When I think about my childhood, there are many things that I wish I had learned as a Black boy growing up in New York City’s housing projects. The power of entrepreneurship is one of them.
I’ve spent my whole career on the front lines of growing tech startups mainly started and run by white entrepreneurs. I’ve also witnessed the job opportunities that these companies create, and sometimes, the unfathomable wealth for those who were lucky enough to ride a company’s coattails all the way to an IPO or lucrative acquisition. I can’t help but think that there’s someone missing in all of this.
In Black communities across the United States, entrepreneurship is a foreign concept; but not because of the lack of awareness. Instead of prioritizing wealth growth, many low-income Black families have to prioritize survival. A broken financial foundation and lack of wherewithal prevents many Black families from considering entrepreneurship as a means of sustenance. This is evidenced by the rate of new Black entrepreneurs, which lags behind that of whites, Asians, and Latinos at 0.24% (i.e., there are 240 new entrepreneurs for every 100,000 adults each month).
What we see in white households, however, is a financial foundation that is relatively sound. According to American Progress, in 2019, the median wealth (without defined-benefit pensions) of Black households in the United States was $24,100, compared with $189,100 for white households. Where white families can take risks, Black families can’t, which suggests that entrepreneurship has become an activity for those who have resources and a strong financial foundation.
Even when Black people decide to pull themselves up by their bootstraps and become entrepreneurs, we know that they face more unique challenges than white entrepreneurs, such as discrimination in accessing capital from venture capital firms and federal assistance programs and a lack of a support network.
At a time when venture capital is being thrown at startup companies like candy, we need to embark on a nationwide effort to breed more Black entrepreneurs. Why? Because we know that entrepreneurship is critical to economic growth.
Entrepreneurship creates jobs.
According to the U.S. Small Business Administration, in 2019, small businesses in the U.S. created 1.6 million net new jobs, and as of 2017, small businesses in the U.S. employed 60.6 million people, or 47.1% of the private workforce. If those nationwide statistics are any indication, Black entrepreneurship would, in theory, drive more job creation in Black communities.
Entrepreneurship is a major driver of wealth creation.
$290 billion would be created in business equity for the Black community if there was revenue parity between Black- and white-owned businesses, according to a McKinsey & Co study. Imagine how many Black families could be better off financially if they even had the chance to build a business with revenues equal to that of white businesses. The benefit is pretty clear on a family level. But what about on a national level?
That same study states that the Black-white wealth gap will cost the economy $1 trillion to $1.5 trillion (in 2018 dollars) per year by 2028. It’s fair to say that what’s better for Black people is better for America.
As we emerge from a once-in-a-lifetime pandemic into what may potentially be another period of steady economic growth in the United States, we need to make sure that this time around, Black entrepreneurs aren’t left behind. We need a new golden age of Black entrepreneurship and we need our community leaders, business leaders, and local and federal officials to set up systems for Black entrepreneurs to thrive.
We can support existing Black entrepreneurs who have taken the leap into entrepreneurship and also create a pipeline for future Black entrepreneurs. That’s why I started OXC. When we create more Black entrepreneurs, job creation will rise, the wealth gap will narrow, and America will be better because of it.