How Black & Brown Businesses Are Finding Support In The COVID Crisis
Black and brown female founders pre-COVID-19 already experienced challenges in starting, receiving funding, and growing their businesses. Only 8% of VC funded startups founders are women, only 1% of VC funded startup founders are black, and 0.4% of VC funded startup founders are Latina. The global pandemic has not only exacerbated these issues but created new challenges, further emphasizing the need to transform current strategies and systems.
The Impact On Businesses Due To COVID-19
Before COVID-19, the gap between innovative minority founders and venture funding was immense. Due to the onset and progression of the current global pandemic, founders are facing further challenges, one of which being transitioning online. This transition does not have a blueprint and requires time and a willingness to be flexible. However, the ability to do this varies significantly across business types. Brick and mortar business owners and those with physical products face severe challenges, leading to loss of revenue and potential loss of contracts. Tech-enabled startups that rely in part on physical businesses also may not be able to transition their models.
Yet, businesses do not just have to worry about transitioning their operations online. COVID-19 is, in many aspects, reshaping the process of seeking and obtaining funding. Accelerators supporting black and brown founders, including DivInc, Hillman / NewMe, Impact Ventures, and HBCUvc, have transitioned their programming online. While Zoom allows for meetings (sometimes featuring the pet cat), the use of teleconferencing technology does not wholly facilitate the relationship building that is an integral part of pursuing investments.
Since this relationship building is limited due to the current overall impossibility of in-person meetings, there is a potential for reduced funding opportunities, even from investors aiming to work with black and brown founders. However, not all accelerators are as affected. Mandela SH Dixon, CEO and Founder of Founder Gym expressed that while Founder Gym has not experienced as severe adverse effects, they are educating their startups on ways to build relationships with investors online effectively.
At the end of March, Congress signed an economic relief package, which included the Paycheck Protection Program (PPP). Provided by the Small Business Administration (SBA), the PPP is a loan program intended to help small businesses weather the COVID-19 crisis. However, the PPP has not provided timely assistance to small business owners, particularly Black and Brown founders, due to a combination of lack of information, application issues, slow distribution, and inequalities among businesses.
According to a survey conducted by the Global Strategy Group for the equal rights organizations, Color of Change and UnidosUS, nearly half of the surveyed business owners and workers anticipated having to permanently close in the next six months. Only 12 percent of those surveyed reported receiving the amount they applied for, while 26 percent said they received only a fraction of the requested amount.
Yet, even before the inequities of the PPP were realized, in April, the Center for Responsible Lending (CRL) predicted that approximately 95% of Black-owned businesses had a nearly zero chance of receiving a PPP loan. This is due to the historical racial divide in the relationships between Black business owners and banks.
Arlan Hamilton, the often purple-clad founder and managing partner of Backstage Capital attempted to combat this issue. She motivated Mark Cuban, to reach out to minority and women-owned businesses via Twitter to help these businesses secure their rightful share of PPP loan funds. Additionally, she co-authored an article detailing how COVID-19 has exacerbated economic imbalances in American and recommendations for closing the funding gap for minority and women business owners.
Black & Brown Businesses Find Support From Other Businesses
However, the situation has not entirely devastated the progress of some Black and Brown founders. The following founders were able to secure significant funding amounts during the past couple of months.
Black Girl Sunscreen, Founder/CEO Shontay Lundy, secured a $1 million investment from a private female funding source.
Resilia Co., Founder/CEO Sevetri Wilson, raised $8M in a Series A round.
PopCom, Founder/CEO Down Dickson, completed her second crowd equity funding campaign, raising $1M.
NewMW Bootcamp secured $1.2 M to train black founders in 2020.
Furthermore, a variety of initiatives have launched in response to COVID-19, including but not limited to, the following:
Launch with GS - Launch With GS is Goldman Sachs’ $500 million investment strategy grounded in our belief that diverse teams drive strong returns. Through Launch With GS, Goldman Sachs aims to increase access to capital and facilitate connections for women, Black, Latinx, and other diverse entrepreneurs and investors.
Red Backpack Fund - The Spanx by Sara Blakely Foundation donated $5 million to support female entrepreneurs in the wake of COVID-19 and teamed up with GlobalGiving to establish The Red Backpack Fund. GlobalGiving is making at least 1,000 grants of $5,000 each to female entrepreneurs in the U.S. to help alleviate the impact of the crisis. The Red Backpack Fund application portal will next open from July 6-13.
The Amazon Relief Fund - The Amazon Relief Fund was created with a $25M donation from Amazon to help individuals who are facing financial hardship immediately after a natural disaster or an unforeseen personal hardship.
Shea Moisture $1 Million Fund - SheaMoisture announced, under its long-established Community Commerce business model, a $1 Million Fund to support entrepreneurs of color and small businesses.
Black Women Talk Tech COVID Relief Fund - The relief fund supports Black women founders who are facing critical financial hardships. This is the first fund of its kind dedicated to helping Black women technology founders due to this global pandemic
It is important to note that COVID-19 relief funds, no matter the source, will eventually end. This compounded with issues of pattern-matching could leave Black and Brown female founders still seeking the resources they need long after society has reached a “new normal.”
COVID-19 is certainly providing challenges. However, there is also an opportunity for Black and Brown female founders. Black and Brown founders bring unique talents and perspectives to their ventures, which contribute to their ability to solve problems in innovative ways. While the current situation is unpredictable, Black and Brown female founders can continue to use their unique talents to drive scale and impact.
Additionally, communities such as Black Girl Ventures (BGV) are ecosystems where Black and Brown founders can have their experiences validated and connect with others seeking a better new normal for diverse founders. BGV offers a community and wealth of resources, including virtual co-working spaces and pitch practice events, to ensure participants are ready to seize their next opportunity.
Schyler Cole is the creator of SACertainly a blog that inspires and provides knowledge and tools for all types of dreamers to turn goals into reality. A Stanford grad of economics she is currently pursuing her Masters of Public Policy at the University of Tokyo.