Over the last decade, businesses owned by either people of color, LGBTQ people, women or the disabled have received only a 2% share of venture capital even though they represent over 50% of new business started, according to Hello Alice. Within spirits and alcohol overall, several industry groups and leaders have recently called attention to similar disparities and are spearheading initiatives to create more capital opportunities for diverse founders.
Carin Luna-Ostaseski, founder of Sia Whiskey, is one of them. But over time, the Bay Area-based entrepreneur has broadened her purview to support founders across the entire food and beverage industry.
“From my own journey as a minority woman, I saw firsthand how hard it is to raise money for your business and to grow your business,” she said. “So brands that are minority-owned naturally grow a lot slower and have a harder time scaling, and have a harder time competing against brands that have more established means of funding.”
The first generation Cuban-American started the Entrepreneurial Spirit Fund, a grant program that has donated over $350,000 to entrepreneurs of color and other underrepresented small business owners. Since launching in 2021, the fund has dispersed $10,000 grants to founders that identify as women, LGBTQ+ or people of color in addition to six months of mentoring from Luna-Ostaseski. The network that the program fosters among participants is one of the most important elements of the program, she said.
“It is a safe space for people to share their grievances, challenges, and victories; they begin to build alliances and collaborate with each other,” she said. “These relationships can last for years beyond the program and can evolve into friendships.”
That community support can also help offset what Luna-Ostaseski described as one of the biggest obstacles for grant recipients: a lack of awareness about funding programs.
“Entrepreneurs are so busy taking care of their business and trying to keep it afloat, that they overlook some of the opportunities available to them in the form of grants, loans, resources, community and more,” she said.
Beyond time constraints, many minority entrepreneurs may simply feel that the odds are stacked against them.
“There is also a lack of confidence, in the form of negative self-talk such as ‘I won’t win that grant’ or ‘I don’t have the time to enroll, why bother,’” she said.
Last year, the fund narrowed its focus to food, beverage and hospitality ventures, including East Los Angeles Chicano-owned coffee company Tepito Coffee and West African spice brand POKS Spices. That will continue in 2023, as minority entrepreneurs in the food and beverage industry were disproportionately impacted by the pandemic. Luna-Ostaseski is concerned as these entrepreneurs continue to face challenges such as reduced consumption, adapting to consumers’ spending behavior and at-home demand, supply chain disruption and pricing pressures.
These founders tend to encounter a more challenging entrepreneurial path, yet they are judged on the same baseline as other non-minority brands, she added.
“It’s obvious that small business owners of color still need broader access to capital, mentorship and community so they can build stronger businesses and have a positive impact on our economy,” she said. “But paying close attention to the amplification programs around supplier diversity can help these type of minority-owned businesses get more exposure on retail shelves, bar programs and other distributor portfolios.”
Minority-owned businesses often face obstacles securing business loans or are less likely to receive all the financing sought. Only 5.5% of women-owned businesses in the U.S. access capital from banks or other financial institutions compared to 11.4% of male-owned companies. While the civil rights protests of 2020 sparked larger conversations about inequities in the food and beverage industry, not much has changed, according to Luna-Ostaseski.
“That 2% venture capital number is still hovering, and that’s venture businesses, so that’s for businesses that have million dollar unicorn expectations,” she said. “That statistic doesn’t talk about the small businesses and the mom and pops that aren’t qualified for venture capital.”
Since launching Sia Whiskey about a decade ago, the entrepreneur has pursued her goal to use the business as a tool to support other underrepresented founders. The first year in business she tallied up her sales and donated the $100 she could afford to an organization that supported women entrepreneurs in the Bay Area. Now she’s partnered with Hello Alice, an online platform that connects small business owners with capital and tools.
Other programs aiming to close the representation gap in spirits include Fawn Weaver’s Uncle Nearest Fund and Pronghorn, which each provide mentorship and investments to beverage entrepreneurs of diverse backgrounds. On a broader level, the Commerce Department launched a nearly $100 million grant program to support female and minority entrepreneurs late last year.
But as economic conditions may dampen other access to capital, Luna-Ostaseski is staying vocal on the need to provide support, economic and otherwise, to underrepresented founders. As a part of the Women’s Cocktail Collective, a group of women-owned spirit producers, founders frequently share stories about the challenges of getting distribution or securing meetings with gatekeepers in the industry.
“From what I’ve seen a lot of capital is starting to squeeze up, so it’s going to be even harder for these businesses to get funding,” she said. “So I think that there’s a lot that can be done across the entire industry to help businesses from underrepresented founders to grow.”
Having been through the trials of entrepreneurship herself, Luna-Ostaseski knows the ups and downs of being an independent beverage operation. One of the first Hispanic founders of a whiskey brand, she began her affair with the aged spirit when a friend encouraged her to try it for the first time on a night out. At the time she was working as creative director for media and tech companies, but she began moonlighting as a scotch collector and host of tasting events, eventually amassing a 300-bottle collection.
She channeled her passion into launching a brand, and after reaching out to 80 distilleries, she found a partner that would work with her on the modern, cocktail-friendly blend she imagined. To bring it into reality, she raised more than $45,000 on Kickstarter. The whiskey landed on shelves in 2013, but the company soon pulled back distribution from nine to two states. After expanding too quickly, the company decided to grow its footprint in California and Nevada, and lowered its cost of goods down to make it an accessible cocktail scotch for more bars and restaurants.
Sia Whiskey was acquired by Diageo in August 2019, joining the company’s largest portfolio category. In 2021 Diageo supported the founder to launch the spirit fund. Luna-Ostaseski is still deeply involved in the brand and will continue to work on growing its footprint nationally beyond the 14 states where it has distribution, and eventually internationally.
In the meantime, the Entrepreneurial Spirit Fund is in the planning stages for 2023, and will announce applications after July.