Black founders spur new business growth, but funding lags behind


First, the positive news: The global pandemic, whose effects have often been brutal on communities of color, has left some silver linings, such as in the number of black founders and entrepreneurs starting new businesses.

Here’s even more encouraging news – as applications for new businesses have skyrocketed across the United States over the past two years, it turns out that black (and Hispanic) counties are benefiting from new business start-ups at a rate 3.5 higher than that of whites. majority counties. Between 2021, black-majority counties saw the number of new businesses double from 2019 (Hispanic-majority counties saw a 58% rate). That 103% increase is nearly double that of majority-white counties, a study by the Alliance for Entrepreneurial Equity found.

The discouraging news? Black founders only score 1.4% of all VC funds in the US

Several underlying factors are driving this spike in activity. As the pandemic continued, black business owners were less likely to be equipped with the tools to deal with mandatory business closures, largely due to lack of access to financial assistance such as emergency loans that otherwise might have provided them with a financial lifeline. After the May 2020 murder of George Floyd, many American businesses pledged their solidarity with Black Americans and pledged billions of dollars in funds to address the inequalities that plague society and the economy — but those pledges did not have largely not been met. Lack of funds and opportunities was a particularly big challenge for black foundresses. So many of them, along with their male peers, have simply found creative ways to strike out on their own.

Editor’s note: Be sure to subscribe to our Brands Taking Stands newsletter, which appears every Wednesday.

The constant scramble of black founders to seek funding is tied to a nagging financial industry reality: access to capital is a problem when only 3% of investors in the venture capital space are black, a study led by the BLCK VC group reached earlier this year. In its in-depth investigation of the funding ecosystem available to Black business founders, the study authors concluded:

“We believe the first step is to invite your partners and colleagues to have an open discussion and ask tough questions, including: where do we recruit and find talent at junior and senior levels? What is the retention rate of black investors in our firm? Do we think black investors feel they have the opportunity to become a partner in our business? Are we currently able to find black founders through our existing networks? If another company had a more diverse investment team and supply network, would that give them an advantage? »

Unfortunately, American society and its institutions generally do not move fast enough to react, except in the case of senseless tragedy. In any case, platitudes or promises to “stand with black Americans” won’t move the needle.

However, there is one thing the financial industry, along with businesses of all stripes, can do to show genuine commitment to black business founders. In a recent episode of the Bloomberg Black Business Beat podcast, Brandon Andrews, a senior impact strategist for Value Partnerships who leads the diversity casting for popular TV series Shark Tank, said, “I believe in going where the entrepreneurs are rather than having them come to us – go to local coworking spaces, black-owned cafes [and] Black-owned coworking spaces.

Image credit: Emilio Garcia via Unsplash


Comments are closed.