Black Women-Founded Businesses Need Funding, No Accelerators or Incubators
During the Great Recession of 2008, the number of businesses started by black women between that date and 2018 increased by 163%, or 10 times the growth of businesses owned by non-minority women. Impact investment consulting firm Cornerstone Capital Group cites that minority and women-owned businesses were massive job creators and stabilizers of the economy after the 2008-2009 recession, adding 1.8 million jobs in 2007-12.
Although businesses owned by women or people of color were more likely to close during the Great Recession of 2007-09, they helped stabilize the economy in the recovery that followed, creating 1.8 million dollars. jobs in 2007-12. In other words, black women entrepreneurs have helped boost the U.S. economy during times of financial crisis.
Some organizations have committed to providing education to black female entrepreneurs through a start-up accelerator (fixed-term, cohort-based programs that include mentoring and education components) or an incubator (an organization that helps businesses in start-up and individual entrepreneurs to develop their businesses). However, few offer venture capital financing. In ProjectDiane’s Founders of State of Black & Latinx Women report, it was shared that only 0.27% of the total venture capital investment between 2018 and 2019 went to black women. This is alarmingly disproportionate since:
- Black women represent 12.9% of the American population.
- 35% of black business leaders are women, compared to just 27% of women business owners of other racial identities.
- 17% of black women are starting or operating new businesses (compared to just 10% of white women and 15% of white men).
Earlier this year, two successful black women entrepreneurs discussed the same topic with Attentive. Amanda Johnson, Co-Founder and COO of Cosmetics Mentees, and Kimberly Lewis, co-founder and CEO of CurlMix, has encountered difficulties in raising venture capital funds. In 2017, Johnson and his co-founder were just the 15th and 16th black women to publicly raise over a million dollars in capital. In just one year, CurlMix has gone from $ 1 million in online sales to $ 5 million. Yet, time and time again, investors told him they weren’t convinced by the idea.
It appears that the failure to fund black women’s businesses is not the much-vaunted problem of the “pipeline” or “lack of education,” but symptomatic of investors pulling out of their networks to strike deals. 61% of black women must self-finance their total start-up capital– debilitating for members of an already indebted and low-income community.
Black female entrepreneur Tori Sudan is the owner and creator of a brand of shoes and accessories made in Italy. She has been invited and participated in acceleration programs for the past decade. However, Sudan’s biggest challenge is to identify financing to develop his business.
“I started my business with personal funds, and I recognize that it will require additional resources to scale effectively,” says Sudan. “Although I think the accelerator and incubator programs are beneficial, I already have a solid business background. I have an MBA and taught business at the university level for several years.
As in Sudan, more than three quarters of black women entrepreneurs have at least a university degree. Sharon Vosmek, CEO of Astia, has heard similar stories from other black women entrepreneurs. Astia is a global, community-based, nonprofit organization dedicated to ensuring the success of women in high growth startups. “Of the negligible amount of funding women entrepreneurs receive, even less goes to people of color. This is because at every stage of the investment process – deal research, analysis and investment, venture capitalists (who are often white males) rely on these rooted networks with prejudices, ”Vosmek explains.
The Hamilton Project says there has never been such a big drop in GDP like that engendered by the recession of 2020. Gross domestic product (or GDP) is the market value of all finished or finished goods and services produced within a country’s borders during a given period. GDP is an indicator of a country’s economic health, calculated by adding personal consumption, private investment, government spending, and net exports.
We need black women entrepreneurs to increase GDP per capita and stimulate the US economy again as they did during the 2008 recession. Yet as our nation’s economy faces challenges once again. , this community of entrepreneurs does not receive the financial support it needs to keep its businesses afloat. Black women are more likely to cite access to credit, refused loans, and higher interest rates as a challenge.
Additionally, when the federal government pledged to support these women during the pandemic through the CARES Act, only 2% of black-owned businesses received loans. The application process was handled by commercial banks, mainly benefiting companies with existing relationships.
In a press release from the donor The Rockefeller FoundationSenior Vice President of the Innovative Finance Initiative Maria Kozloski says, “The pandemic has brought to light long-standing financing problems that disproportionately impact minority-owned businesses. We have reached a critical inflection point exposing the urgency to level access to capital by playing field for these companies which are key engines of growth in their communities. ”
Our economy depends on the ability of black women entrepreneurs to develop and maintain their businesses. This means that venture capitalists and the financial community need to address resource gaps and biases and improve financial practices that prevent these women from obtaining capital.