How Black women-owned businesses have become the fastest growing in the US

BY Preta Peace Namasaba February 22, 2024 5:54 AM EDT
Black women-owned businesses are stronger than ever. Photo credit: WomLEAD Magazine

In recent years, Black women have emerged as the fastest-growing group of entrepreneurs in the United States. Findings have revealed that Black women account for nearly 70 percent of the micro businesses owned by Black entrepreneurs. As entrepreneurship becomes more diverse, Black women are leading the forward surge in the $1.7 trillion revenue micro business sector.

But the COVID-19 pandemic dealt a blow to women in business. Between 2014 and 2019, the number of businesses owned by Black women grew by 50 percent – the highest growth rate of any female demographic. This upward trend was disrupted by the pandemic as Black-owned businesses plummeted by over 40 percent between February and April 2020.  Four years later, Black women have returned to the forefront of entrepreneurship.

Despite the economic decline, the pandemic also presented opportunities for Black women in business. The large layoffs, job insecurity triggered by COVID-related restrictions and the absence of childcare influenced many to look towards entrepreneurship. The lockdown also inspired people to pursue their passions and follow lifelong dreams and aspirations. It prompted a mass exodus from corporate careers to entrepreneurship for more fulfilling and flexible career options.

Black women entrepreneurs are tapping into the inequitable services sector. With over 60 percent of Black female entrepreneurs starting businesses in the retail/wholesale, health, education, government or social services sectors, African Americans have improved access to utility products. They have successfully leveraged technology and the power of the internet to innovate, market and sell products.

Additionally, Black women entrepreneurs have benefited from strong community and support mechanisms. They have established platforms and associations -both online and in real-time – to network, learn from industry experts and grow their businesses. Through organizations such as the National Coalition of 100 Black Women, Black Women Talk Tech, Black Female Founders, and The National Council of Negro Women, Black women entrepreneurs have an avenue to share business tips and talk shop with similar-minded people. These support systems have been fundamental to the demographic’s rise in entrepreneurship.

Limited access to capital hasn’t stopped Black women entrepreneurs from starting businesses. More than 60 percent of Black women entrepreneurs self-fund their startup capital as they are unable to get funding elsewhere. Even though Black women receive less than one percent of venture capital funding, they have utilized alternative sources of funding. They have embraced pitch competitions, crowdfunding and micro and small grants from private and public institutions. In addition, the rise of venture capital firms aimed at financing Black women entrepreneurs has driven their entrepreneurial growth.

Black women entrepreneurs have successfully navigated the hardest part of any endeavor, starting. But with only three percent of Black women running mature businesses (one that survives the five-year mark), staying in business is still a hurdle. Access to long-term funding, resources and prime strategies can transform the high rate of entrepreneurship into established business entities.

Nevertheless, it is within the bounds of reason to expect these gains to be threatened by certain factors including legislation and political expressions through culture wars. As the hostilities toward diversity, equity (DEI) and inclusion pick up steam at state and federal levels, there will be repercussions for capitalization, production and scaling of Black women’s businesses. There is currently a case before the US Supreme Court that is asking the court to delegitimize ethnically targeted venture capital support. This pushback represents white resentment against Black economic and political advancement.

But as BlackStars News previously reported, efforts to curtail venture capital expressly set aside for Black entrepreneurs have far-reaching ramifications. Only one percent of a total $215.9 billion in venture capital funding went to Black-founded companies in 2022. The gap stems from long-standing biases that have historically prevented Black Americans from securing funding and support for their entrepreneurial ideas. Even as the number of Black business owners in America increases exponentially, founders continue to struggle to raise sufficient funding. The underrepresentation of Black entrepreneurs and investors is a missed opportunity to drive innovation and engender economic growth.

We may also not dismiss intra-cultural challenges such as misogynoir, as an impediment to the continuous growth of Black women’s businesses. Most stereotypes of Black women are fomented by Black patriarchy that is supportive or indifferent to violence uniquely aimed at Black women. Regressive and repressive gender roles may also inhibit the freedoms necessary for Black women to take initiatives or even break through their communities.