Who comes to mind when you think of an entrepreneur? Steve Jobs, Bill Gates, or maybe Elon Musk – all white men. What about Madame CJ Walker, Oprah Winfrey, or Serena Williams? These women of color have broken barriers as entrepreneurs, but their success is not recognized or celebrated as prominently as the success of their white male counterparts.
Women of color are the fastest growing demographic of business developers in the United States, and around the world. Yet despite their proven business acumen, the outsized economic potential of women is still undervalued.
Even though the Trump Administration frequently cites US business growth as a top priority, little has been done to address the challenges women of color-owned businesses face in the United States, including equal access to startup and working capital. To help women entrepreneurs realize their economic potential, the barriers women of color face must be addressed. Choosing to preserve the status quo will result in a $4.4 trillion missed opportunity.
According to American Express’ 2018 State of Women-Owned Businesses Report, the number of women-owned businesses in the United States grew 58% from 2007 to 2018. For women of color, this number tripled to 163%, adding over 71,000 jobs to the US market. Even as the economy continued to improve, the rate at which women of color started or stuck with businesses remained high, a combination of entrepreneurship based on both necessity and rebounding opportunity.
However, even while driving this exponential growth, women of color report experiencing significant gaps in capital, equity, and trust – critical factors in a business’ failure or success. Women of color business owners are also more likely to experience challenges securing funding for expansion or operating expenses. This may force some owners to dip into personal funds to make ends meet, increasing the likelihood of damaging their credit reputation due to missed bill payments. Without assets for collateral, along with a positive track record in running a business, banks will not take a chance on lending to aspiring women of color entrepreneurs.
Although hard data continues to prove that race and gender directly impact an entrepreneur’s ability to secure capital, a 2018 Morgan Stanley survey revealed that “[i]nvestors do not see an imbalance.” However, the same survey reports that investors are nearly three times more likely to review male-owned business opportunities. In spite of overwhelming racial and gender biases, women of color are twice as likely to outperform their white male counterparts in profitability for lending institutions, as well as demonstrate a higher return on investment.
In order to fill these glaring gaps and capitalize on this untapped potential, a handful of organizations, such as Harlem Capital and Backstage Capital, are actively seeking to invest in businesses owned by women of color. At the 2018 Essence Festival, entrepreneur and social impact investor Richelieu Dennis announced the official launch of the New Voices Fund, providing more than $100 million to invest in businesses owned or managed by women of color. To date, New Voices has invested or committed $30 million to eight women of color owned businesses. Tennis star Serena Williams launched her venture capital firm Serena Ventures in 2014, investing in more than 30 companies led by women and people of color and recently taking the fund public. Williams shared how one of her goals is to raise the profile of women with great companies, too often overlooked because of the color of their skin.
In light of the Trump Administration’s “America First” policy approach, along with mounting evidence demonstrating the contributions of women of color to the US economy, more policymaking energy should be directed toward reducing the inequalities women entrepreneurs face. The administration must create a framework that sets up all women for success, including eliminating the gender wage gap, increasing access to mentors, and facilitating access to networks that will build social and financial capital.
We can start with more private sector engagement through public-private partnerships, to strengthen the resources and representation of women of color owned businesses with investors and banks. Ultimately, this will also increase access to flexible and unconventional capital, as women business owners will be known and positioned to scale revenues and attract foreign investment.
Sweden is the first country in the world to adopt a feminist foreign policy, and there are strong arguments for emulating this model. Sweden has raised the profile of women’s economic empowerment by pushing to ensure gender equality is integrated into the European Union’s trade policy. Implementing a similar approach focused on American women entrepreneurs, especially women of color, would have a projected net positive impact of $3 trillion annually, which translates into the creation of more than 23 million jobs.
Investing in economic empowerment for all women – regardless of color – will not only give women the ability to participate equally, it will also drive US economic growth. In order to do this, we must create environments that eliminate barriers preventing women of color from fully participating in the US economy, whether those are legal, regulatory, or cultural. Considering the outsized contributions women are already making to our economy, there is no excuse for any woman entrepreneur to be left behind.