalent of 368 new full-time jobs.

An ITAD Company Grows Under Careful Mentorship

One of those businesses supported by BEI is founded and led by the Yepez brothers, whose parents immigrated to the U.S. from Ecuador in 1968 with $46 between them. Their father found a job in New York City’s humming Garment District pushing racks of dresses from one warehouse to another, while their mom worked as a seamstress.

 
Yepez brothers Juan (left) and Luis (right,) CEO and COO respectively of Mainstream Global
 

“It was two or three jobs for each of them for many years,” recalls Luis Yepez. “They had larger aspirations for my brother Juan and me.” His mother eventually became an electrologist and his father an envelope machine mechanic.

Luis, the older of the two, went to private schools funded by his parents’ work, was accepted by the U.S. Naval Academy and is an Iraq war veteran, still in the reserves. He was working in Minnesota for a company that produced implantable pacemakers and defibrillators when his brother called him in 2000 and suggested they go into business together.

This was the start of Mainstream Global, an ITAD (Information Technology Asset Disposition) company based in Lawrence, Massachusetts. Mainstream Global refurbishes computers when possible, and when not, disposes of them and safely destroys data in environmentally responsible ways. Juan Yepez is the CEO, and Luis Yepez is the COO.

They brought dreams, drive and know-how to the work, but there were rocky moments in those early days, most notably when New England’s so-called Mothers’ Day Flood in 2006 caused the Merrimack River to rise 30 feet. Mainstream Global had a warehouse along the riverbanks “and we lost close to $400,000 of inventory,” Yepez recalls.

They survived that, but watched their business plateau. “We didn’t know how to expand or increase our profit margins. Our network of advisors got tapped out,” Yepez recalls.

That’s when the brothers connected to FBE and Michael Hicks, an entrepreneur and advisor working with BEI at its inception, who embedded in the company in the autumn of 2018, becoming a strategic advisor, mentor, and eventually, a personal friend.

“This is what differentiates FBE,” Yepez says. “We dedicated the first three months to developing a five-year plan, and the next nine months to implementing the key aspects. Michael was able to call the baby ugly when he needed to. If we hadn’t had this, I think the business would have plateaued.”

Hicks credited Yepez and his team for being responsive to the process. “Here’s a complete stranger and you’re going to open up,” he says. “How do you create trust? Luis and his team were receptive. The work is important to me because by nature, I’m not a protester, but I think I can have a much broader impact by addressing the problem of income inequality at its root cause.”

From its start in 2000 with three employees in a 600-square-foot office, today Yepez says Mainstream Global is on track to reach $50 million annual revenue by the end of 2022, a 100 percent increase since when the company began working with BEI. Mainstream Global currently employees 52 people in the U.S. and another 55 in Latin America, 59 percent of whom are Hispanic and 41 percent of whom are women.

Yepez notes that his business is founded on the philosophy of a commitment to community and mutual respect that his parents taught him and his brother, and that’s now enabling Mainstream Global to help provide the income for its workers to pay for private schools or other advantages for their children, benefitting both them and their community.

  • From our newest broom sweeper in the warehouse to a senior-level executive, we are committed to a respectful environment for all of our employees.
    Juan Yepez
    COO, Mainstream Global

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