Black Female Founders Face Constant Rejection. They're Thriving Anyway. Despite the lack of funding, black women are the fastest-growing group of entrepreneurs today. Here's why.
This story appears in the April 2019 issue of Entrepreneur. Subscribe »
Most women under the age of, say, 45 dread a particular time of the month. (Fellas, stay with me.) So, Arion Long, an African American millennial out of the Washington, D.C., area, came up with the Femly Box, a way to make the monthly menstrual routine less burdensome and more like a gift. Her ultimate PMS kit includes a supply of organic, all-cotton feminine products, along with wholesome wellness treats, like shea butter, herbal tea, and organic chocolates. For about $30 a month, it comes in a pretty package that gets delivered right to a woman's door, just in time for her cycle.
When Long, a former health plan communications specialist, launched her business in 2015, she had only one problem: getting funding from investors. "Let's face it," she says. "I was talking to middle-aged white men. They didn't know the product or use the product. And they didn't care. I'm a brown-faced, five-foot-one-inch young woman, who wasn't taken seriously. I had done my research and was ready. But young white men -- some of whom had simply jotted down an idea on a beverage napkin -- got the nod." Long was hoping to snag a modest $10,000 to $75,000 investment. Everyone she talked to said no.
Related: My Female-Led Company Raised $6.25 Million in 2.5 Years. Here's How We Did It.
The numbers bear out her plight. Since 2009, out of the $424.7 billion in total tech venture capital funding, the portion given to Black female founders? A minuscule .0006 percent, according to Project Diane 2018, a report by DigitalUndivided, an entrepreneurial pipeline for women of color. Further, the average investment is only $42,000, compared with the overall average of $1.3 million. The picture is not much better for traditional bank credit. A recent report from the Federal Reserve Bank of Kansas City reveals that 40 percent of Black women who request financing don't receive a single penny -- nearly twice as many as nonminority women who are turned down.
Natalie Madeira Cofield, founder of Walker's Legacy, a national network for women of color in business, chalks it up to relatability. "People invest in people they feel connected to, and the majority of those in power don't necessarily get a Black woman," she explains. Another way to put that is "selection bias" -- which researchers from the nonprofit Diversity VC found "a staggering amount of" after analyzing five years of deals made by 135 firms. "The investors were largely from the same gender, educational, ethnic, and location background as the founders they chose to invest in," they write.
Cofield goes on to add that turning to family members isn't generally an option for a Black woman. "Even if they're middle-class or upper-middle class, they are often providing some kind of financial support to a brother, cousin, parent, or auntie in crisis, or a community group they support, and they just don't have the disposable income to invest in your business dream. Nor can they quit their jobs to do it."
But I don't need statistics to know this is true -- I've seen it personally. Back in the mid '90s, when I started my company, Akwaaba Bed & Breakfast Inns, I spent many a sleepless night watching those far-fetched infomercials on how to buy a house with no money down. With eyes wide open, I dreamed of purchasing a dilapidated mansion in my Brooklyn neighborhood and converting it into a luxury bed-and-breakfast, where I would have the time of my life decorating the inn and meeting the world as guests at my breakfast table. In fact, I envisioned owning four B&Bs, one in a different city I loved for each season of the year.
I wasn't born to the manor; in fact, I hadn't even slept in a bed by myself until I was 22, because my sister was always pushed up next to me. (We were both queen-size, sleeping in a full-size bed!) I had no money, and so, most would say, I had no business having such a bodacious goal.
But it didn't stop me, and it didn't stop Arion Long with her PMS kits, and it didn't stop many just like us, because we Black women will find a way. In fact, despite the lack of funding and resources, we are the fastest-growing group of entrepreneurs today. The number of businesses we started between 2007 to 2018 shot up 163 percent -- 10 times the growth for nonminority women-owned companies, according to an American Express report. How do we do it? We do what any entrepreneur should do. We move through this world boldly, recognizing we have to use the word no like a vitamin. Swallow it -- and sometimes your pride -- as it makes you stronger, so you bounce back with a new plan, a renewed conviction.
After her rounds of rejection, Arion Long stepped back and took stock of what she had gained. "I had tried so hard, so often, with the venture capitalists," she says, "that I mastered the art of the pitch." This was a useful skill all on its own. Pitch competitions have been a funding staple for years -- contests usually held at incubators and conferences, and sponsored by the likes of UPS and Mastercard, where founders pitch their businesses in front of judges and winners snag a cash prize.
So Long entered one. In 2016, she won $125,000 at a Baltimore-based competition called Piranha Tank. With the winnings, she was able to service her first 5,000 subscribers. Then she started entering and winning more competitions. She has since competed in more than 40 of them, taking home a total of $300,000 in cash along with professional services and two office spaces. That's helped Femly ship to almost 10,000 buyers and be on track to hit $1.2 million in sales this year. And as Long became a regular at these competitions, she began to notice some other regular contestants who, like her, seemed to be traveling the country to enter and win as many as possible.
They were all Black women doing what she'd done: They'd recognized an untapped opportunity and turned it into an asset.
Related: How Issues of Gender Equity Become Issues of Wealth Equity When It Comes to Startup Funding
Pitch competitions have become the "sport of entrepreneurship," says Shelly Bell, founder of Black Girl Ventures, which sponsors its own contests exclusively for women of color. Bell sees her events -- where audience members donate to support the winner, whom they pick -- as an updated version of how Black people historically held each other up. "It's crowdfunding meets rent party. During the Great Migration, Black people threw house parties and collected fees at the door to make money to pay their escalating rent. When Black people face adversity, innovation is our lifeline."
All the competitions, says Bell, offer "a unique and viable way to perfect your message, gain access to investors, market your company to consumers, receive high-level, rapid feedback about what you're doing, and hopefully bankroll your business." She suggests women of color are especially drawn to these pitch-fests, because they can connect to an influential network they might not ordinarily have access to. "And because, culturally, we're strong storytellers. When you couple that with a business that works, our odds of winning the pitch are great."
This is what I mean when I say we bounce back with a new plan and a renewed conviction. That Federal Reserve study identified two major characteristics of successful Black female entrepreneurs: self-learning and determination. We don't stay dejected. We learn from the experience and pivot to a new path.
And that goes for more than just pitch competitions.
"I believe you may have to change your geography and go where your people are," says Ashlee Ammons. She and her mother, Kerry Schrader, launched their mobile networking app, Mixtroz, in 2014 in Nashville. Mixtroz lets conference or event attendees create a profile based on questions from the host or sponsor; the app then matches attendees and helps them connect at the event more productively. Ammons, an events producer, and Schrader, a Fortune 500 HR executive, were fortunate enough to raise about $200,000 from friends and family, but they found that their local network wasn't strong enough to support them for long. "We were running low on cash, and with a hypertech startup, you have to move fast."
They also competed in more than 20 pitch events, their biggest win being at Revolution's Rise of the Rest Road Trip, where they took home $100,000. They've since gone on to score clients like Georgia Tech, Alabama Power, and BBVA Compass, and raise more than $1 million in outside capital -- making them only the 37th and 38th Black female founders to do so.
"You have to be intentional," Ammons continues. "Yes, you have a suit on you that you can't take off, and you're going to be judged before you open your mouth, but you have to be resilient. Use what you have to build what you want, even if all you have is Google and street smarts."
Of course, not all entrepreneurs have the luxury to jump into a project full-time, or the flexibility to move cities. And so they rely upon a method that is certainly no secret -- but that the Federal Reserve study says has been embraced by Black female founders more than anyone else: They build a side hustle.
Carmelle Kendall and Robin Beck are examples of what it means to truly side hustle. It's about committing the time, yes, but also engaging the community and scrappiness and patience for small steps. The two women have good jobs -- Beck works at the education company Pearson, and Kendall is an art director at The Integer Group advertising agency -- and they were friends growing up on the same block outside Atlanta. Years later, in their 20s, they became neighbors again in New York and began plotting out a greeting card company called Neighborly Paper.
"We create cards that feel like they've been written by a friend, not a company," says Beck, like one that reads, "I love our strong connection," complemented by a sketch of the familiar symbol indicating online internet connectivity. For $1,500 each, they set up the business and produced eight card designs. Then they kicked off what has so far been two years of utilizing every available opportunity.
Their launch party was at a neighborhood gift shop in Harlem called NiLu, owned by another Black woman. They sold out of product. But later, when they failed to earn enough money to make it into that year's National Stationery Show in New York, Beck says, "it just made us more vigilant to press forward and try to exhibit this year." They found a way in, applying for space in a hallway entrance that was made available to emerging companies. "We tacked up about 80 different cards, and with an investment of $960 for the four days of the show, we wrote large orders for 10 different retail stores in eight cities across the country," Kendall says. With the actual sales commitments in hand, only then did they place orders with their printer. Retailers were charged in full upon shipping of the cards.
"Right now our business is a second source of income, but we're determined to grow it into a full-time, profitable company," Beck says. "We're going to need capital for that, but we can already envision the tote bags, wrapping paper, and related items we will create!"
Vision is real. Folks certainly looked at me as if I had three eyes when I purchased the dilapidated Brooklyn mansion the neighborhood kids called the haunted house with plans of turning it into an inn. All entrepreneurs should hope for a third eye -- it's the ability to see the possibility. With no money to renovate the 1890s structure, I turned to bartering, a tradition dating back to my African ancestry, and thought about what I had that someone else may want and what they had that I needed. I knew a plumber, for example, whose daughter was getting married, and the mansion became the wedding venue in exchange for him fixing all the pipes.
Staring down the challenges of being Black and female when getting my first Akwaaba inn off the ground has enabled me to leverage the $6 million equity of the Brooklyn inn, which my husband and I purchased in 1995 for $250,000, to finance four additional locations. Now my four-season dream is a reality: I'm at my Brooklyn or Philadelphia inn in the fall; in Washington, D.C., in the spring; in Cape May, N.J., in the summer; and in Pennsylvania's Pocono Mountains in the winter. And though I didn't have my own bed until age 22, I now have plenty -- I can stretch out and sleep in peace in any one of 40 king-size beds within my hospitality collection.
