Black women founders fear ‘calculated attacks’ on small business funding

Last year, a conservative group sued the Atlanta-based investment firm Fearless Fund and its foundation over a $20,000 grant contest designed to help Black women founders, saying the contest had and discrimination. A federal appeals court panel has suspended the competition while the case continues through the courts.

Fearless Fund is the first public equity firm run by women of color that invests exclusively in companies owned by women of color. As of 2024, 66% of the portfolio companies they work for are owned by Black women.

“There are grant programs that give people $100,000, $200,000, and $500,000. They were giving [$20,000] and they are attacked,” Jones-Brown said of Fear. “Everything has been calculated. All of these things are strategic. … They know exactly what they are doing to dismantle all this.”

DEI financial attacks

Jones-Brown started his own business, Freeing Returns, a business that helps traders reduce losses, at the right time, he says – in 2020, during the COVID-19 pandemic. Before that, he was struggling to find investors.

“First [COVID-19]I tried to raise money to build Freeing Returns, and I couldn’t raise a cent,” Jones-Brown said. “People laughed me out of the room.”

He initially used charity money to start his company. Then, after the killing of George Floyd, a wave of support for Black businesses began to build.

He has raised $750,000 in 2021, mostly in black-led funds, he says.

“A lot of black-led funds were founded that year,” Jones-Brown said. “So, I was diving for Black women, Black men, and they heard me; let them see me.”

But now, amid a wave of lawsuits that have led to enforcement and other diversity efforts, more commitments, equity and inclusion by companies and non-profit organizations have begun to emerge. decrease.

In 2023, the United States Supreme Court declared that the use of race-based criteria in college admissions was unconstitutional. This decision was followed by a series of cases against organizations that use such methods to provide special funds to small businessmen.

“In 2023, everything changed, and it became very difficult to raise money again,” Jones-Brown said. “And now DEI is under attack. It’s just a dream.”

Earlier this year, a Texas federal judge struck down a small federal agency’s ability to extend business funding and government contracts to minority groups. The law governing the Minority Business Development Agency states that the term “disadvantaged” by nature applies to persons who are Black or African American, Hispanic or Latino, American Indian or Alaska Native, Asian, Native American America or other Pacific Islanders. The court held that this violated the Equal Protection Clause.

MBDA was established in 1969 under the Department of Commerce as the first, and remains the only government agency dedicated to promoting the growth of small businesses. A similar case was filed against the Small Business Administration as well. US District Court A judge ruled last year that the system violated the US Constitution with a grant program known as 8A, which included an opinion rule for minorities.

“I think the bigger conversation is that it’s all a distraction,” said Donna Ennis, director of community engagement for the Georgia MBDA Business Center. “You can’t always pinpoint an incident. … I think [this] everything continues to cause problems for us and our community.”

Barriers to Black Business

According to Ennis, small business organizations are critical to solving the financial problems that the Black community and women entrepreneurs face.

“These organizations, funds and programs were created to address the divide that exists between brown and Black communities, and women,” Ennis said. “Because if you do research even in women’s companies, no matter what color they are, they don’t have a lot of money either.”

In 2023, Crunchbase data shows that venture capital in companies with at least one founder was 23% of US venture capital, while companies with only female founders earn 3%.

In the 2021 MBDA survey, black small business owners are more likely to use their money to respond to their firms’ financial problems – 13% more likely to do so than small business owners, and 9 % than Hispanics and Asians. entrepreneurs.

For Jones-Brown, the challenges of earning money compound other challenges that Black women business leaders face, such as sexism.

“Walking into a room and trying to sell my business or sell our software to people, I feel hesitant,” Jones-Brown said. But if I have one of my men to speak, I feel like (customers) listen more, and they attract their voices. Even if they know that I am the CEO, the boy starts talking and everyone is looking at them. They forget everything about me.”

Ennis says another barrier to getting funding as Black entrepreneurs is the lack of experience in running a business, organizing companies and how to get business capital.

“A lot of our companies are first generation, so we’re still learning how to do business,” Ennis said.

Looking ahead

According to Jennifer Palsey, executive director of the MBDA Business Center of Georgia, it is important for Black entrepreneurs to both know that despite the challenges, there are still lenders. who are willing to support them.

“There’s a lot of room for financial institutions to do a better job of making sure our companies get the money they need,” Palsey said. “But there are a lot of social investors out there who are dealing with requests in a very clear way of why they were created.”

Jones-Brown notes, however, that aside from getting money, the key to sustaining their companies is having the business to keep the doors open.

“Of course we need money, but I feel like the biggest thing that Black businesses need is opportunity for customers and for sales,” Jones-Brown said. “We’ve raised almost 5 million dollars today, but if we can’t sell this product, we’re still going to die.”

According to the Bureau of Labor Statistics, 50% of new Black businesses close within five years, compared to 45% of new businesses overall. Only 3% of companies owned by Black women have grown and survived longer than five years, according to statistics from JPMorgan Chase.

“We need to focus on getting more of our revenue from sales, not just from equity investments and grants and non-dilutive funds,” Jones-Brown said. “It’s nice to start, but we need business. We are in the business of making money. ”

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