Posted at 5:48 AM
Any armchair economist will tell you that entrepreneurship is central to a healthy economy. What they probably won’t tell you is that the rate of entrepreneurship in the United States has significantly declined over the last several decades. Data from the U.S. Census Bureau shows that in the late 1970s, at least 15 percent of American businesses were startups. Despite the popularity of business-venture-themed TV shows such as ABC’s Shark Tank, the number of new businesses has fallen to just 8 percent of all U.S. business operations.
The reasons are varied, with both new and historic challenges contributing to the problem. As you might imagine, the Great Recession of 2008-2010 has played no small role.
The constriction of global capital markets during the Great Recession exacerbated the perennial problem of entrepreneurs: accessing the capital needed to start or grow a business. This problem, like many other economic challenges in America, is more acute for women than for men and for communities of color than for white people. Now more than ever, addressing the need of businesses for capital is also an economic imperative.
That’s where the U.S. Minority Business Development Agency comes in, offering more than 40 business centers across the country to assist minority entrepreneurs. Experts are available to help minority business owners find access to capital, contract opportunities and new markets needed to create jobs.
As our nation becomes more diverse and the economy continues to recover, the share of new businesses founded by Native, Hispanic, Asian and African Americans, as well as other marginalized communities, must increase. If this fails to happen, there will not be enough businesses led by Generation X and Millennial entrepreneurs to replace those closed by Baby Boomers as the latter exit the labor force.
I work with Values Partnerships to lead a nationwide casting tour for ABC’s Shark Tank with the goal of bringing more diverse ideas and voices to the Emmy-winning show. In 2016, we held casting calls in nine U.S. cities, engaging thousands of entrepreneurs. I have seen firsthand thousands of black, brown, and veteran entrepreneurs who already have incredible businesses, bring innovative ideas and have the talent to become highly successful contributors to society and the economy.
But according to MBDA, minority-owned firms are less likely than non-minority firms to receive the loans often needed to make their business goals a reality: They are more likely to receive lower loan amounts, pay higher interest rates or be denied funding altogether. To help minority entrepreneurs overcome this barrier to growth, MBDA has developed programs and partnerships with private industry to provide them with alternative sources of capital. Just one example is my work with MBDA to identify minority-owned firms to compete on Shark Tank. Although MBDA focuses primarily on growing medium-sized firms, they have recently also started supporting entrepreneurs with the potential to succeed in the industries that will drive the U.S. economy in the future.
The latest Survey of Business Owners data show that fully 70 percent of U.S. firms are owned by white men. While the number of minority-owned firms continues to grow (by 38 percent between 2007 and 2012, for example), as M&A activity leads to sector consolidation and non-minority businesses close, minority-owned firms in Southeast Washington, DC; South Bronx, New York; and other communities will strain to make up the difference. According to the Survey of Small Business Finances, however, the dollar amount of equity investments received by minority-owned firms is, on average, only 43 percent of what non-minority firms receive. If minority-owned firms cannot access the capital needed to start or grow their businesses, the economic and social benefits of entrepreneurship – employment, community investment, and innovation – will not be realized.
This is why the work of the MBDA is so important. It is the only federal agency dedicated to the growth and expansion of minority-owned firms. Their work is integral to the continued growth of the U.S. economy. You can find an MBDA business center near you by logging onto www.mbda.gov.