After being hit hard in the early months of the pandemic, Black American business owners have bounced back in a big way. By around this time last year, the U.S. was home to over 30 percent more Black-owned businesses than before the pandemic, a trend driven largely by Black women. Since then, new small business applications from Black entrepreneurs have continued at a "record-setting pace," said Bridget Weston, CEO of SCORE, a nonprofit network of volunteer business mentors.
It's not just the number of Black-owned businesses that's growing. Black business owners reported a 23 percent jump in annual revenue last year, more than double the growth rate recorded by U.S. small businesses overall. Black-owned small businesses also added employees at double the rate of all other U.S. businesses, according to recent data from SCORE.
Even though they're outperforming their peers, Black entrepreneurs told SCORE they still find it a challenge to secure funding and establish trusted banking relationships. "Black business owners are thriving, but face unique challenges no matter what their business stage," Weston said in a statement last week.
The broader business community has an opportunity to offer their support to amplify the impact Black-owned businesses have in local communities and the economy.
SCORE, the nation's largest network of volunteer business mentors and a resource partner of the U.S. Small Business Administration, launched SCORE for Black Entrepreneurs in 2021 to better connect with this founder group. The program includes business resources, free workshops and training, and access to SCORE's network of experienced mentors.
That last point in particular is invaluable, as Black entrepreneurs are less likely than their white peers to have access to the mentorship networks that could help them build their businesses.
Through its free network, SCORE connects experienced business people willing to volunteer their time with entrepreneurs who can benefit from their guidance and connections. SCORE mentors do sessions in person, virtually or via email.
"Without my mentor and SCORE, I would not have been able to get the funding I needed to grow," said Lenora Ebule, a member of SCORE's entrepreneur network in Memphis and founder of Bailan Spice, which specializes in African-inspired spice blends. "I started with one store with one product and I have gone to an entire range of nine products in more than 30 stores, including Kroger. Working with SCORE has helped me tremendously and I believe it would help any business."
Likewise, a growing number of businesses are realizing the benefit of opening up their networks and expertise to the burgeoning community of Black business owners. Some of the big financial players — including Mastercard, American Express, Chase Bank and Bank of America — now offer expert mentoring as part of their outreach to Black entrepreneurs. Meanwhile, efforts to source more from Black-owned businesses, including Target's pledge to spend over $2 billion with 500 Black-owned brands by 2025, are opening up new doors to Black founders.
Black entrepreneurs have historically received less than 2 percent of the venture capital funding provided in the U.S. That began to change as companies made new commitments to racial justice after the murder of George Floyd, and Black founders received a record amount of VC funding in 2021. But the good news didn't last long: As markets worsened and business leaders began shifting their attentions elsewhere, VC funding for Black-owned businesses plummeted by 45 percent last year, compared to a 36 percent drop for all businesses.
On this front, the early-stage VC firm Nex Cubed is stepping up to lend a hand with a planned $40 million accelerator for startups founded by students, alumni and faculty at historically Black colleges and universities (HBCUs).
The fund officially launched on Monday with an initial $5 million investment from Costco, and the first cohort of eight to 10 businesses will be announced in the spring, the Plug reports. The fund builds on California-based Nex Cubed's HBCU Founders Initiative, an independent nonprofit launched in 2021 to support HBCU students and alumni along their entrepreneurial journeys while encouraging them to pursue startup solutions that close the racial wealth gap.
Despite the VC hiccup last year, the economic growth seen by Black-owned businesses proves they are still a massive opportunity for funders in the years ahead. “From a financial investment perspective, this remains a huge blue ocean for people to dive in,” Pocket Sun, co-founder and managing partner of SoGal Ventures, a VC firm devoted to supporting women and diverse entrepreneurs, told CNBC last week.
Corporate initiatives launched since 2020 have the potential to offer a major boost to Black-owned businesses in the years to come. Along with commitments from mega-retailers like Target to spend more with Black-owned suppliers, 25 top companies including Macy's and Sephora signed the 15 Percent Pledge to ensure 15 percent of their shelf space is dedicated to Black-owned brands. Corporate programs like Mastercard's Strivers Initiative and the American Express-led Coalition to Back Black Businesses offer room to grow in the form of millions of dollars in grants to Black founders.
But it's vital to keep the momentum going. Black creators recently told AdAge they're already seeing fewer brand partnerships this Black History Month, as the wealth of opportunities on offer from brands in 2020 began to dry up.
As we continue to challenge brands to stick to their pledges and bolster this high-potential founder group, individuals also have a role to play. Shopping at Black-owned businesses in your area helps ensure they'll stay afloat for years to come, and directories like We Buy Black and EatOkra make it easy. "It's so important for us to engage, because it's a very specific community that's drawn to us," software developer and EatOkra founder Anthony Edwards Jr. told Salon. "We love enabling people to find things in their own neighborhood that they might have passed a thousand times but just didn't know."
Image credits: Tim Mossholder/Unsplash and RF._.studio/Pexels
Mary Mazzoni has reported on sustainability in business for over a decade and now serves as managing editor of TriplePundit. She is also the general manager of TriplePundit's Brand Studio, which has worked with dozens of brands and organizations on sustainability storytelling. Along with 3p, Mary's recent work can be found in publications like Conscious Company, Salon and Vice's Motherboard. She also works with nonprofits on media projects, including the women's entrepreneurship coaching organization Street Business School. She is an alumna of Temple University in Philadelphia and lives in the city with her partner and two spoiled dogs.