Black Women Entrepreneurs Need Funding Not Mentoring

“Corporate America was not built for Black people and certainly it was not built for Black women. This is why we must carve out our own space.” This is how my conversation with Marty McDonald, founder of Boss Women Media, starts. After her fair share of being the only one in the room, McDonald decided to found a company focused on empowering women to develop the career of their dreams. As it happens far too often, she could not see what she could and wanted to be in a corporate world that did not seem interested in seeing her reach her full potential. She created her company so she could be what she knew she was capable of being. Women, especially Black women, have long struggled for equal representation in the workplace. The U.S. Bureau of Labor Statistics shows that although women represent more than 50% of the available talent pool and occupy 52% of all management- and professional-level jobs, fewer than 21% of c-suite executives in the U.S. are women, and women represent just 5% of CEOs at major corporations. Furthermore, just 1% of c-suite executives in the U.S. are women of Color. This corporate environment drives many women, particularly Black women, to become their own bosses. Covid accelerated this trend and Black Women enterprisers are now among the fastest-growing segments.  

According to the  Global Entrepreneurship Monitor in the United States, 17% of Black women are in the process of starting or running new businesses. That’s compared to just 10% of white women and 15% of white men. In the last 20 years, while women-owned businesses have increased by 114%, women of Color owned companies increased by 467%. Yet, despite this early lead, only 3% of Black women are running mature businesses. McDonald’s shares an even more shocking data point: “Out of the 1800 Black-owned businesses that are created every day, only 20% make it above the poverty line. Why? Because of lack of equal access to capital.” McDonald experienced herself how difficult being granted an SBA loan can be. Pre-Covid, she was denied a small business loan on several occasions and for reasons ranging from having a name deemed “too ethnic” to a lack of understanding of her business model. 

Goldman Sachs research found that only about 40 Black women in the U.S. have raised more than $1 million for their ventures. Like McDonald, their research points to institutional inequality driven by lack of access to funding, grants and loans. 

McDonald argues, very effectively, that to build for the future, we must acknowledge the past as uncomfortable as it can be. “The past is that Black people have been left behind. Black people, as a collective, have had limited opportunities. I think about my Black grandmother, who didn’t have the opportunity to purchase land or real estate. I’m biracial and I have a white grandmother who had the opportunity when she was in her 20s to acquire 56 acres of real estate. So if those were the laws in place, how do you think someone is supposed to catch up?” 

One way is for the private sector to step up and provide financial, training and support opportunities. For example, McDonald has partnered with Amazon on several occasions, and she has recently become a member of the council advisory board for Amazon’s Black Business Accelerator. Thousands of Black small business owners and entrepreneurs have already signed up to participate in the program and access financial support, business education, mentorship, and marketing and promotion opportunities.

Amazon launched the BBA in June 2021, committing 150 million Dollars to the project.  More recently, it also spearheaded a collaboration with Lendistry, an established minority-led Community Development Financial Institution (CDFI) that serves urban and rural small businesses in socially and economically distressed communities. The majority of the funds Lendistry has historically disbursed have gone to traditionally low-to-moderate income and other historically disadvantaged business owners and the communities they serve, including African American and Hispanic-Latino populations.

The collaboration between Amazon and Lendistry generated a lending solution built specifically for Amazon sellers. Lendistry will provide term loans targeting a range from $10,000 to $100,000 with periods of up to two years and annual percentage rates generally ranging between 8% and 9.9%. Because businesses are in different stages of development and their leaders have different needs, the capital can be used to grow the business in Amazon’s store in several ways: staffing, operational costs, inventory management, product development and manufacturing, and marketing effort.

Another way to support Black women in business, whether they are running their own or are part of an organization, is to switch from mentoring to sponsorship. A sponsor is an advocate in a position of power and influence. Sponsors create real opportunities for another person. They promote their sponsees and recommend them for new opportunities. Sadly, women tend to be over-mentored and under-sponsored. Only 32% of white women and 26% of women of Color say they have access to sponsorship. Yet, sponsorships can be extremely powerful for helping women advance their careers. We tend to think of sponsorship within an organization, but the practice can be very effective even for women entrepreneurs. It is about making connections and recommending the business.

I ask McDonald why she invests so much time being a mentor and a sponsor on top of devoting her business to empowering women. She says, ‘I think about my daughter, who is seven months. In 2040 she’ll be in her 20s and in her world, she won’t be a minority. She will be a majority. And so, I have to do my part to set her up for success. And being that majority piece by having her around diverse people, diverse organizations, and diverse outlets, we collectively make this change happen.” On a personal level, as a white mother raising a biracial child, I share McDonald’s drive to wanting to do my part to set up my child and all who look and identify like they do for a better future. As an analyst used to look at facts and figures to understand trends, it is clear to me that the investment in Black business overall is a must not only to rectify past wrongdoings but to thrive in a just society and upgrade the basic OS of the overall American economy into a new inclusive and prosperous version of itself. 

Disclosure: The Heart of Tech is a research and consultancy firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this column. The author does not hold any equity positions with any company mentioned in this column.