Black Business And Funding: How We’re Making It Real, Despite The Daunting Amount Of Money It Takes
"The business world is about to look very multi-colored, very soon."
The world of business isn't very inviting to minority business owners, but despite this, there is a distinct presence in the business world that represents these minorities. According to a 2017 article in the The Atlantic, a mere four black CEO's exist in the Fortune 500 (as of today, there are three). But instead of being negative about it, black businesses have started popping up all over the place, as if in stark defiance of this fact.
There are a large number of factors that affect the funding of a black business, not least of all the prejudice that exists already regarding race in the world of business. In spite of this, and partially because of it, black business owners in the middle-class arena have started to figure out new and innovative ways of funding their businesses and building their dreams that creates growth and a vehicle for wealth production for other minority investors. The business world is about to look very multi-colored, very soon.
The State of Funding Today
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Accessing funding from venture capital firm remains to be a very difficult endeavor. The report "State of Women-Owned Businesses" shows that over the course of nine years, female entrepreneurs have opened 3.5 million new enterprises, with 78 percent of those enterprises being owned by women of color. This testifies to the potential of these women, but also to the representation of minorities in an area where there is less stringent control on the development of businesses. Social + Capital has found that less than three percent of venture capital funds have minority investment partners, which may explain why they tend to fund minority businesses less.
The Problems with Investor Funding
By and large, there is no clear methodology on how investors choose the businesses they want to invest in. Because this information isn't always readily available, it's a bit like navigating a minefield, where one wrong step could cause you to fail. Even after presenting items demanded by investors, there's nothing that ensures those investors would buy into the product or service being presented, even if validated by ProductExpert. At the end of the day, the final decision is with them to determine whether they want to invest in a particular business or not. Investor funding still makes up a major part of the private funding that minority businesses have to depend upon, but quite often, these investors intend to change the business and its mechanics as part of the criteria for their investment, thereby impacting how the business itself is run.
Looking at New Funding Avenues
Minority businesses have to face the fact that the funding for their businesses is a necessity. However, with more minority investors becoming available (even investors that were previously business owners) there seems to be a general uptick in the amount of traction black business owners can now command. Even so, the numbers are still small and as black business owners tend to not pander to a particular crowd, the battle for funding is heavily competitive. While there are a number of venture capital firms that are likely to listen to black business owners, many of them do so just to appear inviting while making up their minds behind closed doors as to whether funding black businesses is worth it. At the end of the day, businesses need to be aware that to get funding, the idea must be both sound and profitable with a viable exit strategy. Even with all those things, it's still a matter of finding the right VC fund or angel investor to take it to the next level.
Forging Forward as a Black Business Owner
Providing skills, services and products requires input in the form of capital. Without it, a business is just an idea. Black business owners have lot of potential and they number in the thousands. While not every single idea they generate will have the potential for development into a profitable end-game, many of their ideas do. They just lack the funding to push through and make those ideas a reality. The day is coming, however, when the best ideas will make it off the paper and into real life, probably funded by black business owners of a generation before wanting to give back to their community in the best way possible — offering them the creation of wealth through business.