Our co-founders, Perfecto Sanchez and Christina Van Houten together own the majority of the company and both run it actively full-time. Perfecto is an service-disabled Army Veteran and tenured, big brand marketing leader whose heritage is Jamaican and Puerto Rican (or Black and Hispanic). Christina is a white woman who’s a long-time technology executive with over 30 years of career experience. On the surface, Perfecto and Christina are the ideal diverse business, or would-be diverse supplier to larger corporations. Equity Quotient is objectively minority-owned, veteran-owned, and woman-owned. 

However, despite this fact, we do not qualify for any of these certifications. Here’s why:

1. Ownership %
   Equity Quotient has raised seed funding from investors, which has taken our co-founder ownership levels below the 51% threshold. This challenge will exist for most entrepreneurial businesses with the ingredients required to make them viable options for large company supplier diversity programs–i.e., they will have more than one partner and often an outside financial backer, putting them in a position of not meeting the 51% ownership test.
   
   
2. Net Worth
   As former executives turned entrepreneurs, both Perfecto and Christina have had seasoned careers and accumulated savings. Most business owners that would be mature enough to qualify for a global supplier ecosystem will be like Perfecto and Christina–i.e., have had active careers for over a decade, saved money through their 401K and other investments, and purchased a home. Together, these dynamics will knock out many qualified diverse business owners based on the $850,000 net worth means test.

With just Equity Quotient as an example, the current certification standards are clearly limiting the supplier diversity program pipeline. These narrow requirements only allow sole proprietorships without significant investment backing from third parties or “mom and pop” shops to gain certification. Yet by the nature of their small scale, many of these certified businesses will lack the capability to scale in order to meet the needs of larger corporations.  Here’s why:

1. Demand/Supply Mismatch
   The offerings that these types of businesses provide are largely not within the demands of what bigger companies need.
    
2. Financial Position
   Their financial standing, by definition, would not be significantly robust to withstand the rigorous requirements that most larger companies require as part of their supplier onboarding process.
    
3. Foundation to Scale
   The firms providing goods and services that do fall within the purview of what larger corporations need and have the financial position that enables them to scale to the level needed to deliver larger firm orders are mostly owned by more than one party, making the 51% threshold for ownership in any of these categories (women, minority, veteran, disabled) impossible to achieve. 

Data also tells us that this dynamic is causing a significant gap between the number of businesses that are run by diverse founders and those with official certifications. One recent study found that less than half of diverse owned and operated SMBs have a certification despite the significant benefits it provides. 

The key to overcoming the demand-supply disconnect is to take a fresh look at how programs are being measured and managed and how the full procurement funnel can be measured and managed differently to achieve a win-win-win for corporations, diverse businesses, and their surrounding communities. 

A significant opportunity exists to help dedicated supplier diversity programs become a powerful force in our economic growth while also creating positive socio-economic impact. To achieve that, these programs require a data driven approach to inform and guide the ecosystem, both on the supply and demand sides of the equation.