A lot has changed since the world witnessed the death of a Black man on the streets of Minneapolis in June 2020. Locked down in our homes, everyone had no choice but to pay attention to the inequalities that Black people faced. The response was swift – we believe that your lives, your community organizations, and your businesses matter. Swaths of funding were released from governments to corporations, hoping the bootstraps would be sturdy enough to lift Black entrepreneurs up and into the sun.
But while a lot has changed, much remains the same. In this year-long series, we will examine Black entrepreneurship in Canada and the United States, surveying the playing field and pulling the curtain back on the realities of being Black, Bold, and in Business
In December 2021, the Canadian federal government announced the creation of the Black Entrepreneurship Knowledge Hub (source) to support a deeper understanding of Black business ownership in our nation. It’s the start of a concerted effort to learn from the past to inform what we should do now.
However, we do know a lot more about the state of Black entrepreneurship in the U.S. In 2020, there were an estimated 140,918 U.S. firms with a majority Black or African American ownership, up 14% from 124,004 in 2017, according to the latest available data from the Census Bureau’s Annual Business Survey (ABS). (Source). The United States goes even deeper into the numbers by gender:
- 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. (Source)
Black women are leading the charge when it comes to starting businesses in the US, but how are they doing it, and how is it going? Are the new funding streams helping Black women’s businesses grow and succeed?
According to JP Morgan, the stats for Black women-owned businesses in the U.S are stark:
- Only 3% of Black women are running mature businesses. Maturation is widely recognized as a business surviving past its first five years.
- Moreover, Black female founders earn an average revenue of just $24,000, compared to $142,900 among all women-owned businesses.
- 61% of Black women self-fund their startup capital. Despite the fact that 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, and when considering ethnicity, less than 100 Black women managed to raise $1 million or more in venture capital funding in 2020.
So, Black women earn less, have to save longer, and are more likely to self-fund their businesses due to a lack of external funding and networks that don’t tend to include angel investors and high-net-worth individuals. And yet, access to capital isn’t the only obstacle for Black women entrepreneurs. Research firm FoundHers, reported, after surveying over 1,500 Black women founders, that there’s a lack of financial and educational opportunities. The systemic biases, discrimination, and lack of cultural understanding are leaving Black women behind.
It is essential for series like BMO’s Bold & Black to celebrate and amplify these remarkable achievements. A business that comes to fruition, and, more importantly, can last, is a revolutionary act that goes against all odds. Over the course of the next few months, we will speak with two Black female entrepreneurs, in Canada and the U.S., to see how they do exactly that, and provide the tangible tips needed for Black women wanting to take the deep dive into entrepreneurial waters.