Black-owned businesses have been hit hard during the COVID-19 pandemic — shutting down at almost twice the rate of others.
When it comes to funding, entrepreneurs of color are also at a disadvantage. Only 1% of Black founders and 2% of Hispanic founders received venture capital funding compared to 77% of their white counterparts.
To help bridge this funding gap, Karen Cahn, founder of IFundWomen, teamed up with American Express (AXP) to select 100 Black female entrepreneurs for its “100 for 100” program. Cahn joined Yahoo Finance’s “A Time for Change,” along with LaToya Stirrup, co-founder of the Miami-based cosmology company Kazmaleje and one of the 100, to discuss some of the ways the funding gap could be closed.
Cahn tells Yahoo Finance that there's not only a racial gap in VC funding but also a gender gap.
“There is a complete lack of funding options for early-stage women entrepreneurs. In 2019 female-founded companies received a mere 2.8% of venture capital dollars and female founders of color received exponentially less than 1%, 0.32% to be exact. So when you look at just women, the numbers are even worse than what you just showed. And you know, only 1% of companies, regardless of the gender of the founder, will ever raise venture capital. So what are the other 99% of startup founders? Do they tend to max out their credit cards, or they go into debt funding, the earliest days of their business? At IFundWomen, we dogmatically believe that no one should go into debt funding their proof-of-concept stage.
According to Cahn, IFundWomen has built a marketplace in which it works with tens of thousands of entrepreneurs from the idea stage to raising capital.
Amex’s “100 for 100” program takes a similar approach. Each of the women will receive a grant of $25,000 and 100 days of resources, including business education, mentorship, marketing assistance, and virtual networking. American Express says that its goal is to help these entrepreneurs grow their businesses as part of the company's $1 billion initiative to promote racial, ethnic, and gender equity for colleagues, customers, and communities.
While researching small businesses, Clayton Ruebensaal, Amex’s EVP of global B2B marketing, and his team had a shocking realization: While black business owners make up 9% of small businesses in the country, they were only making up a little over 1% of sales.
“That says something's really wrong. That is a big gap. We dug into what the gap was — because of systemic racism, a lot of problems were happening. They were getting their first credit card later than their white counterparts. They were getting a lot of things a little bit later, and what would end up happening? They were getting funding less successfully or getting less funding.”
Ruebensaal tells Yahoo Finance that it was at that moment that he and his team knew that their efforts had to focus specifically on helping Black businesses, especially ones run by women. He says that one of his goals is to let the general population know that Black women entrepreneurs are exceptional.
"Of all the entrepreneurs in this country, the number one growing group is Black women. They are starting 763 new businesses every day, and that's awesome. So not just focusing on black business owners, but even getting more specific and saying, we want to champion Black women entrepreneurs, not because they need our help, but because they are going to be the next big businesses out there," he said.
Ruebensaal reminds Yahoo Finance that recessions can prompt innovation. “GE, P&G, Facebook, Square, Instagram, Uber were all created during a recession. I have no doubt that out of this recession and this crisis, there too will be the next Ubers and GEs. And I wouldn't be surprised if it comes out of Black women.”
The 100 entrepreneurs represent various industries, including fashion and beauty, food and beverage, finance, fitness and wellness, home goods, apparel, technology, social good, and more.
Brittany Rhodes is another one of the women selected. She has a startup called Black Girl MATHgic, which is aimed at helping Black girls conquer their math anxieties by providing a foundational math lesson/activity booklet based on real-world themes. Rhodes says the lessons are designed to show relevance and create excitement among students.
"I am so honored and grateful to be chosen as a ‘100 for 100’ program recipient! This opportunity couldn't have come at a better time as I prepare to grow my team and launch new products to continue to build math confidence in our next generation."
Ruebensaal says that the $25,000 grants and networking are just the beginning for these entrepreneurs.
"This effort doesn't stop with the hundred. It doesn't stop with the 250,000 we want to help. We're going to help people that are also going to be part of this mission and this long-term commitment to helping Black business owners.
Stirrup tells Yahoo Finance the honor couldn’t have come at a better time.
"So this year, we wanted it to be a huge growth year, and it has been. We've done some amazing things, but when you just think about how everything just kind of came to a screeching halt, and so many of us had to pivot and think about new ways to make sure that our brands and our companies will survive."
She said her company was in a unique position to fill a void left by COVID-19, with many woman tending to their own hair and beauty care at home amid coronavirus stay-at-home orders and recommendations.
“We were excited ... that we could have a product that our customers needed during this time. So many women have started to embrace their natural curl texture because they couldn't go to the salons. They couldn't go to the beauty supply stores,” she said.
“So we were able to deliver tools direct to their home that would allow them to take care of themselves, their hair, as well as the hair of their family members, their kids. ... And to be able, to still be here and to be one of the businesses chosen as a part of the Amex 100 ... is phenomenal.”
Reggie Wade is a writer for Yahoo Finance. Follow him on Twitter at @ReggieWade.