As an entrepreneurship educator, the lack of equity in entrepreneurship is a topic that concerns me deeply and one that the Center for Innovation and Entrepreneurship (CEI) at Duke’s Fuqua School of Business is committed to positively impacting. I want to explain more about why and why now.
First, entrepreneurship has historically been a means of creating individual and generational wealth. The wealth gap between Black and white Americans has continued to grow since the 1950s. In 2016, the net worth of a typical white family was $171,000, nearly ten times greater than that of a Black family ($17,150). There is a moral imperative to create an ecosystem in which all individuals can successfully pursue their entrepreneurial passions, and thereby, create wealth for themselves, their families, and their communities. Over time, this will begin to impact the growing racial wealth gap in America.
In addition to the moral argument, there is also the economic argument. The barriers to entrepreneurial action result in a significant negative impact on USD GDP, costing $190 billion in additional GDP. By not cultivating an environment where all Americans have access to the resources, skill development, and capital they need to grow their business venture, we are leaving billions of dollars of productivity on the proverbial table.
A review of recent data clearly identifies gaps that need to be addressed in order to move toward equity. A critical gap is the lack of access to capital: Black founders receive roughly 1% of VC funding and Black female founders received 0.27% VC funding in 2018–19. The access-to-financing gap extends beyond equity to include access to debt: Black startups face more difficulty in raising external capital, especially external debt.
While a thesis could be written on the layers of causes that create this access to capital gap, including a homogenous VC marketplace (over 80% of venture capitalists in the US are men and 70% are white; 40% of VCs surveyed went to either Harvard or Stanford), implicit bias in the venture/founder evaluation process, etc. — there are other dynamics at play that must simultaneously be addressed to see systemic change. This includes creating access to networks of well-connected advisors who can help facilitate connections to capital and expertise, identifying funding mechanisms that will address the “friends and family” funding round that is often elusive for Black founders, funding Black VC fund managers, and ensuring that Black founders and investors have a seat at the decision-making table when it comes time to deploy public and private resources.
Efforts can’t stop there, but these will be essential steps in moving forward. We all play an important role in removing these barriers to entrepreneurial action; CEI is taking our role seriously by engaging with Fuqua research faculty to more deeply explore the barriers and potential interventions that can catalyze change, by partnering with North Carolina Central University (NCCU) School of Business to proactively support early-stage Black founders through pitch: A competition for Black student-founders, and by partnering with Duke Innovation & Entrepreneurship & NCCU School of Business on a two-part virtual conference, Equity Matters.
To the question of “why now?” I respond, “if not now, when?” Should we have committed to this work earlier? Yes. Taking steps today ensures what we are not looking back in a year or five years and asking ourselves the same question.
After reading this, you may ask yourself what you can do. This is a great question and not one that’s easily answered. However, many of you start from a place of privilege by having access to networks that others will not. I encourage you to think critically about how you leverage that access. Can you make connections for others that may not have similar relationships? Can you find a way to support a Black founder with a “friends and family” investment raise? In fact, there are new platforms emerging to allow for crowd-funding for founders, which allow for smaller check sizes, e.g. Doonie Fund and Fund Black Founders. These are all small steps, but we each have a sphere of influence and if we are thoughtful and intentional with our actions then our ripples will make a wave.
What idea to you have to help move the needle?
What actions will you take?
P.S. I invite you to join CEI and friends to continue this important conversations by registering to attend the Equity Matters conference on March 18th and 19th and pitch: a competition for Black student-founders on April 8th and 9th.