How to help Black-entrepreneurs thrive in 2021 and beyond
For Black entrepreneurs the road to success is littered with obstacles which require far more than characteristics to overcome. These obstacles are products of a complex system of racial disadvantage and are so deeply seated, they will need a global movement to conquer. In short, a Black individual starting out on their entrepreneurial career, rarely does so on a level-playing field.
Even before the impact of Covid-19 (the subsequent recessionary environment and the past 18-months of the Black Lives Matter movement) Black British businesses were in crisis; they earned substantially less, failed to make profit at a higher rate and secured less funding. The reality is that there is no shortage of gaps that exist for the Black community.
In this article we will address the challenges Britain’s Black entrepreneurs face and we will also look at how the business world can step up to help individuals and their businesses thrive.
Let’s start by delving into the former – the challenges:
Support
Where government support schemes have existed for businesses, such as start-up support schemes, grants, and apprentice initiatives, it has been found that those from ethnic minority groups do not access them at the same rate as white-led businesses, or do not think that they would qualify for the financial support on offer.
Finance
There is a serious issue that exists with the carelessness of capital allocation. The truth is investment capital rarely finds the best opportunities. Between 2009 and 2019, 0.24% of venture capital (VC) funding was invested in Black businesses in the UK. Since access to financial capital is an essential ingredient in business growth and social capital, this statistic makes for grim reading.
The result of this low input is that 88% of Black founders financed their companies using their own money, or by receiving funding from family and friends to account for the lack of VC capital.
Lending
Discriminatory lending practices are well documented for Black businesses and homeowners. It may come as no surprise then that the size of loan offered to Black-owned business is smaller on average compared to White-owned businesses. And, if loans are granted, they are often delivered with unfair and outlandish terms and conditions. These biased due diligence practices go a long way in preventing Black business owners accessing capital that is so badly needed.
Under representation
The under-representation of Black individuals in middle management and senior leadership positions has been a long-standing issue in the workplace. However, what this does for Black-entrepreneurs, or those seeking to start a business, is reduce the opportunity to develop business-relevant skills, knowledge, and networks and this is a big issue. Likewise, role models, who are so important to one’s individual drive and ambition, have historically been scarce for ethnic minority individuals. It begs the questions, who is inspiring the next generation to overcome these challenges?
Five ways businesses can help Black entrepreneurs thrive.
Despite these huge challenges, the number of Black people considering the entrepreneurial path is likely to rise over the coming years, especially as the pandemic forces us to consider new ways to work and create revenue streams for ourselves.
But for this to happen, businesses need to go beyond surface level pledges and avoid tick box exercises.
Let’s look at five of the many ways businesses can support Black entrepreneurs:
There is so much the business community can do to help Black entrepreneurs thrive, not least by starting to recognise and amplify the value of Black entrepreneurs. We must all acknowledge that committing support is not that of charity but it is to create fairness in a process where those from ethnic backgrounds are not restricted based on their ethnic background.
The investor link has the power to hold businesses to account with a unique pocketbook of its own and they must address this critical role they play. Investors must invest in Black founders. Not least because discussions which lack a Black perspective are incomplete. They must invest in them because they have insight into issues they do not and (if they are White) never will. Just 17% of the VC community say they are satisfied with the rate at which they invest in multicultural-founded companies. It may sound like a gut-wrenching statistic but clearly there is an avenue to build a more just investment portfolio. In addition, VC’s can support by demystifying the funding process and provide the training and workshops to upskill Black entrepreneurs and business owners.
As for loans, repayment conditions must be fair, reasonable, and low risk. Above all, they must come without being shackled to systemic racism which has, traditionally, disadvantaged Black-business owners.
Big business will also need to allocate corporate social responsibility budgets towards supporting the Black enterprise ecosystem and be open and willing to share expertise. Project Rise, a programme we have launched in partnership with global PR firm, Weber Shandwick is one example of this in action. Weber Shandwick will use its expertise in PR and communications to boost the equity and profile of Black-owned businesses in the UK by providing five Black owned business with pro-bono PR services. It’s schemes like this that can shift the dial.
It’s also fair to say that the media has a crucial role to play. The media must start to spotlight Black entrepreneurs and increase awareness of those who can act as role models to demonstrate just how resilient and successful Black entrepreneurs can be.
In summary, it’s not the job of Black businesses to guide their white allies through this process. Businesses who are in positions of privilege, knowledge, and influence, need to take action to prevent Black-owned businesses becoming the next casualties of the Covid-19 pandemic.
