Barriers to black entrepreneurship increase the wealth gap | Job Binary


One of the best ways to build wealth in the United States is through ownership your own business. According to a report by the Alliance for Venture Capital, only 2% of businesses with employees are black-owned.

This played a major role in its expansion racial the wealth gap in the USA. Black households, which make up about 16% of the US population, The Federal Reserve’s 2019 Survey of Consumer Finances shows that it accounts for less than 3% of total wealth. White households, on the other hand, owned almost 87% of the wealth, but only 68% of the population.

While there is no shortage of black-owned businesses in the United States, systemic racism and a persistent lack of adequate support and funding make it much more difficult for black-owned businesses of all sizes to flourish, according to a panel of experts. He spoke at an event jointly organized by MIPAD and CNN Business.

“It’s not about starting a business, it’s about sustaining a business, being able to help a business grow and scale over time,” said Brandon Andrews, co-founder of Gauge, an AI-powered mobile market research platform.

From left: Alfa Demmelsch, CEO of Rising Tide Capital;  Brandon Andrews, co-founder of Gauge;  and Gail Jennings O'Byrne, founder of the Wocstar Foundation, discuss what needs to be done to support black entrepreneurs.

In the first half of 2021, only 1.2% of total US venture capital dollars went to black entrepreneurs.

The shortage of funds “can be attributed to all of them – biases and biases that have been built up over the 400 years we’ve been a part of this country,” said Gail Jennings O’Byrne, founder of the Wocstar Fund, an early-stage investment fund that invests in technology innovation. by women of color.

But Discrimination is subtle, not overt, O’Byrne said. “Hey, great job. This is a great idea. Continue. You know, come back to me in a year. I want to see how you are doing. Hey, stay in touch.'”

It’s not just a lack of funding for promising startups. It is the lack of constant support microenterprises which constitute the lifeblood of communities.

“How do we enable these micro-businesses?” How do we ensure their access to capital? How do we ensure they have access to business knowledge? Andrews asked.

It can also contribute to the livelihood of the community. “We know that Black business owners and Black entrepreneurs typically hire from within their own community, thereby spreading the economic benefits,” said Kenneth Eby, executive director and chief development officer of Black Entrepreneurs NYC.

If the goal is to strengthen communities and local economies, it’s important to rethink what it means to “return” investment from these small businesses, said Alfa Demmelsch, CEO of Rising Tide Capital, a nonprofit that teaches business development skills to entrepreneurs from historically marginalized communities.

“We don’t just need a few successful millionaire-billionaire entrepreneurs. Communities of color are truly empowering communities. We saw this during the pandemic. When you’re at home and you have to have that food delivered, who’s cooking? Who drives this truck? Who is bringing it to your house? Who cleans your house? Who monitors sanitation? This is literally our livelihood,” Demmelash said. “They are important workers and they are important entrepreneurs. They shape the culture. They make a living. …. [But they] invisible and never invested because it is not considered cool [investor] return”.

At this point, O’Byrne noted, investing in a black-owned small business can take the form of pitching a business or being intentional about using someone’s services or hiring contractors with a diverse leadership team.

If you don’t run a business, you can make a fortune by getting in on the first floor of seed capital raising. But for blacks and other minorities, there is a barrier to entry called the “accredited investor rule,” Andrews said.

“Many people in our communities are legally barred from doing this in the United States because of the definition of an accredited investor,” he said.

The Securities and Exchange Commission requires anyone who wants to invest in an early-stage company to have a net worth of more than $1 million. their primary residence and income in each of the previous two years in excess of $200,000 for individuals ($300,000 if a spouse or partner) and their income in the current year will be the same.

“So again, there’s a systemic pressure that’s preventing our communities from spending their money on our businesses the way they could otherwise,” Andrews said. said.

–CNN Business’ Lori Frankel contributed to this report



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