June 18, 2022
In the wake of the murder of George Floyd and the ensuing marches, protests and civil unrest, it has become very fashionable to support black-owned businesses.
According to Bloomberg and Business Insider, Black Americans became the fastest growing group of entrepreneurs in the United States between February 2020 and August 2021, with a 38% increase. This trend was especially prominent in progressive communities like the Bay Area, which are steeped in diversity, but also haunted by persistent inequality.
But as media attention turned to the next cultural crisis and the pandemic dragged on for more than two years, support for black businesses dwindled and pledged capital was slow to follow.
Founded in 2010, African Diaspora Network (ADN) is a Silicon Valley-based, immigrant-led nonprofit organization that promotes racial equity and economic justice by building the leadership and economic capacity of African immigrants and African Americans. Black leaders grow their businesses and networks through our entrepreneurship acceleration programs and meetings.
Simultaneously, we work with investors, academics, and industry leaders to mentor, train, and accelerate investments in Black-led organizations and talent. Our goal is to break down systemic barriers for black entrepreneurs in accessing capital and leadership positions while amplifying their voices to create long-term societal change.
Africa is the next frontier of economic development. The continent’s population will double in the next 25 years, and projections show a quarter of the world’s population will be African by 2050. This seismic demographic shift creates a significant opportunity for investment, innovation and entrepreneurship.
Africa is also an entrepreneurial continent. According to Africa Economic Outlook Report 2017, 22% of Africa’s working-age population start new businesses, the highest rate of any region in the world. Why? Many start businesses to take advantage of market opportunities, and 33% report that they react to the lack of employment opportunities in their communities. Each year, 29 million new entrants join the African workforce, and small and medium enterprises are the main engines of job creation.
But not all companies are treated the same. Trends indicate that businesses based in Africa and led by non-Africans are more likely to receive funding. The Guardian reports that eight of the top 10 Africa-based startups that received the highest amount of venture capital were led by foreigners. Additionally, systemic barriers to capital in the United States mean that black startups receive on average only 1% of venture capital funding, while black nonprofits receive only 8% of the funding than their peers. receive.
The obvious factors at play here are unconscious bias and pattern recognition on the part of investors. Additionally, the disparities between the cost of capital available to Black entrepreneurs through credit and other debt and their ability to access it is why many Black entrepreneurs who may need financing do not even choose to seek it. . According to National Bureau of Economic ResearchBlack businesses are less likely to have a formal relationship with a bank, and loan applications from black entrepreneurs are three times less likely to be approved than those from white entrepreneurs.
As the saying goes, if you don’t have a seat at the table, you’re probably on the menu, and lack of representation is another contributing factor. A survey by The Information found that there were just seven black decision makers at 102 of the largest investment firms in the United States in 2018. The threat that unprecedented economic investment will never reach the people who need it most is very real.
Yet despite these drawbacks, BIPOC entrepreneurs have managed to create 4.7 million jobs in the last decade alone. Returns on investments in minority-owned businesses exceed those of white-owned businesses. The median net worth of black business owners is 12 times that of non-business black owners. And when a black business owner is successful, they employ an average of 10 other people.
It’s numbers like those that motivated ADN to partner with Santa Clara University’s Leavey School of Business, Silicon Valley Community Foundation, Santa Clara County and other partners to launch the Accelerating Black Leadership and Entrepreneurship (ABLE), with the goal of advancing the development of Black entrepreneurs and Black-owned businesses in the United States that catalyze an array of sustainable solutions to poverty across multiple sectors locally and nationally.
The ABLE program built on the success of the DNA program Africa’s Future Builders Award, a celebration of innovation and the impact of African entrepreneurs leading not-for-profit or for-profit start-ups that address key community needs through technology or differentiated business models. The goal is to help scale their businesses and impact and draw attention to the opportunity that exists for significant and meaningful investment in BIPOC and immigrant-owned businesses.
Now in its fifth year, the Builders of Africa’s Future program rewards 10-15 of Africa’s most promising entrepreneurs with business development training, partnership and mentorship opportunities, and a platform to boost the visibility of their business. brand and their investment potential in Silicon Valley. Since 2018, the program has recognized and catalyzed 42 African startups, and ADN is currently reviewing applications for the 2022 cycle.
The final cohort of 10 to 12 entrepreneurs will participate in a pitch session during the year African Diaspora Investment Symposiumwhich will be held via Zoom on June 23. This showcase is the perfect opportunity for venture capitalists as well as angel, impact and philanthropic investors to meet the local business leaders who are the future – and the present – of the entrepreneurial continent.
All are invited to register here.
Almaz Negash is Executive Director of the African Diaspora Network.
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