Negash: Black-owned businesses are our economic future
In the wake of George Floyd’s murder and the marches, protests and civil upheaval that followed, it became quite fashionable to support Black-owned businesses.
According to Bloomberg and Business Insider, Black Americans became the fastest-rising group of entrepreneurs in the United States between February 2020 and August 2021, increasing by 38%. This trend was particularly prominent in progressive communities like the Bay Area, which are steeped in diversity, but also haunted by persistent inequities.
But as media attention moved on to the next cultural crisis and the pandemic stretched on for more than two years, support for Black businesses waned, and promised capital has been slow to follow.
Founded in 2010, African Diaspora Network (ADN) is a Silicon Valley-based, immigrant-led nonprofit that promotes racial equity and economic justice by building leadership and economic capacities of African immigrants and African Americans. Black leaders grow their businesses and networks through our entrepreneurship accelerator programs and convenings.
Simultaneously, we work with investors, academics and industry leaders to mentor, train and accelerate investments in Black-led organizations and talent. Our goal is to break through systemic barriers for Black entrepreneurs in accessing capital and leadership positions while amplifying their voices to create long-term societal change.
Africa is the next frontier of economic development. The continent’s population will double over the next 25 years, and projections show a quarter of the world’s people will be African as soon as 2050. This seismic demographic shift creates a significant opportunity for investment, innovation and entrepreneurship.
Africa is also an entrepreneurial continent. According to the 2017 African Economic Outlook Report, 22% of Africa’s working age population is starting new businesses, the highest rate of any region in the world. Why? Many start businesses to take advantage of opportunities in the market, and 33% report they are responding to a lack of employment opportunity in their communities. Every year, 29 million new entrants join Africa’s labor force, and small and medium businesses are the biggest drivers of new jobs.
But not all enterprises are treated equally. Trends indicate Africa-based businesses led by non-Africans are more likely to receive funding. The Guardian reports eight out of the top 10 Africa-based startups that received the highest amount of venture capital were led by foreigners. Furthermore, systemic barriers to capital in the U.S. mean Black startups receive just 1% of venture capital funding on average, while Black nonprofits get just 8% of the funding their peers receive.
Obvious factors at play here are unconscious bias and pattern recognition on the part of investors. Additionally, disparities between the cost of capital available to Black entrepreneurs through credit and other debt and their ability to access it explains why many Black entrepreneurs who may need financing do not even choose to seek it. According to the National Bureau of Economic Research, Black businesses are less likely to have a formal relationship with a bank, and loan requests from Black entrepreneurs are three times less likely to be approved than those of white entrepreneurs.
As the saying goes, if you don’t have a seat at the table, you’re probably on the menu, and lack of representation is another contributing factor. A survey by The Information found that there were only seven Black decisionmakers at 102 of the largest investment firms in the United States in 2018. The threat that an unprecedented economic investment never reaches the people who need it most is very real.
Yet despite these disadvantages, BIPOC entrepreneurs have managed to create 4.7 million jobs in the last decade alone. The returns on investments in minority-owned businesses exceed those from white-owned ventures. The median net worth for Black business owners is 12 times higher than Black non-business owners. And when one Black business owner succeeds, they employ 10 other people on average.
It’s numbers like those that motivated ADN to partner with the Leavey School of Business at Santa Clara University, the Silicon Valley Community Foundation, the County of Santa Clara and other partners to launch the Accelerating Black Leadership and Entrepreneurship (ABLE) program, with a goal of advancing the development of Black entrepreneurs and Black-owned businesses in the United States who are catalyzing an array of sustainable solutions to poverty across multiple sectors at the local and national level.
The ABLE program was built off the success of ADN’s Builders of Africa’s Future Awards, a celebration of the innovation and impact of African entrepreneurs running early-stage nonprofit or for-profit businesses that address key community needs through technology or differentiated business models. The goal is to help scale their ventures and impact and draw attention to the opportunity that exists for meaningful and significant investment in BIPOC and immigrant-owned businesses.
Now in its fifth year, the Builders of Africa’s Future program awards 10 to 15 of Africa’s most promising entrepreneurs with enterprise development training, partnership and mentorship opportunities, and a platform to boost their brand visibility and investment potential in Silicon Valley. Since 2018, the program has recognized and catalyzed 42 African startups, and ADN is currently reviewing applications for the 2022 cycle.
The final cohort of 10-12 entrepreneurs will participate in a virtual pitch session during the annual African Diaspora Investment Symposium, which will be held via Zoom on June 23. This showcase is the perfect opportunity for venture capitalists as well as angel, impact and philanthropic investors to meet the grassroots business leaders who are the future—and the now—of the entrepreneurial continent.
All are welcome to register here.
Almaz Negash is executive director of the African Diaspora Network.