Throughout my career, people have often asked me: What do I need to become a successful entrepreneur? It’s a complex question and, the sad truth is, it depends on who it is that’s asking.
Successful entrepreneurs often embody certain characteristics, such as passion, innovation, and tenacity. And for many people that serves as a good foundation to tackle what’s ahead.
However, for Black entrepreneurs the road to success is littered with obstacles which require far more than characteristics to overcome. These are products of a complex system of racial disadvantage and are so deeply seated, they will require a global movement to conquer.
One of these challenges is highlighted from the British Business Bank’s research which suggested entrepreneurs with an ethnic minority background typically have a higher level of educational attainment than their white British counterparts and put more time and money into developing their business.
A Black individual starting out on their entrepreneurial career is clearly not doing so on a level playing field.
The challenges faced by Black-led businesses are rife.
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.
To progress, it is important that we unpick the disadvantages Britain’s Black entrepreneurs face. No single factor can explain the disparity that exists here, instead it is a combination of underlying, deeply embedded issues. The reality is that there is no shortage of gaps that exist for the Black community.
Let’s start with the issue of financing.
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.
There are other issues with finance at play here.
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.
Moreover, 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.
Aside from issues of financing, there are other serious factors at play, including the under-representation of Black individuals in middle management and senior leadership positions. This has been a long-standing issue in the workplace but 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.
In the same merit, 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?
Yet, 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.
How do we go beyond surface level pledges, avoid tick box exercise, and truly support Black entrepreneurs?
Firstly, we cannot be resigned to the disparities that exist, those that continue to keep Black- owned businesses and entrepreneurs at the bottom of the pecking order and prevent the rendering of tangible change. There is so much the business community can do to help Black entrepreneurs thrive, not least start by recognising and amplifying the value of Black entrepreneurs; acknowledge that your actions are not that of charity but are to create fairness in a process where those from ethnic backgrounds are not restricted based on their ethnic background.
Secondly, 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. Invest in them because discussions which lack a Black perspective are incomplete. Invest in them because they have insight into issues you do not and, if you are White, never will. Solidify their commitment to programmes that support Black-business founders and accept that if they do not, they are falling short of their role as an ethical leader.
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.
Thirdly, big business ought 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.
In addition, all applicants to the programme will receive access to a series of training sessions focused on communications such as media relations, social media, video creation, aimed to help all businesses improve their skills in a range of areas.
Finally, the media has a crucial role to play too. They need 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.
Specific solutions are needed for specific challenges and there is action to be taken by everyone; do business with Black-owned companies, not for sake of supporting them but because, quite frankly, you’ll be doing better business. Sponsor Black entrepreneurs, use your internal political and social capital to move Black-led start-ups forward, connect them to your leads, introduce them to your clients and include them in cross-marketing collaborations.
It is time for the captains of industry to commit.
More than 60% of VCs say that the Black Lives Matter movement has affected their investment strategy. This is a positive shift in VC attitudes and the actions being taken are considerable. I now see VCs unanimously acknowledge the importance of racial diversity amongst their portfolio companies’ founders ‘ this is progress.
What concerns me is this: 26% of VCs cite that the reason they do not invest in more multicultural-founded companies is because they cannot find multicultural entrepreneurs or do not have the right relationships.
It is not the job of Black businesses to guide their white allies through this process. Now is the time for businesses who are in positions of privilege, knowledge and influence, to take action to prevent Black-owned businesses ‘ which are critical in the fabric of our nation – becoming casualties of the Covid-19 pandemic.