Equity in Business and Entrepreneurship

Anyone can start a business. These days, the bare minimum you need to start a business is an internet connection. There are challenges to starting a business with physical assets, namely access to capital. But if you wanted to start a business, any business, you could. So what inequities could possibly exist in this sphere of our society? 

Sadly, plenty. 

What Does Inequity in Small Business and Entrepreneurship Look Like? 

It can look like limited access to capital. Women own about 38% of all businesses in the United States. But they still don’t have access to the same resources. The initial years after a business’s launch are critical. Many fail within the first year, and most by their fifth year in business. Many businesses don’t fail due to lack of passion or technical business acumen, but due to lack of start-up capital. 

Skewed Access To Start-Up Capital for Minorities and Women

As more people pay attention to inequities in the business space, more investors are founding women and minority-focused venture capital (VC) firms. Unfortunately, this change isn’t happening fast enough. Minority-owned businesses laid claim to about 3% of VC dollars. Women-owned businesses garnered about 2%. 

Sadly, intersectionalities among these groups can make access even harder. From 2007 to 2018, the number of women of color-owned businesses increased by 163%. Women of color stand at the intersection between “minority-owned” and “woman-owned.” Despite being the demographic opening the most businesses, WOC-owned businesses received less than 1% of all VC dollars. 

In 2017, the Harvard Business Review published an article about research that looked into the VC funding gender gap. Due to the fact that many VC firms are owned by white men, they favor (consciously or unconsciously) investing in people who look like them. 

But their research showed investors questioned women and men entrepreneurs differently. When speaking with men, potential investors asked questions around the potential for gains. However, when they spoke with women entrepreneurs, they asked questions related to the potential for losses. It would appear that the investors assumed (again unconsciously or consciously) that women-owned businesses were riskier than men-owned businesses.

Changes For Minority and Women-Owned Businesses

We’re seeing more women and minority-focused business support organizations popping up in our communities. These are places business owners can go and see others who share many of their struggles. They have become business hubs for fantastic network building within the communities. 

Additionally, the government has small business goals, and that includes women-owned small businesses and minority-owned small businesses. Only companies in these categories can bid on these contracts. Getting started in government business can seem daunting, but more companies are taking advantage of the structural limitations on competition. 

VC firms can do their part by being diverse AND inclusive. As Dr. Aparajita Jeedigunta, the creator of the C3EB Summit said in an interview on my podcast, “Diversity is being allowed into the building. Inclusion is being invited into the boardroom. Equity and belongingness come from being given a megaphone and being told your voice matters.”

They need to work on real diversity, equity, and inclusion initiatives. Once they do, they’ll breathe a new source of creativity and resourcefulness into their organizations. 

Equity in Business Means A Stronger Business Community For All of Us

The marginalized communities in our society have different needs. There are entrepreneurs struggling to make it because they don’t have the resources and capital they need. They don’t have these things because the gatekeepers don’t understand the business and the communities they’re trying to serve. According to Morgan Stanley, VC firms are missing out on a trillion-dollar opportunity by not intentionally investing in minority and women-owned businesses. 

Now, more than ever, this is something our economy needs. 


Like this article?

Share on Facebook
Share on Twitter
Share on Linkdin
Share on Pinterest

Leave a comment