Cate Costa on Why Small Business Support Is Broken — and What Better Metrics Could Fix

By Kekeletso Nkele, small.news Assistant

Q: Can you say more about the questions you kept running into, no matter what sector you were working from?

A: The thing that’s driven me crazy through my whole career — and I’ve been in entrepreneurship support for almost all of it, aside from a brief stint working on cruise ships at 21 — is the wishy-washiness in how we approach this work.

In almost any other industry, people are expected to get clear about what they’re trying to achieve and how they’ll measure progress toward it. If I’m trying to lose 40 pounds, I track how many pounds I’m losing. If we want more affordable housing, we track whether more people can afford their housing.

But in small business support, we get away with saying something like, “We’re supporting entrepreneurship for economic mobility” — and nobody asks what that actually means. Economic mobility for whom? Are we talking about closing the racial wealth divide? Helping families out of poverty? Building a safety net for a sudden cost? Creating strong commercial corridors that address unemployment in a specific community?

Nobody makes people get clear about what their actual goals are, which leads to metrics that don’t tell you anything — which means we’re spending a huge amount of money with no way to know if it’s working, because nobody will even define what “working” means. There’s no single source that tells you how much is spent globally on entrepreneurship support, but pulling from enough different places adds up to hundreds of billions of dollars a year. And nobody can tell you if any of it actually works.

Q: The people designing the mechanisms and decisions for how money flows into the market are largely foundation, philanthropy, and government people. Meanwhile, the vast majority of on-the-ground organizations helping small businesses — the number-one engine of the economy — are charities and nonprofits. So the whole infrastructure built to help for-profit small businesses succeed was designed by nonprofit, philanthropy, and government people, not business people.

A: The only part I disagree with is that a large chunk of the philanthropic dollars supporting entrepreneurship actually comes from corporate philanthropy. If you’re a large multinational bank, for example, you’re putting real funding into this work. And if you’re something like an eBay Foundation — built by people who built a business out of a garage — the people in that leadership actually know how to build a business. For some reason, they’ve decided that rigor doesn’t need to apply in the philanthropic space.

Government is different — it’s a mixed bag of who’s doing what, and often it’s family foundations a few generations removed from the person who actually understood what it took to build the business. But in corporate philanthropy, most board members are straight-up business people. So it’s bizarre: they’d never accept a loosey-goosey goal or a loosey-goosey metric on the for-profit side of their work. Strangely, they accept it in how they support nonprofits.

Q: I think one of the things that drives me crazy is that most people think of small businesses as charity cases. We’re arguably indebted to them — they’re probably the most resilient business people on the planet, given what they have to sustain. But the instinct, as soon as someone wants to help a small business, is to start a nonprofit, get philanthropy dollars, and treat these businesses as charity cases. I think that’s actually deeply disrespectful.

A: The goal here is to have a conversation, but yeah — that’s the truth, and it’s part of what drives the issue. Funders aren’t looking at this as an imperative for society: ensuring people have equal opportunity to build businesses and recognizing that everyone is harmed when that doesn’t happen. It shrinks the tax base, lowers GDP, and leaves communities without resources; there’s less competition, so people end up with monopolies that can drive up prices and do whatever they want. All of that affects everyone. But we treat small business support like a favor or a handout, which lets people get away with fuzzy, feel-good giving — wanting warm, fuzzy feelings about the money instead of asking whether it actually had an impact. Is anyone better off because of those dollars? If not, spend them somewhere else. To be clear, I’m not actually advocating for that — I love small businesses, and I think we need to do this better. But if we’re being direct: why spend money that isn’t working?

Q: Corporate philanthropy, private foundations, government — most small business support organizations rely on those dollars. But the experience of those organizations is that it’s incredibly hard to get that money, and the funders are difficult to work with. How can both of those things be true at the same time?

A: Because there’s a complete lack of clarity. Think about a boss who can’t tell you what they actually expect you to achieve, so you’re constantly in trouble because they keep moving the goalposts and then get mad that you can’t hit them — that’s what’s happening in this space.

That’s part of why I went back to do research. I’m not trying to become a full-time professor — I just realized nobody had the actual data. We all sit around saying a metric doesn’t seem right, but nobody has done the work to get hard data that could help people have these conversations productively.

Q: Big corporations create short-term programs expecting quick wins from small businesses, even though it takes years for a small business to create lasting change. Why do you think that is?

A: There are a few reasons. Part of it is constant turnover on both sides — a lot of turnover among funders, but nonprofit leaders are also exhausted and burning out fast. So people are constantly trying to rebuild relationships to keep the same work moving. They’re not clear about their goals because they haven’t taken the time to dissect them, and sometimes that means sitting with real conflict that people aren’t comfortable with. If you’re an economic development professional, the idea that a wealth-building strategy and a job-creation strategy might conflict is genuinely upsetting. People are exhausted on both sides, just trying to get through the day without things falling apart.

But personally, I think a lot of this comes down to the fact that philanthropy wasn’t designed to solve these problems. Philanthropy was designed to maintain the power structures that create the need for philanthropy in the first place. It exists so you can get the warm fuzzies, get a nice press release, go to a gala — while intentionally preserving the structures that let you keep the power, so somebody else has to ask you for a small piece of it.

Q: What’s the solution — how do philanthropy and nonprofits get better at doing the work of small business development?

A: I think it’s an all-of-the-above situation, because these are big, messy, systemic issues. We’re not going to fix racism tomorrow. We’re not going to fix sexism tomorrow. I’d love to dismantle the oligopoly tomorrow, but that’s not happening either. So we need philanthropic funders to do a better job. And we need for-profit organizations to show up too — not necessarily framing it as economic justice. However— that would be great — but at least recognizing that the people they’re serving represent the vast majority of the world, and that this work is economic justice whether it’s labeled that way or not.

Q: How are people responding to your research?

A: It’s a mixed bag. Some people totally get it — metrics matter, but metrics alone don’t solve the whole problem, and I completely agree. Some people get nervous because I used to be a funder; they assume I want to impose a bunch of requirements on them, and that’s not it at all. What I actually want is for people to stop using a metric if it’s meaningless and nobody’s using it. Either use metrics that tell the funder and the organization what they’re doing well and where to improve, or lean into trust-based philanthropy and let organizations run. Don’t impose measurement that doesn’t tell anybody anything — that’s just a waste of resources.

And then some people are very attached to specific metrics, and they get frustrated when I call one out that I don’t think is right. The response is usually something like, “Here’s 40 years of why we use this metric, and everybody uses it, and we’re going to keep using it” — and that I’m just being difficult.

Q: What’s an example of one of those metrics?

A: Jobs created — I hate it as a metric, unless your actual goal is community job creation and entrepreneurship is one of the levers you’re pulling to get there. But if you’re saying, “I’m here to support business growth, and I care about the business owner,” then job creation tells you nothing about the strength of the business, the financial health of the owner, profitability, mindset, or resilience. And the way we typically measure “jobs created” is terrible. I’ve seen plenty of impact reports that look fabulous when published, and I know the people in the community — and by the time the ink is dry, none of them still have those jobs, because the jobs weren’t safe or stable. After all, the business wasn’t actually strong.

Q: What are you worried about for small business owners?

A: I’ll speak to the U.S. specifically. What I’m actually most afraid of is that while everyone can see the immediate problems we’re facing, there’s a more sophisticated attack happening that’s creating something close to an extinction-level event in certain situations, because of how things are being structured.

For example, I work with a client that’s a constitutional law organization protecting the right for supplier diversity programs and programs like the ADA and DBE to exist. These attacks aren’t just “we’re blocking this program right now, so people won’t get contracts for the next two years, and maybe after an administration change it comes back.” They’re attacking the fundamental ability to defend these programs on constitutional grounds. If you make it illegal to document certain things, illegal to use certain words, illegal to track certain differences, you’ve undermined the ability to make the constitutionally required case for why a program is needed to repair harm. So even if there’s an administration change down the line and people want to bring these programs back, we may no longer have the evidence base to defend their constitutionality, because it was systematically destroyed.

Everyone’s asking how we’re going to get through the next two years. I’m worried these two years will damage the next 20 or 30.

Q: What’s the opportunity?

A: It’s the inverse of that. If the other side can be strategic, organized, and play the long game, so can we — we need to get organized and do it. I don’t mean you need to be a billion-dollar corporation with your own lobbying arm. A lot of the funding behind efforts to take these rights away comes from people giving $5, $10, $20 a month to organizations doing that work. We should be doing the same for organizations trying to protect them. At a certain point, protecting your right to exist as an organization is probably a better investment than the next client lunch. We can be strategic, we can stand up, we can fight this. I truly believe that more people don’t want to divide the world into “us versus them”.

Q: If you had a Magic Silver Wand and could make one thing possible for every small business in the world right now, what would you use it for?

A: That’s the easy — and admittedly fluffy — answer, even after everything I just said about not being fluffy. I’d wish that every small business had the same access to the things it needs as every other small business, regardless of where it’s located or the owner’s gender, race, or country. If someone else has easy access to a resource that helps them build, you should have that same access. If that were true tomorrow, we’d have a completely different mix of people and power making up the economy — and I believe it would be a much better one.

Q: How do we support you?

A: I’d love to connect with people who want to talk about this issue and get clear on how to do this work better. More pragmatically: I’m a PhD student, and my university is in Europe, so I pay tuition in euros, which keeps getting more expensive. It often feels like the people who genuinely care and are trying to do impactful work don’t have money, and the people who have money aren’t always trying to do impactful work. I know that’s not entirely true, but it often feels that way. So what’s most helpful for me is connecting with people who have access to resources and want to move this conversation forward — whether that’s a consulting engagement helping with theory of change, program design, or impact evaluation, or simply a conversation that sparks someone to go back and push their board to do something differently. Both are a win for me.

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