Entrepreneuring While Black: Here’s Our Situation

Introduction

While entrepreneurial startup activity is on the rise, Black entrepreneurs still face barriers their white counterparts don’t. Despite this, Black entrepreneurs make powerful contributions to the U.S. economy:

  • Minority-owned businesses contribute close to $49 billion in local, state, and federal tax revenues.

The Challenges of Entrepreneuring While Black

There is a significant appetite for entrepreneurship in the Black community. According to the “2019 State of Women-Owned Businesses Report” commissioned by American Express, Black-led companies represent 89 percent of net new firms, most of which, are led by Black women.

  1. Management Capability: The leadership of sufficiently skilled and capable entrepreneurs to effectively launch and operate a venture;
  2. Brand Awareness: Exposure of a venture’s products/services leading to an increased awareness of the brand in which to successfully promote and sell; and
  3. Venture Capital Access: Access to Venture Capital (VC) firms in which to successfully promote a venture, improving the likelihood of receiving investment and associated benefits.

Financial Resources

I cannot predict which start-ups will succeed, but I can tell you from experience that those start-ups with limited capital have a higher likelihood to fail. A business that starts from a strong financial position is more likely to be able to endure challenges, adapt to change, and scale based on opportunities that arise. Startups with more initial funding are also more likely to receive additional sources of funding during financing rounds, which effectively compounds the negative effect of a smaller initial raise.

Management Capability

A critical factor impacting the success of Black entrepreneurs also relates to their ability to develop and execute a solid business strategy and manage underlying business operations mostly due to limited experience and exposure in these roles. Prior family business ownership is far less frequent among Black entrepreneurs than among Asian and White entrepreneurs. Black entrepreneurs have lower education levels and fewer years of managerial experience than Asian and White entrepreneurs.

Brand Awareness

Marketing and sales are essential, but brand awareness also plays a significant role in driving sales. In fact, 82 percent of consumers searching online favor brands that they know. Yet, Black-owned businesses are disproportionately located in urban areas and disproportionately serve ethnic retail markets according to the Kaufman Compilation report on Race and Entrepreneurship. As a result, Black entrepreneurs have limited opportunities outside of this urban sphere to raise brand awareness, thus impacting sales.

Venture Capital Access

There is a lot of myopia in today’s venture capital (VC) firms primarily driven by the lack of diverse representation as noted in this TechCrunch report. Venture firms and investors who still claim they cannot find racial minority entrepreneurs to invest in today are not looking hard enough. The fact is that talented black founders are only growing in numbers, and that is despite a system that continues to discourage them systemically.

  • Minority entrepreneurs made up just 8.5 percent of the people pitching their businesses to angel investors in the first half of 2013, according to a report by the University of New Hampshire’s Center for Venture Research.
  • In general, White- and Asian-Americans are overrepresented in both large technology companies and the venture world relative to their share of the U.S. population.

Why It’s a Problem

Understanding and supporting the needs of minority entrepreneurs is not just a moral imperative, but an economic one as well. The workplace is getting increasingly diverse. According to the U.S. Census Bureau, the minority population is expected to rise to 56 percent of the total population in 2060, compared with 38 percent in 2015. This growth, coupled with the fact that minority-owned businesses have increased more than 50 percent over the last decade, means that the future economic growth of America will increasingly depend on this burgeoning group.

A Path Forward…

While entrepreneurial startup activity is on the rise, Black entrepreneurs still face barriers their white counterparts don’t. Despite this, Black entrepreneurs make powerful contributions to the U.S. economy. This first post provides a current state assessment of the matter. The intent is not to scare but to allow ourselves to have an open and frank discussion on “Entrepreneuring While Black.” While there is no silver bullet, it seeks to capture the current state in order to recalibrate and drive momentum in the right direction, enabling both investors and entrepreneurs alike to turn the corner and unleash the potential that exists with the Black entrepreneurial community.

Awareness

  • Increase Exposure to Entrepreneurship: Create and increase internships and apprenticeships to help young people of color learn more about entrepreneurship.
  • Drive Access to Viable Markets: Enable entrepreneurs the opportunity to market and sell their products/services successfully.

Access

  • Create Access to New Social Networks: We need allies; institutions need to broaden the outreach of their business and social networks.
  • Pursue Advanced Financing Solutions: Enhance capital vehicles, including consistent and relevant credit models, to extend credit responsibly and improve capital availability for individual Black entrepreneurs.

Training

  • Develop a Pipeline to Access Professional Education Programs:As the cost of education skyrockets,increase access to educational resources on demand and partner with technology companies and institutions to make access to computers more readily accessible.
  • Establish a Talent Development Pipeline: The establishment of the entrepreneurship ecosystem consisting of the exposure, education, and skills development is a critical pathway to develop and drive entrepreneurship.

Accountability

  • Develop and Employ Entrepreneurship Scorecards:According to Peter Drucker, “you can’t manage and do things right in your business if you’re not measuring it.” To be held accountable; devise and employ scorecards to monitor and measure performance and employ criteria in personnel performance evaluation.
  • Make Entrepreneurial Support Organizations More Inclusive:Encourage entrepreneurship support organizations to track entrance and retention rates of entrepreneurs of color. This data can track progress and help identify challenges to address.

About the author

Ronald (Ron) Berry is a senior-level executive with global experience and success in B2B and B2C digital commerce in a variety of industries and businesses. If you have any further questions or would like provide additional insights, please contact him at ron@EastanConsulting.com.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.