From mom and pop shops to life-changing inventions and Fortune 500 companies, African American’s have an extensive history of innovation and entrepreneurship. Yet historically, according to the U.S. Chamber of Commerce, Black Americans are underrepresented among entrepreneurs, representing 12 percent of the U.S. labor force but only 9.4 percent of business owners. As deep as Black America’s relationship is with small business and entrepreneurship, we have seen our set of rises and setbacks.
Despite the strong legacy, Black entrepreneurs still experience their share of setbacks. More so than other ethnicities with similar backgrounds. To gain some insight into why this happens, I recently spoke with Malcolm Crawford, a member of Chicago’s African American Business Association, and director of the Austin African American Business Network. He indicated three things that set back many Black entrepreneurs:
- Lack of proper mentors and education
- The lost language of capital
- Lack of cultural enclaves
Finding a Mentor
Founders who have been mentored are three times more likely to become top performers themselves. Entrepreneurship can be an isolating journey. However, having a mentor can open doors and generate ideas in ways you couldn’t do alone. Given the fact that most businesses fail within the first five years, it is evident that early stage entrepreneurship is a critical time for all entrepreneurs. Especially those who are Black. According to Malcolm, “…there simply aren’t enough African American mentors within our communities that can pass financial and business knowledge down to the next generation”. In contrast, other entrepreneurs in other demographics have no problem finding help or assistance with launching an organization.
Education and Access to Capital
Research conducted by the University of California, Santa Clara revealed that minority-owned startups have access to less capital than their white counterparts. In fact, when it comes to funding, Black entrepreneurs only receive one percent. Not only are businesses not investing in Black business as much as their White counterparts, but Black entrepreneurs aren’t as familiar with the various ways to access capital. During my brief discussion with Malcolm, I learned that many African American entrepreneurs have limited knowledge about receiving capital for their business outside of loans. The smaller percentage of Black entrepreneurs that do seek financial independence look for banks to fund their startup. Malcolm explains that not only is this not the only way but he insists that it may be harmful to the individuals receiving them. By taking a loan from a bank, you’re starting your journey in debt. Malcolm suggests that instead of looking to banks for their primary source of funding, Black startups should look into other options such as crowdsourcing. Some recommendations he suggests include setting up a Gofundme or planning an event to attract investors to your company. Only after attempts of securing voluntary funding should you start looking into financial resources such as loans.
According to BlackinAmerica.com, the dollar circulates within six hours in the Black community, 17 days in White communities, 20 in Jewish, and 30 in Asian communities. There is strength and power in community. Wealth is critical to entrepreneurial empowerment. Towards the end of our discussion, Malcolm brings up on the last observation he’s made in his time serving as a board member of Austin African American Business Networking Association Inc. Malcolm notes the lack of cultural enclaves within the African American communities that can drive up cultural capital.
What is a cultural enclave? When you think of Chinatown or German town, you are thinking of a cultural enclave. We don’t have that anywhere in the African American community, he says. Malcolm says that cultural enclaves are a good way to bring up “cultural capital” which is basically money being spent within a community.
Did you know, that if the number of minority-owned businesses increased to be proportional to minority labor force participation, there would be an additional 9 million jobs created? You heard me, 9 million. Through it all, Black businesses continue to persevere. Despite the setbacks and obstacles Black businesses still thrive. With the support of the resources mentioned above, more of these businesses can better position themselves for success. If you need a mentor in starting up your own business, get a hold of the business consultants at Suivant Consulting today. With years of start-up experience, our team can help you.