Equity Capital for BIPOC Entrepreneurs in CPG

Despite their resilience and innovation, BIPOC entrepreneurs frequently encounter systemic barriers that hinder their ability to start, sustain, and grow their businesses, particularly in New Orleans. Ultimately, this limited access to capital prevents their businesses from scaling and reaching their full potential.

• In 2023, U.S.-based, Black-founded startups received less than 0.5% of venture capital (VC) funding, an alarming 71% decline from 1.5% of VC funding in 2022 (Accenture).

• Black-owned firms are nearly twice as likely to be denied loans compared to their White counterparts, face higher bank fees, and are 3-5 times more likely to be labeled a high credit risk (Accenture)

• In 2021, Black-owned firms generally had the highest credit application rates (42%), yet only 38% of their applications were fully funded. Meanwhile, 62% of White-owned firms were approved for the full amount of credit for which they applied (Federal Reserve).

• In New Orleans, BIPOC entrepreneurs are half as likely as White-owned firms to receive debt financing via traditional bank loans (Greater New Orleans Startup Report).

The lack of venture capital is catastrophic both for Black business owners and for the economy as a whole in lost potential. So why does this issue persist? VC  investors, who are largely White, often overlook Black entrepreneurs due to four common barriers (Harvard Business Review):

1. Pattern Matching Error: The VC disregards innovative market opportunities when they do not share the same background and experiences as the entrepreneur.

2. Disconnection: VC perceives the venture as unviable when they do not share networks or the entrepreneur lacks initial capital assets due to smaller or under-resourced networks.

3. Communication Gaps: Differing styles of communication, terminology, and cultural expectations cause misperceptions or limit access to opportunities. The entrepreneur may not yet know what to request or how to deliver that request to achieve optimal results.

4. Cultural Bias: The lender’s unconscious bias may undermine their trust in the applicant. 

These common errors have a particularly negative impact on the food industry in New Orleans, a city famous for its vibrant restaurants that remain vulnerable to insolvency and contribute to food waste. In New Orleans, 7 of 10 restaurants have closed per year due to the highly competitive market, seasonal earnings, and low profit margins (The Advocate). While Black entrepreneurs in New Orleans invented much of our cuisine–from enslaved street vendors selling calas on Sundays to culinary icons like Leah Chase and Loretta Harrison–Black-owned food businesses have rarely reached large-scale success due to systemic racial barriers in accessing capital. Tourists travel across the globe to visit the French Quarter, where there are only 3 black-owned restaurants (Sun Chong, B Sweet Bistro and Bennachin's) in the 78-block tourist hub.

To nurture the sustainability of Black-owned small businesses in the food industry, we focus our Fund II resources on supporting restaurants and ventures that diversify their income through Consumer Packaged Goods (CPG) production. The CPG industry contributes to 8.7% of Louisiana's total employment, representing over 242,000 jobs and $13.1B in labor income (Consumer Brands Association). With strong agricultural partners and a national interest in New Orleans culture and cuisine, the CPG sector represents a high-growth field for local BIPOC entrepreneurs seeking to create thriving businesses that create jobs.

In a city famous for its food, Propeller envisions a local food system that is economically sustainable and vibrant, where local food products are manufactured here and shared with the world. To attain this vision, Propeller works responsively to build the capacity of entrepreneurs working within the Food industry in New Orleans. In particular, Propeller launched Propeller Impact Fund II in 2024 to invest in Louisiana food or beverage consumer packaged goods businesses with measurable social or environmental impact. With a focus on supporting BIPOC and socially/economically disadvantaged entrepreneurs, this seed equity fund aims to foster growth and sustainability of local businesses in the Greater New Orleans area by providing crucial financial support, mentorship, and resources. Through targeted investments between $25,000 and $50,000 combined with comprehensive support, we aim to address the lack of parity in access to VC funding, which is catastrophic for local entrepreneurs and the economy. With Fund II, we aim to drive positive change, empower entrepreneurs, and create lasting positive impact in our community.

The Propeller Impact Fund II is partially capitalized through the Louisiana Economic Development Corporation (Louisiana’s lead for the U.S. Treasury Small States Business Credit Initiative), which is matched through private funding from supporters, such as The Kresge Foundation and UNFI Foundation. With Fund II, we aim to diminish the barriers BIPOC entrepreneurs often face in obtaining venture funding by providing technical assistance to build robust financial models, develop strong pitch decks, and polish investor pitches. Once an entrepreneur has completed technical assistance (TA) projects and reached the point of pitching to the Propeller Impact Fund II, they are well positioned to leverage the materials and skills they have developed in the process to secure funding from other investors, as well. A grant from ICC would allow Propeller to continue this technical assistance program without interruption during a time when previous federal funding sources are in question. 

Within the grant cycle (March 1, 2025-May 30, 2025), Propeller would allocate funds to offer TA to BIPOC entrepreneurs seeking seed equity funding through Fund II. Through support of an equity fundraising consultant, the funding will directly empower our ventures to create or refine pitch decks and financial projections, which will enable them to close their rounds successfully based on the investment from Fund II and external investors. Propeller’s goal with Fund II is to demystify equity as a form of capital among entrepreneurs and small business owners. To measure our success in reaching underrepresented entrepreneurs, we will track the number of BIPOC businesses that submit an Interest Form, complete due diligence, and receive equity funding. Propeller will also track the total amount businesses raise in external financing, the number of jobs they create as a result of their fundraising, and the total revenue growth they achieve as a result of their fundraisers, demonstrating their success in diversifying funding streams. Through this grant, we expect to be able to move swiftly to:

• Screen 18 businesses for potential equity investments.

• Offer 62 hours of technical assistance to 7 applicants to create/refine pitch decks and financial projections.

• Award between 2-5 investments, ranging from $25,000 and $50,000 to entrepreneurs (66% BIPOC).

• Secure $25,000-$62,500 in external investments.

  Enable ventures to create 1-2 new jobs and retain 2-3 jobs.

We feel confident that we can achieve these goals based on our strong internal capacity and record of success. Propeller’s dedicated Director of Capital Access (2020-Present), Patrick Hernandez, oversees the deployment of the Propeller Impact Fund II and entrepreneurial development to achieve investment readiness. Prior to joining Propeller, Hernandez served on the private equity fund investment team at Allianz Capital Partners in New York City. In 2015, Patrick returned to Louisiana to co-found and serve as Chief Financial Officer for Roulaison Distilling Co. Patrick holds a Bachelor of Science in Economics with a concentration in Finance from the Wharton School at the University of Pennsylvania. In 2025, the Director of Capital Access will be available during the entirety of the program during normal business hours and during special after hours events, such as meetups, and will provide individual financial planning guidance to CPG entrepreneurs seeking equity financing.

Under Patrick’s leadership, Fund II launched in May 2024 and achieved the following results by December 2024:

• Screened 44 applicants, 3 of whom completed due diligence.

• Provided 74.5 hours of technical assistance to 15 entrepreneurs to create/refine pitch decks and financial projections.

• Approved two investments totaling $100,000 for two Black-owned beverage brands producing adaptogenic beverages to support healthy lifestyles. These investments have been the first approval in the entrepreneur’s current round of funding, signaling confidence to other potential investors. Several other applicants remain in various stages of technical assistance and due diligence.

• Raised $325,000 in matching funds.

Fund II Case Study: Dalton Honoré III founded Dreamland Koffucha in 2020, as a consumer packaged goods (CPG) business offering a line of lightly fermented cold brew coffee beverages that are easier to digest than conventional coffee.

When Dreamland participated in Propeller’s Impact Accelerator in 2021, the business was still nascent with two flavors of koffucha on sale at a single retail location, the New Orleans Food Co-Op. Over the subsequent years, Dreamland Koffucha launched in local grocery stores and food service accounts, including Breaux Mart, Canseco’s Market, Dorignac’s Food Center, Langenstein’s, and Robert Fresh Market. 

In March 2024, Dalton attended the Expo West trade show and received an outpouring of interest from retailers and distributors, but he lacked the capital needed for this expansion. Then came a notice in a startup email about Propeller’s Impact Fund II. Dalton completed the Interest Form, and quickly began working with Patrick Hernandez. Patrick connected Dalton to CPG investors and change-makers while providing 25 hours of technical assistance to help him produce a winning case for support. After submitting his application in August of 2024, the investment committee approved his request for $50,000 just 6 weeks later. 

Dreamland Koffucha is now working to launch in several local and national grocery chains. This rapid expansion is only possible because the company had the seed capital needed to attract additional investors and build contracts with co-packers across the Gulf South who could efficiently bring the product to market.

Dalton Honoré III said of the experience, “From the beginning, Patrick was so hands-on and helpful. He linked me with someone to help with our pitch decks, financial projections, helping us pitch not only to Propeller but to other funds. We raised $50k from Fund II. Having that established relationship with Propeller helped us talk to other funds. Now we have $350-500k in funding, allowing us to hire key personnel (fractional CMO) and a sales broker to scale the business. Up to this point, we haven’t had a marketing presence/social media presence, but funding has allowed us to expand. We’re hoping to make it to Whole Foods, HEB, and Sprouts shelves.” 

Propeller’s deployment of the Propeller Impact Fund II is designed to catalyze the total percentage of equity investment in Black- and BIPOC-owned businesses. Together with ventures like Dreamland Koffucha and responsive partners like ICC in 2025, we can work to grow New Orleans’ food manufacturing system, prioritizing products that preserve our city’s unique food culture, advance equity, and positively impact the environment. The outcome has the potential to be transformational in the market by better positioning participating entrepreneurs for financial success.

Propeller’s Fund II short-term outputs and outcomes will include:

• Conducting outreach and providing open access to the Fund II Interest Form on our website.

• Screening 18 businesses for potential equity investments.

• Awarding between 2-5 investments, ranging from $25,000 and $50,000 each.

• Leveraging pitch prep to secure additional funding on at least a 4:1 basis.

• Tracking demographics of participants, with 75% or more identifying as BIPOC.

Intermediate Outcomes (measured 6-months post program)

• Enable each venture receiving technical assistance to create 1-2 new jobs and retain 2-3 jobs.

• Increase deals-closed for and dollars-invested in scalable Black-owned businesses.

Long-Term Outcome

• Shift investor due diligence and risk assessment methods to reduce racial discrimination as well as reduce access barriers to networks of investors, particularly around seed capital.