The Challenges and Opportunities of Black Women in Entrepreneurship

Black women entrepreneurs are the fastest-growing demographic of entrepreneurs in the United States, with nearly 2.7 million businesses nationwide. Despite their impressive growth and contributions to the economy, we face significant financial headwinds that are holding us back.

And I truly believe that is by design. 

Growing Fast

The number of businesses owned by Black women grew 50% from 2014 to 2019, representing the highest growth rate of any female demographic. Black women accounted for 42% of all women who opened a new business during that time, and represented 36% of all Black employers.

And we are not letting up. 

In the US, 17% of Black women are in the process of starting a new business, compared to 10% of white women and 15% of white men. Motives for creating a new business include producing a source of income or following a dream - at least that was the nice news publication say.

I am willing to bet it’s largely due to the fact that we are tired. Tired of the hoops. Tired of code-switching. Tired of the harassment. Tired of the hair demands. Tired of the bs. 

And a tired Black woman is going to double down and make lemonade out of lemons. 

“High rates of Black women in entrepreneurship may also reflect lack of opportunity in the traditional workforce – many start businesses to survive rather than pursuing market opportunities,” said Tosh Ernest, Head of Business Growth & Entrepreneurship and Financial Health & Wealth Creation for Advancing Black Pathways at JPMorgan Chase. “Over 60% spend fewer than 40 hours per week on their businesses, suggesting that they have other jobs or responsibilities that demand their time and attention.”

Thoughts on that? 

Not So Easy

Running a business does not come without its challenges – and those headwinds are disproportionately distributed among Black women. In fact, there are fewer established businesses run by Black women relative to their high rate of entrepreneurship, with just 3% of Black women running mature businesses. (Maturation is widely recognized as a business surviving past five years.)

Moreover, Black women founders earn an average revenue of just $24,000, compared to $142,900 among all women-owned businesses. 

Why the inequities? 

One explanation might be the types of businesses started, with 61% of Black women entrepreneurs starting businesses in the retail/wholesale, health, education, government or social services sectors. This compares to just 47% of white women and 32% of white men entrepreneurs starting businesses in those sectors. Because these sectors are crowded with low margins and high competition, these types of businesses are more difficult to sustain over time.

But…

Another (more impactful and more likely explanation is the lack of access to capital, with 61% of Black women self-funding their startup capital. This comes even though just 29% of them live in households with incomes over $75,000, compared to 52% of white men. The trend to self-fund is likely because Black women find it difficult to get funding elsewhere. Black business owners who apply for funding have a rejection rate that is three times higher than that of white business owners, and they are more likely to identify access to credit as a challenge. Meanwhile, only 2% of venture capital funding goes to U.S. female-only founder teams.

2 f-ing percent, y’all.

The intersectionality makes it even more difficult for Black women to get funding, with less than 100 Black women raising $1 million or more in venture capital funding in 2020.

Fixing the Problem

To create a more equitable environment for Black women entrepreneurs, the finance community must recognize the biases that exist in investment assessment. They need to understand the value and benefit of businesses run by Black women leaders. With that recognition, systems can be reassessed and refreshed into something that is more fair.

One way to support Black women entrepreneurs is to increase lending and technical assistance for these communities. 

At the same time, we can support Black women entrepreneurs as individuals by shopping at their businesses and sharing their products and services with our networks. 

To make lasting change, we must also urge our elected officials to pass legislation that provides support and resources to Black women entrepreneurs. This includes policies that address the barriers Black women entrepreneurs face, such as access to funding and resources, as well as policies that provide education and training.

*ahem* Voting is crucial if we want to move the needle forward. 

We must also encourage the business community to do more to support Black women entrepreneurs. For example, corporations can allocate funds to support these entrepreneurs and their businesses, and they can also provide mentorship and networking opportunities. In addition, investors can focus on increasing diversity in their portfolios by investing in businesses run by Black women entrepreneurs.

Finally, we must continue to raise awareness of the challenges facing Black women entrepreneurs and the need for greater support and resources. By shining a light on these issues, we can work towards creating a more equitable and inclusive business environment for all entrepreneurs.

Do you have a story to tell about accessing funding as a Black woman business owner? I’d love to hear from you.