The Realities and Perceptions of Entrepreneurial Risk within the Black Community
After the movie Hidden Figures came out, many people praised how far we’ve come since the 1960s; others noticed the similarities between the lack of black women in tech-heavy jobs then and today. One aspect that stuck with me was how, at the very end of the film, Dorothy Vaughan discovers that NASA will need a team of 30 to feed an IBM 7090 computer. She studies how to do it on her own, then teaches the new skillset to the next generation of black women workers. Through this act, she not only makes history, but she writes herself and her black female colleagues into the future of that workplace — something many black leaders and entrepreneurs believe we need more of today.
Entrepreneurship is risky for everyone. Something Sarah Endline, founder of the chocolate company Sweetriot and Entrepreneur-in-Residence at Harvard University, knows well. Sweetriot’s mission is to build a sweet movement to fix the world, and they have sold billions of units of healthy, sustainably-sourced chocolate whose packaging also features the work of emerging artists.
Sarah knows first-hand that entrepreneurship can be scary, because often you find yourself in, “no structure — you are making everything from scratch.” Sarah sold Sweetriot in June because, “the company reached a point where the board decided between raising more capital and an exit strategy. We were all united that it was time in our marketplace to sell.” She goes on to say that,
“[Entrepreneurship] is not for everyone. It’s important to not think that entrepreneurship is super cool and you should go do it. It’s not easy. You need a sense of understanding that you might need a risk appetite to work outside of structure.”
When prompted about the specific challenges she’d faced while starting “a sweet movement” from the ground up, her immediate response was, “[s]o many. Building a team early on is really hard: placing bets, following your instinct. Who are the right first people? Sometimes you’re right, sometimes not. My first two rioters [employees] were incredible: [but] a couple years in, I hit a bump.”
Sarah credits her team and her perseverance for her success. But she also credits her early exposure to the concept of entrepreneurship. “[My] grandparents were farmers: they had their own business. My parents were small business owners. [I grew up in an] environment of independence.” Sarah’s proximity to different kinds of entrepreneurial ventures from an early age gave her the opportunity to see both the advantages of owning your own business, like getting to “be my own boss”, and a healthy understanding of the risks. This is a perspective that often many black people don’t always have, due to the myriad of careers that historically have been closed off to us for so long.
One thing Sarah knows for sure in her experience as an entrepreneur is that,
“Inclusive teams create better results…You need [lots of different] creative people at the table.” For Sarah, the idea that there is a lack of qualified black and brown candidates — a pipeline problem — is a myth. “There are incredible candidates across all minority groups. The idea that they’re not available means you’re not looking in right places.”
Michael Seibel, CEO and partner of the startup accelerator Y Combinator, co-founder of Justin.tv and Socialcam, described how an increased “willingness to take risks” could benefit the black community, specifically within technology-focused entrepreneurship spaces. Michael believes that while many black students “get into top schools through math and science, the problem […] is finance is pushed very heavily: computer science education is lagging.” Despite having the passion and mind to become successful tech entrepreneurs, due to elite, liberal arts colleges promoting finance above entrepreneurship, these students do not get the encouragement they need. Ultimately this leads to less tech-based entrepreneurship among those students.
Michael understands the logic behind choosing security over entrepreneurship but notes that there can be significantly higher rewards if you have a willingness to take more risk. “If you are underrepresented, technical and good, you can make $150,000 to $250,000 per year at a tech company. Or we [the black community] could take the tech engineers and make a startup — but that’s less secure. [So, people often think] why risk it?”
And the risk is real. In 2012, 9.4 percent of U.S. companies were led by people who are black. In the same year, the U.S. Census Bureau reported that the average American business had revenues of approximately $1.2 million, while companies run by black business owners had revenues of only $72,000. Beyond that, “the ratio of the average sales of businesses headed by white Americans to those led by black Americans actually increased between 2007 and 2012 from 6.4 to 8.3.” These statistics make it difficult for many people in the black community to believe that taking the leap into entrepreneurship is worth the risk.
Michael also describes the kinds of information asymmetries that exist within the black community about entrepreneurship: “Some people think they won’t get hired if the startup fails, which is incorrect.”
But beyond the statistics, there are also very real risks specific to the black community. When asked if it is harder for black founders to raise money, Michael’s response was “Yes. [Although] it’s not significantly harder in tech compared to other industries. If you’re performing well — top 20–25% — investors are more interested in you. But to get there, you need to have studied computer science and have the right information.” Michael knows taking the risk of entrepreneurship can seem even more challenging when the list of high-profile, high-visibility, successful black founders is small. Representation matters. It lets black children know not only that entrepreneurship is possible for them but that successful entrepreneurial ventures are possible too.
“We haven’t had [a company like Facebook, Uber, or Google]: we need this.”
While recognizing the community-specific obstacles black entrepreneurs face, it is also important to recognize that there are steps to success that all young entrepreneurs can take. As Sarah Endline explains, some of the “Key factors are innovating early in the marketplace. Being unique. Going out and looking at real trends in the world. Finding gaps within that. Don’t start a business unless you are passionate about the idea 24/7. Having a deep passion is critical. Join the entrepreneurship club at school to get exposure to entrepreneurship, startups and companies. This gives you a sense of do you want to do this.”
Being an entrepreneur and being black both have their own joys and hardships. But by recognizing and breaking down barriers to entry, looking for inspiration in our own environments, and searching for missed opportunities, both aspiring entrepreneurs and innovative organizations can start to make an impact. Just like Dorothy Vaughan, Sarah Endline, or Michael Seibel, it starts with a single, passionate person, but has the power to impact an entire community.
