Entrepreneurship can empower people to achieve financial freedom and build generational wealth. It also has macro implications for our economy and can contribute to driving growth and making our nation more competitive globally.
But the opportunity to create and own a small business is not as accessible as it should be to many Americans. Though Black people make up 14.2% of the U.S. population, we only account for 2.2% of the nearly 6 million employer-owned businesses in the country.
Several factors influence this underrepresentation, but there is hope on the horizon: Black women are now the fastest-growing group of entrepreneurs in America. Like many small business owners, Black women face several challenges in their entrepreneurship journey. However, some of the obstacles they face are unique, especially as it relates to access to capital, social and business networks, and the maturity of their businesses.
For America to grow, we must develop a truly inclusive economy. That means creating more fertile ground to nurture and cultivate entrepreneurship — regardless of who or where it comes from. As Black women forge their own paths in business, we must take steps to maintain their momentum. Not just for the benefit of this particular community, but for our overall economy.
The Rise of the Black Female Entrepreneur
To be clear, entrepreneurship isn’t a new phenomenon among Black women. America’s first female self-made millionaire was a Black woman, Madame C.J. Walker.
But in the more than 100 years since Madame C.J. achieved that distinction, the road to entrepreneurship for Black women has been characterized by fits and starts.
The number of Black women-owned businesses grew 50% between 2014 – 2019, according to Census data, and today Black women make up 36% of all Black-owned businesses. This percentage will likely rise in the near future, as 17% of Black women are in the process of starting their own business, with many saying their motivation for doing so is either to pursue a lifelong dream or create a new source of income.
But as Black women launch their own businesses, they also face distinct challenges as entrepreneurs. Businesses with Black female founders have $24,000 in annual revenue — about six times less than women-owned businesses overall. Black women’s businesses also are not as mature as their counterparts. Currently, only 3% of Black women run mature businesses, meaning they have survived past the five-year mark.
In several industries, Black women also face an uphill climb to get access to loans, grants, outside capital and venture capital (VC) funding. The stories are well known at this point of the disproportionate amount of funding White male founders receive compared to female founders, but the gap is widest between them and Black women. Black women receive less than 0.35% of all VC funding — or not even a full percentage point of the billions of dollars that flow through the startup ecosystem.
The irony here is that the same barriers and microaggressions that caused many Black women to flee Corporate America and venture out on their own are still obstacles when they re-engage with these same spaces as entrepreneurs.
We must address these barriers to open the path to entrepreneurship to more Black women.
How to Support Black Women in Business
Ensuring Black women create businesses — and stay in business – will require lots of intentional effort and letting our principles guide our practices.
At a larger policy level, it will take federal investment in targeted programs that expand equity and access. We are already seeing movement in this area through efforts like the Treasury Department’s $9 billion Emergency Capital Investment Program, which offers funding to help low- and moderate-income community financial institutions provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers, many of whom are from underserved communities.
We also need to increase outreach and knowledge-sharing. Research indicates 48% of Black women do not know where to go for information when starting a business. Many also want to build their knowledge in financial literacy, accounting and marketing, so there is an urgent need for federal, state, local and community organizations to work more effectively together to provide free or low-cost seminars, online courses and educational resources that empower Black women to start, maintain and grow their business.
On a community and individual level, there may be a lot more we can do to move the needle more quickly. If you already own a business or have an extensive network, pull up a seat at the table for a promising Black female entrepreneur. Invite her to a business event, ask her to participate in a panel or give a presentation, or simply take her out to breakfast or lunch and share what you know.
You also can be more intentional about diversifying your supplier network. Many women and minority-focused national professional organizations maintain extensive member databases and share weekly communications with members, so leverage these organizations to find Black female entrepreneurs to work with. For example, NABA Inc. has more than 7,000 members, many of whom have decades of finance, accounting and business experience. If your business needs accounting services or other financial expertise, reaching out to NABA and similar organizations is a great place to start.
Making the leap into entrepreneurship requires bravery and vision. But it also requires resources and the right network. Black women are becoming entrepreneurs in record numbers, but as they create more businesses, they also need ongoing support to keep their doors open. Whether it is access to business and financial education, a meaningful introduction to a network contact, or capital to launch and grow their offerings, we must get behind Black women and propel their entrepreneurship journey. In doing so, we will not only position them to excel, but also cultivate a more prosperous economy for all of us.