During August, there were many recognitions and celebrations for National Black Business Month. It should also be a time to acknowledge that while Black-owned enterprises have grown to 3.12 million in the U.S., according to the latest census data, history has not been kind to Black entrepreneurs. The road ahead has many challenges.
Subjected to bias for generations, people of power and influence continue to doubt the viability of Black businesses despite statistics that prove otherwise. For example, the national failure rate for startups in the U.S. was 40 percent in 2020, while the average business failure rate was 27 percent for Black and Latinx female-led startups, according to Statista Research. Meanwhile, Black founders continue to struggle with obtaining investment capital, one of the biggest barriers to entrepreneurial success.
The Covid-19 pandemic created additional barriers. A study by the University of California Santa Cruz cited that between February and mid-April 2020, 440,000 Black-owned businesses shuttered for good—a 41 percent plunge.
How to inspire change
The Institute for Entrepreneurial Leadership (IFEL), a 501(c)(3) nonprofit organization, which I founded in 2002 with my father, aims to eradicate the systemic barriers preventing people of color from accessing the knowledge, networks and capital required for entrepreneurial success. IFEL envisions inclusive economic ecosystems and equal opportunity for success.
While training and education are always helpful, this is not the path to solving the problem of access to capital. In fact, this approach implies that it is the deficiency and inadequacy of the entrepreneurs themselves that creates the barrier to access to capital. IFEL recognizes that the problem is due to the historical exclusion of Black entrepreneurs from important channels that create an onramp to capital access. The design of our structural lending foundation—credit and collateral—is intentionally exclusionary. They continue to serve as barriers for the vast majority of Black businesses. In the world of venture capital where “pattern matching” is the norm and only four percent of VCs are Black, it should not be a surprise that Black founders are not getting funded.
Black business owners work harder to prove they are investment-worthy. Black business owners work harder to demonstrate that they are capital ready. They continue to face barriers from banks, investment firms and even alternative funders who seem eager to talk about the benefits of diversity but do little to create new pathways to funding for Black-owned businesses. No matter how much harder they have worked, the capital has yet to come.
What we need to do
In order to achieve diversity, equity and inclusion in the entrepreneurial ecosystem, we must acknowledge that the capital that flows freely to some is not due to their inherent genius, but rather is the result of compounding wealth within their network over generations originating from free labor provided by slaves. The systems through which capital flows have since continued to uphold policies that create barriers for Black entrepreneurs. The problem of access to capital for Black entrepreneurs will continue to exist until more of us become intolerant of “business as usual” and commit to creating new systems that make inclusion possible.
Learn how IFEL is creating opportunities to be part of the solution: www.weareifel.org.
About the author
Jill Johnson is the co-founder and CEO of the Institute for Entrepreneurial Leadership (IFEL), based in Newark, NJ. IFEL, founded in 2002, is an independent, not‐for‐profit organization that supports economic development through entrepreneurship. With over 30 years of experience as a business strategist, Johnson is a pioneering voice for inclusive entrepreneurial ecosystems. She is especially focused on creating a new paradigm for the access to capital conversation. Most recently, Johnson conceived and launched the Women of Color Connecting initiative to change the way we think about building the capacity of Women of Color entrepreneurs for the grow-scale-exit trajectory. She is also spearheading The Making of Black Angels movement to drive diversity and inclusion within the angel investing sector.
Johnson is a member of the Women’s Forum of New York, the Women Business Collaborative and Harvard Alumni Entrepreneurs. She also serves on the board of the Horizon Foundation for New Jersey and is a member of the America250 Innovation, Science & Entrepreneurship Advisory Council.
In 2021, Johnson was named to the NJBiz Power 100 and received the Women’s Empowerment Award by Berkeley College. In 2020, she served on the NJ Restart & Recovery Advisory Council Main Street Committee. Previously, she served on the Red Tape Commission created by New York City Comptroller Scott Stringer and was an appointee of Mayor Cory Booker to the Board of Trustees of the Newark Public Library. She has also served as a co-chair of the South Orange Main Street Economic Development Committee.
Johnson has a B.A. in economics from Harvard University and is married with four amazing sons.
The Institute for Entrepreneurial Leadership (IFEL), founded in 2002, is an independent, not‐for‐profit organization that supports economic development through entrepreneurship. Our mission is to eradicate the systemic barriers that prevent access to the knowledge, networks and capital required for entrepreneurial success and wealth creation.