A recent report from think-tank OPEN, on behalf of MSDUK, a nonprofit championing diversity in business supply chains, highlights that eight of the 21 unicorns in the U.K. are run by BAME entrepreneurs. In addition, it is estimated that minority businesses contribute at least £74bn to the U.K. economy each year.
The MSDUK report also highlights the barriers to entry, discrimination, and difficulties in raising VC financing for BAME entrepreneurs, especially businesses run by Black women who are the most under-represented.
Melanie Eusebe, Founder of the Black British Business Awards established the BBBA to recognize the outstanding contribution of the black community in the U.K.
Eusebe highlighted that for many people of black heritage, entrepreneurship is not seen as a viable career path with a lack of parental support. “My mother was a nurse. She wanted me to get a degree – something no-one can take away from me. Enterprise wasn’t an option” said Eusebe.
This in part could explain the findings of a report published in 2020 by the Federation of Small Business (FSB). The report found that on average over a 16-year period, nearly 30 percent of people in the Black population were involved in thinking about, setting up, or operating a business venture, (nearly twice the level of the non-ethnic population). However, only 3 percent have been reported as running a start-up or a young business, suggesting that a high number of nascent black entrepreneurs do not realize their vision.
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Succeeding against the odds
Eusebe explained that “for Black entrepreneurs, not a lot of wealth is passed down generationally to support you when starting out and growing your business. Therefore you have to work full time 9-5 and start your business during the 5-9 in order to keep paying the bills.”
She proceeded to add, “you don’t have the ability to purely focus on setting up a business and therefore you often see black entrepreneurs starting a bit later in life, as they feel they need the credibility, resources, and experience from being in the workforce.”
“It’s not what you know but who you know”
The old adage ‘it’s not what you know but who you know’ is certainly true in business.
Jag Singh, investor and serial entrepreneur who is currently the Managing Director at tech accelerator Techstars reflected on his own experiences as a founder. He said “I didn’t have access to very many mentors when I was starting out, and certainly none that looked like me — the former, because I didn’t know it was important, and the latter, partly because I never actually sought those out. Today, there’s no excuse. Read any successful founder’s biography, and there will be no fewer than three mentors given prominent listing. Mentors can lend their wisdom (which benefits every founder) and also their confidence – which can be a real challenge for founders to maintain if they rarely see successful entrepreneurs from a similar background.”
Sheryl Miller, Founder of business coaching company Reboot Global and mentor for The Prince’s Trust, believes that there is a difference between formal mentors accessed through dedicated programs and the broader social capital which is essential in business.
Miller explained, “for many of the young people I’ve mentored, particularly when they are from a BAME and working-class background, they just don’t have access to those same networks and opportunities, even though they are assigned a formal mentor.”
She added that “mentoring is great and I’m clearly a big advocate but the thing that’s often more useful is access to informal business networks and connections, which is where many BAME and working-class people are disadvantaged.”
The funding imbalance
A report from Extend Ventures showed that whilst people from Black, East Asian, South Asian, and Middle Eastern backgrounds make up 14% of the U.K.’s population, only 1.7% of capital at all stages went to entrepreneurs from those communities.
Comparatively, 76% of investment went to teams of all white entrepreneurs, and 23% to mixed teams. The lack of diversity within the investment landscape is a barrier for many entrepreneurs from underrepresented backgrounds.
Manjul Rathee, CEO of health tech startup BFB Labs said “championing diversity at all levels in the team is great for business, but not ideal when seeking investment from a majority white male investor group who may not resonate with the diverse nature of the team — even though they appreciate diversity.”
Bypassing the institutions
In true entrepreneurial fashion, BAME entrepreneurs, frustrated by the lack of success engaging with the more traditional sources of risk capital i.e. from banks and venture capitalists, have turned to other routes for funding. Julianne Ponan, CEO of Creative Nature — a healthy snacks business shared her own experiences and the discrimination she felt during the fundraising process.
Ponan said, “I spoke to a couple of Private Equity houses, however felt I was not being taken seriously and was unsure this was the route to take. I was even advised to take a male colleague with me as it would ‘look better’ even though I’m the CEO.”
She went on to add that “I didn’t feel there was a serious intent to look at my business and consider my plans on their own merits, I felt judged as soon as I walked through the door based around who I am — young, female with a rich ethnic heritage.”
As a result, Ponan turned to crowdfunding. “We hit our target in 14 days and overfunded to £500K. It was hard work, it’s not an easy route however the idea of ‘community’ very much suited Creative Nature’s ethos of creating products for people who live with food allergies and intolerances. We are a community which is often overlooked,” said Ponan.
Celebrating the trailblazers
Shivvy Jervis, Founder & Futurist at The FutureScape 248 Lab, was one such entrepreneur profiled in the TechRound list and explained the importance of such initiatives in supporting founders on their journey.
She said, “when striking out on my own four years ago it wasn’t as straightforward a path to secure, for instance, visibility or coverage for my work compared to the accounts I was hearing from non-BAME founders. I found that I had to work thrice as hard owing to my background.”
To address some of these issues, MSDUK has launched their ‘Better Ideas for a Better World’ competition. Aligned to the UN Sustainable Development Goals (SDGs), BAME start-ups and entrepreneurs will compete for prizes worth over £150,000 including cash, publicity, and mentoring.
It is clear that the entrepreneurial landscape is diverse and that entrepreneurial spirit is thriving within the BAME community. Celebrating and supporting BAME as well as female entrepreneurs who face disproportionately more barriers on their journey can become key to fueling further economic growth. Addressing the fundraising, mentoring, and opportunity gaps are the first steps to ensure everyone can fulfill their true potential.