Black Women In the U.S. Are Starting Successful Businesses More Than Any Other Group

Supermajority Education Fund

March 6, 2020

Black women are starting successful businesses in the United States faster than the population at large — despite often lacking critical access to loans and venture capital funding. The State of Women-Owned Businesses Report, which is released annually by American Express, found that women of color founded nearly 90 percent of the new women-owned businesses opened per day between 2018 and 2019. American Express also found that businesses founded by Black women entrepreneurs experienced the highest rate of growth of any group during this period.

This success is made all the more impressive by the reality that this growth in success has not coincided with an increase in financial investments in black women’s businesses. A recent Wisconsin Public Radio report noted that only 2 percent of venture capital funding goes to companies started by women, and women of color get only one percent of all venture capital investments. Banks are also still reluctant to lend Black women money to grow their businesses, Nicole Mason, the president and CEO of the Institute for Women’s Policy Research, told Supermajority News.

This lack of access to loans and investments can significantly impact the profit margins and security of black women-owned companies. The Institute for Women’s Policy Research found that businesses owned by Black women tended to be less profitable than companies started by other ethnic groups. “The inability to attract the capital and investment a business needs to grow causes a tremendous amount of strain on women-owned or black-owned businesses,” noted Mason. In fact, any entrepreneurs continue to work full-time jobs while working on getting their companies off of the ground because of these slim profit margins, she added. 

This lack of access, compounded with the racial wealth gap in the United States, also means that many Black women who wish to start businesses are delayed from doing so. “Ideally, you have some sort of savings [to live on] while the business becomes viable, but for a lot of women of color and black women, in particular, that safety net is not there,” said Mason. “That presents a barrier in terms of taking that leap and starting that business.”

Mason stressed that not only does more need to be done to break down the barriers that exist for black women trying to access capital, but also those future entrepreneurs need to be better educated about the obstacles and the challenges involved with launching a company in such an environment. “A lot of time, women internalize what is happening with their businesses, and they think that what is happening to them is because they don’t have a good idea,” said Mason. “But they are not the only person facing these kinds of hurdles.”