Minding My Black Owned Business: The Journey of Black Entrepreneurs
As recent as two decades ago, loan denial rates for Black-owned small businesses were significantly higher than for white male owners and other minority groups, as discovered in the 1998 and 2003 Survey of Small Business Finances. These disparities are still relevant today, as a lack of financial resources and mentorship opportunities remain major obstacles for many Black entrepreneurs.
However, there has been a shift in how society perceives and encourages entrepreneurs from various backgrounds as newer generations continue to fight for social justice and equality.
Black tech and equal opportunity ventures
According to Fortune.com, Black-owned businesses across the US rose by 38% compared to pre-pandemic levels. One of the key drivers to the success Black-owned startups are making is technology. With low barriers to entry and access to tools that empower small businesses to scale quickly, Black entrepreneurs can leverage digital platforms like never before. According to Meta’s 2022 data report on the global state of small businesses, 39% of Black small businesses reported that over half their sales were made digitally.
With Black employees making up less than 10% of the tech workforce, there are also non-profits supporting and providing resources to help Black people gain more entry in the industry. For example, the non-profit Black Girls Code is providing a technological education for young Black women along with offering career support by partnering with major companies such as Google and IBM. The tech industry holds some of the biggest opportunities to open doors for Black entrepreneurs to disrupt in underrepresented sectors and likely lead to more substantial Black success.
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In addition, economic policies have increasingly supported Black entrepreneurship in recent years. The US government now offers financial incentives such as loan guarantees and indirect tax benefits for minority-owned businesses that meet certain criteria. According to Forbes Advisor, there are several small business grants for minorities providing much-needed resources to help Black entrepreneurs start and maintain successful operations.
The explosion of venture capital in the US has also opened up unprecedented opportunities for entrepreneurs from diverse backgrounds. Unfortunately, Black founders still only raised 1% of all VC funds in 2022, according to recent Crunchbase data. Many venture capital firms will need to actively invest in startups led by African American or Black founders, providing them with access to new markets and technical expertise that can help them succeed in the long run.
Black entrepreneurship provides the opportunity to inspire others worldwide who may not have certain access or resources. Through leading by example and sharing their stories on social media channels and other forms of media outlets worldwide, Black Americans can help change mindsets about what’s possible for people of color when it comes to owning their own companies or launching innovative products or services onto the marketplace.
Challenges hindering successful Black entrepreneurs
Currently, Black entrepreneurs face several challenges in the modern business environment. One of the most significant is access to capital and other resources. Many traditional financial institutions often have stringent criteria for loan eligibility, which often excludes minority-owned businesses. Without these resources, it can be extremely difficult to start a business or grow an existing one.
Another challenge is the lack of mentorship opportunities for Black entrepreneurs. Securing experienced mentors and advisors who can provide guidance and networking is critical for success, yet many Black entrepreneurs find themselves without such support structures. This is due in part to systemic racism within many industries, specifically in the US.
A third key challenge is the difficulty of breaking into certain markets or industries where diversity remains low. Businesses in sectors such as technology and finance are often dominated by white men, making it more difficult for Black entrepreneurs to gain entry and succeed. According to McKinsey, Black-owned businesses tend to be overrepresented in the food and hospitality industries, subsequently earning lower revenues. And even when they do break through barriers, there’s still bias and discrimination that needs to be overcome to achieve long-term success.
The issue of representation and geography also play a major role in these current challenges faced. It’s not uncommon for businesses owned by people of color to receive less media coverage or lucrative business opportunities than their competition owned by their white peers, leading to an overall lack of visibility that can impact sales and profits significantly over time. Not only that, but more than half of Black Americans live in economically disadvantaged neighborhoods.
Finally, many black entrepreneurs face issues with branding or marketing their products or services effectively to reach target audiences accurately and efficiently. This type of marketing requires knowledge and expertise that may be difficult for some small business owners who don’t have prior experience creating effective campaigns from scratch or connecting with influencers relevant to their product or service offering.
There are numerous challenges facing Black entrepreneurs today; however, there are also steps we can take to help pursue their success despite these obstacles. Education about resources available specifically for minority-owned businesses is one way individuals can become better informed about how best to launch their own ventures while maintaining sustainability over time - enabling more Black-owned businesses to thrive across all industries moving forward.
Black entrepreneurs to watch from Plug and Play’s DRIVE initiative
Plug and Play has established a dedicated diversity, equity, and inclusion initiative called DRIVE (Diversity, Respect, Inclusion, Visibility, and Equity), designed to develop, assist, and provide better access to funding for diverse founders, and educate our broader ecosystem on the importance of DE&I and how it fuels innovation.
The success of this initiative will be achieved through a community-centric approach bringing together all stakeholders needed to build a thriving ecosystem for diverse founders and communities nationwide. This framework allows innovation to work as a great equalizer.
DRIVE Batch 0 Cohort
John Borders IV, Founder and CEO, Our Liberty Games
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Tope Mitchell, CEO, REFLEKT ME
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Horace L. Flournoy, Founder and CEO, SwayBrand
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To learn more about Plug and Play and our global innovation ecosystem,get in touch today.