You have heard how severally underrepresented minorities are in the pool of those that have received capital. But you have probably rarely ever seen the statistics behind that statement or the details of what that means.
Setting the Stage
Below is the text of a presentation I gave January of this year. This speech was given at Minority Access to Capital, Inc. (my non-profit’s) first meeting which was titled “The State of Minorities’ Access to Capital”. Some of the information below MAY shock you; unfortunately, others will not. But I believe that knowledge is power. So, it’s necessary to have a starting part of knowledge in order to be able to come up with deliverable metrics by which to measure minority progress in the area of capital access.
Minorities: How do we measure up?
The Minority Business Development Agency states in a 2012 survey that there are almost 8 million minority firms in the United States. They have combined gross receipts of $1.4 trillion, a 38% increase since 2007. However, only 11% of minority-owned firms have paid employees compared to 22% for non-minority firms. Other takeaways include:
- According to an Ewing Marion Kauffman Foundation report, businesses started by people of color perform differently than white-owned businesses as white-owned businesses had double the number of sales. One of the reasons includes industry difference, with black-owned businesses being overrepresented in less successful industries. But entrepreneurs of color also started their business with less capital than their white counterparts. Additionally, this Kauffman brief revealed that education was an impediment as well. Asian and white Americans were more likely to have college degrees—50% and 29% respectively–and therefore more likely to have sales, than their black and Latino counterparts (18% and 13% respectively).
- More than 2/3 of entrepreneurs use personal savings as a source of funding and more than 1 in 5 rely on family for funding.
- Research also suggests that approximately 15% of the difference in startup rates among black and white Americans can be explained by differences in assets.
- According to the Annual Survey of Entrepreneurs, about 82% of firms that started with at least $100,000 in capital were white-owned, 13% Asian-owned, 4% Hispanic-owned, and 1% are black-owned.
Women: How do we measure up?
As of 2016, it is estimated there are over 11.3 million women-owned businesses in the U.S. generating over $1.6 trillion in revenues. (The sources for the information below: From American Express OPEN: The State of Women-Owned Businesses Report (2016) and National Women’s Business Council Report (2012))
- The growth in the number of women-owned firms surged in the aftermath of the recession. (Growth was 9.2% for non women-owned firms and 45.2% for women-owned firms)
- Among women of color, Latinas lead the way in the growth of number of firms, Asian-American women lead in employment and revenue growth. African American women-owned firms constitute a 61% majority of African American owned firms.
- In a 2012 report, the National Women’s Business Council found that on average, men start their businesses with nearly twice as much capital as women ($135,000 vs. $75,000). This disparity is slightly larger among firms with high-growth potential ($320,000 vs. $150,000), and much larger in the Top 25 firms ($1.3 million vs. $210,000).
- The same report found that high-growth potential firms started with about twice as much capital as other firms, and were more likely to rely on outside financing, both debt and equity. However, controlling for other variables including growth potential, men still used significantly higher levels of capital than women from 2005 to 2007.
- The biggest difference in amount of capital between men and women was with regard to outside equity, even controlling for other factors. Women received only 2% of total funding from outside equity, compared to 18% for men. This gap also occurred in both the high-growth potential firms and the Top 25 firms. As growth potential increases, so does the dollar amount of external equity used—this is true for both men and women, although the rates of increase differ.
- Regarding demand for credit (i.e. outside debt), women were more likely to be discouraged from applying for loans due to fear of denial, particularly during the financial crisis of 2008–2010. This fear was somewhat justified: in 2008, women-owned firms were much more likely to have their loan applications denied than their men-owned counterparts.
What am I doing about this?
For anyone that knows me, you know I am a DOER instead of a complainer. So this is why Kendrick Advisory & Advocacy Group, LLC was started—to provide a unique experience for minorities to engage with one another and others in accessing capital. You can join the cause too! You can sign up for our enewsletter, follow us on social media, volunteer or DONATE to the cause. It takes all of us doing our part to make this happen.
Here are some IMMEDIATE opportunities to get involved below:
My name is Dar’shun Kendrick and I am a business attorney and owner of Kendrick Law Practice, helping businesses raise capital the LEGAL way. I have 2 B.A.s from Oglethorpe University, a law degree from the University of Georgia and an M.B.A. from Kennesaw State University. Additionally, I have been elected to the Georgia House of Representatives (East DeKalb/South Gwinnett counties) since 2011 and I serve on the committees of Juvenile Justice, Interstate Cooperation, Judiciary Non-Civil and as the ranking Democrat on the Small Business and Job Creation Committee. I am also a board member of the Technology Association of Georgia’s corporate development board, a writer for Black Enterprise magazine and featured in the Huffington Post as one of 25 people in Atlanta to improve diversity in the ecosystem for African Americans in technology.
I am also the founder and Board Chair of a non-profit organization to EDUCATE and EMPOWER minorities called Minority Access to Capital, Inc. Furthermore, I am an Economic Justice Advocate and Owner of Kendrick Advisory and Advocacy Group L.L.C. providing consulting and advocacy services on policy and initiatives across the nation for those that want to reach minorities. More information can be found online at www.DarshunKendrick.com about my platform.
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