In the wake of George Floyd’s murder and the marches, protests, and civil upheaval that followed, support for Black-owned businesses grew significantly.
According to Bloomberg and Business Insider, Black Americans became the fastest-rising group of entrepreneurs in the United States between February 2020 and August 2021, increasing by 38%. This trend was particularly prominent across Silicon Valley, which notably holds less than a 3% Black population. But as media attention moves on and the pandemic stretches for more than two years, support for Black businesses has waned, and promised capital has been slow to follow.
Founded in 2010, African Diaspora Network (ADN) is a Silicon Valley-based, immigrant-led nonprofit that promotes racial equity and economic justice by building leadership and economic capacities of African immigrants and African Americans.
Black leaders grow their businesses and networks through our entrepreneurship accelerator programs and convenings. 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 through 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 over the next 25 years, and projections show that a quarter of the world’s people will be African as soon as 2050. This seismic demographic shift creates a significant opportunity for investment, innovation, and entrepreneurship. Africa is also an entrepreneurial continent.
According to the 2017 African Economic Outlook Report, 22% of Africa’s working age population are starting new businesses, the highest rate of any region in the world. Why? Many start businesses to take advantage of opportunities in the market, and 33% of them report that they are responding to a lack of employment opportunity in their communities. Every year, 29 million new entrants join Africa’s labor force, and small and medium businesses are the biggest driver of new jobs.
But not all enterprises are treated equally. Trends indicate that Africa-based businesses led by non-Africans are more likely to receive funding. The Guardian reports that 8 out of the top 10 Africa-based startups that received the highest amount of venture capital were led by foreigners. Furthermore, systemic barriers to capital in the U.S. mean that Black startups receive just 1% of VC funding on average, while Black nonprofits get just 8% of the funding their peers receive.
Factors at play include unconscious bias and pattern recognition on the part of investors. Additionally, disparities between the cost of capital available to Black entrepreneurs through credit and other debt and their ability to access it explains why many Black entrepreneurs who may need financing do not even choose to seek it.
According to the National Bureau of Economic Research, Black businesses are less likely to have a formal relationship with a bank, and loan requests from Black entrepreneurs are three times less likely to be approved than those of white entrepreneurs.
Oftentimes, there have been discussions about investment in the continent where I was the only African at the table. African and Black leaders often lack seats at the tables of power or are significantly underrepresented. A survey by The Information found that there were only 7 Black decisionmakers at 102 of the largest investment firms in the United States in 2018.
Yet, despite these disadvantages, BIPOC entrepreneurs have managed to create 4.7 million jobs in the last decade alone. The returns on investments in minority-owned businesses exceed those from white-owned ventures. The median net worth for Black business owners is 12 times higher than Black non-business owners. And when one Black business owner succeeds, they employ ten other people on average.
It’s numbers like these that have motivated ADN to partner with organizations like Bill.com, the Silicon Valley Executive Center at Santa Clara University, Silicon Valley Community Foundation, the County of Santa Clara, and others to launch the Accelerating Black Leadership and Entrepreneurship (ABLE), with a goal of advancing the development of Black entrepreneurs and Black-owned businesses in the United States who are catalyzing an array of sustainable solutions to poverty across multiple sectors at the local and national level.
The ABLE program was built off the success of ADN’s Builders of Africa’s Future, an enterprise accelerator for African entrepreneurs running early-stage nonprofit or for-profit businesses that address key community needs through technology or differentiated business models. The goal is to help scale their ventures and impact and draw attention to the opportunity that exists for meaningful and significant investment in BIPOC and immigrant-owned businesses.
Now in its fifth year, the Builders of Africa’s Future program awards 10 to 15 of Africa’s most promising entrepreneurs with enterprise development training, partnership and mentorship opportunities, and a platform to boost their brand visibility and investment potential in Silicon Valley. Since 2018, the program has recognized and catalyzed 42 African startups.
The final cohort of 11 entrepreneurs will participate in a virtual pitch session during the annual African Diaspora Investment Symposium, which 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 grassroots business leaders who are the future — and the now — of the entrepreneurial continent.
All are welcome to register here.
Almaz Negash is executive director of the African Diaspora Network.