“To accept that the cries of the oppressed are legitimate, you also need to accept that the systems put in place that created the oppression need to be changed,” said Mike Green, cultural economist and chief strategist with the National Institute for Inclusive Competitiveness (NIIC). The mission of the NIIC is to raise the productivity of our most vulnerable populations (MVPs) by at least 1% of the gross domestic product (GDP) in one generation. Today, 156 years after the Civil War, African Americans create about 1% of the U.S. GDP, and disparities in income, housing, and homeownership, as well as lack of generational wealth, are still at the forefront.
In 1963, the U.S. celebrated 100 years since the signing of the Emancipation Proclamation, and this historical milestone reminded Blacks of how little their circumstances had changed. This sparked the essential “Negro Revolution” movement led by Dr. Martin Luther King Jr., which focused on ending segregation in schools, ending discrimination in banking and discriminatory housing practices. Black America had never found economic footing when The Great Depression hit due to the violent destruction of incremental progress made by Black Americans after the Civil War. And the economic recovery experienced in white America was denied to Black America through segregationist policies and practices leading up to the massive protests in 1963. Dr. Martin Luther King Jr. released his blueprint description about the Negro Revolution in “Why We Can’t Wait” in 1964. The book addresses the inequities in all systems in the U.S., and subsequent peaceful protests that still serve as a means of nonviolent activism demanding change.
There was extreme distrust in government, and the 1960 presidential election was a turning point in the U.S. because this was the first time Black people had fully exercised their right to vote as a powerful constituency for change. Black voters gave John F. Kennedy the presidency over Nixon by 1%, but Nixon was elected president eight years later after the death of JFK and his brother, Bobby Kennedy, when LBJ declined to run for re-election. Black voters overwhelmingly opposed Nixon. Protests and uprisings against systemic conditions were not met with significant policy change. The response from Nixon was to end the protests and promote “law and order,” largely perceived as a euphemism for cracking down on Black protests to chronic systemic societal problems. Nixon’s preference was to get rid of the tension but not to address quality solutions. White America overwhelmingly chose Nixon.
A massive push toward innovation and entrepreneurship was initiated when President Kennedy challenged the nation to achieve a mission to the moon. This stimulated massive investments in technology during the 1960s and was the genesis of intentional STEM education in America. However, schools remained largely economically and racially segregated across the nation, resulting in the development and implementation of STEM courses disproportionately benefitting white America’s children.
The rise of STEM (a.k.a. STEAM with Arts) in education cultivated a new crop of tech-based innovators and influenced an uptick in tech-based entrepreneurship, but there was no entrepreneurial guide or plan to produce more consistency in successful outcomes. The emergence of venture capital (VC) in the late 1960s fueled ideation and innovation in entrepreneurship due to banks not wanting to take on high risk. Since 1968, an average of 1.6 new VC firms was created every month nonstop. Today, the National Venture Capital Association has over 1,000 venture firm members.
Access to capital helped grow America’s 21st century Innovation Economy and entrepreneurial startup landscape. But again, Black innovators and other talented entrepreneurs in across communities of color have been marginalized and largely shut out. Since 1963, banks have paid over $243B in government fines for discriminatory lending practices. Rather than address these policies based in racism and gender inequities, these institutions have apparently incorporated the inevitable fines as a line item in their budgets as a cost of doing business as usual.
While the VC landscape exploded nationally, that capital was not entering Black communities even though Black entrepreneurship grew exponentially faster than any other demographic for decades. With African American-owned businesses experiencing a growth rate of over 60%, trends show more VC interest in founders of color. This should be more than a trend. Kevin T. Payne noted in his blog a report published by Pitchbook which “revealed that of the over $40 billion of funds raised by venture capital firms, less than 3% of this is allocated to Black- and minority-owned startups. Even more alarming is that this percentage decreases if you fall into more than one minority group.”
When an entrepreneur needs funding for a “startup” idea, their first seed money is traditionally from friends and family. The landscape for entrepreneurs of color in 1968 didn’t fit that model at the outset of the equity investment industry. Most Black Americans were born into generational poverty and don’t have the disposable income to invest in their own ideas nor have family or friends with such risk capital investment capacity. Most VCs are not interested in funding early-stage ideas prior to market confirmation; they require proof of concept and market traction.
Simultaneously during the early VC boom, major universities began investing in market-driven research, incubated ideas, and technology transfer to markets. The federal government also invested billions into research and commercialization of technology and innovation emerging from university research. Yet again, “Black and Brown communities were not getting this money. Community colleges are not getting any of this money. The HBCUs were mostly left out of receiving this money as well,” states Green.
The angel investment landscape grew over the last five decades, now with a national association for angel investing and educational institutions that teach about angel investing. Regardless, the vast majority of all entrepreneurs do not receive angel capital; most are reliant upon friends and family as the primary source of initial investments. There are 1,400 entrepreneurial incubators across the U.S., and these serve only a small portion of the ecosystem.
Finding solutions to support entrepreneurship equitably across America is up to us all. Directly connecting youth with potential workforce options helps bridge youth into promising careers with the idea that “if they see me, they can be me.” The same is true in encouraging entrepreneurship (education is the subject of Part 3) and cultivating generations of new business owners to bolster America’s global competitiveness. But entrepreneurs need supportive infrastructure and ecosystems that create and support fair and equitable lending practices, provide supportive services to existing minority businesses and invest and buy from these businesses. To borrow the eco-slogan of “think globally, act locally,” we should not forget the MVPs so that we are creating inclusive, competitive talent by prioritizing those communities that need the help the most. Innovation and creativity are distributed across all of America’s demographic populations. Equitable exposure, access, education, support of entrepreneurship should be also. Focusing on closing the gap strengthens all of our communities.