On a recent Saturday in July, about 70 Black business owners gathered into the Russell Innovation Center for Entrepreneurs in Southwest Atlanta to talk about the future of Black business. Award-winning tech CEO Barbara Jones-Brown led the class, and she noticed that a majority of those in attendance looked just like her.
Black women have recently emerged as the fastest growing group of entrepreneurs, recent research from web domain company GoDaddy shows. The group represents 14.8% of all women-owned businesses, and 52.1% of all Black-owned businesses with more than 2 million firms, according to a 2023 data report from the National Women’s Business Council.
Jones-Brown said her Business-to-Business class is pivotal for these entrepreneurs in trying to navigate what she called the current climate of “calculated attacks” on minority business funds.
Credit: Adrian Sheby
Credit: Adrian Sheby
A year ago, a conservative group sued Atlanta-based venture capital firm Fearless Fund and its foundation over a $20,000 grant contest designed to help Black women founders, alleging the contest is discriminatory. A federal appeals court panel has put the contest on hold as the lawsuit winds its way through the courts.
Fearless Fund is the nation’s first venture capital firm run by women of color that exclusively invests in companies owned by women of color. As of 2024, 66% of the portfolio companies they serve are owned by Black women.
“There are grant programs that are giving people $100,000, $200,000, and $500,000. They were giving [$20,000] and they get attacked,” Jones-Brown said of Fearless. “It’s all calculated. All of this stuff is strategic. ... They know exactly what they’re doing to dismantle all of this.”
Attacks on DEI funding
Jones-Brown started her business, Freeing Returns, a business that helps retailers reduce losses, at the right time, she says – in 2020, during the height of the COVID-19 pandemic. Before that, she struggled to find investors.
“Before [COVID-19], I tried to raise funding to build Freeing Returns, and I couldn’t raise a dime,” Jones-Brown said. “People laughed me out of the room.”
She initially used pandemic relief funding to launch her company. Then, after the murder of George Floyd, a wave of support to Black-owned businesses started to build.
She raised $750,000 in 2021, mostly from Black-led funds, she says.
“A lot of Black-led funds got created that year,” Jones-Brown said. “So, I was pitching to Black women, Black men, and they heard me; they saw me.”
But now, amid a wave of litigation targeting affirmative action and other diversity efforts, many diversity, equity and inclusion commitments made by companies and nonprofits have started to recede.
In 2023, the United States Supreme Court declared the use of race-conscious practices in college admissions unconstitutional. The decision was followed by a string of lawsuits against organizations using such practices to provide exclusive funding to minority entrepreneurs.
“In 2023, everything changed, and it became so hard to raise money again,” Jones-Brown said. “And now DEI is under attack. It’s just a nightmare.”
Earlier this year, a federal judge in Texas struck down the ability of a small federal agency to extend venture capital and government contracts to minority groups. The statute governing the Minority Business Development Agency stated that the term “socially disadvantaged” naturally applied to individuals who are Black or African American, Hispanic or Latino, American Indian or Alaska Native, Asian, Native American or other Pacific Islanders. The court declared that this violated the Equal Protection Clause.
The MBDA was created in 1969 under the Department of Commerce as the first, and still the only, federal agency committed to promoting the growth of minority businesses. A similar lawsuit was filed against the Small Business Administration as well. A U.S. District Court Judge ruled last year that the administration violated the U.S. Constitution with an assistance program known as 8A, which included a presumption rule for minorities.
“I think the larger discussion is that it’s all a barrier,” said Donna Ennis, director of community engagement for the Georgia MBDA Business Center. “You can’t always point specifically to an incident. ... I think [this] all continues to create more difficulty for us, and for our communities.”
Barriers to Black business
According to Ennis, minority business organizations are essential in addressing the funding problems that Black communities and women entrepreneurs face.
“These organizations, funds and programs are set up to address the disparity that exists between brown and Black communities, and women,” Ennis said. “Because when you do the research even on women companies, no matter what color, they’re significantly underfunded as well.”
In 2023, Crunchbase data shows that funding amounts to companies with at least one female founder were 23% of U.S. venture capital, while companies with only female founders received 3%.
Credit: Adrian
Credit: Adrian
In a 2021 MBDA study, Black small-business owners were most likely to have used personal funds in response to their firms’ financial challenges— 13% more likely to do so than white small-business owners, and 9% more than Hispanic and Asian entrepreneurs.
To Jones-Brown, the challenges obtaining funding only compound other struggles Black women business leaders face, such as sexism.
“Going into a room and trying to sell my business or sell our software to people, I feel some hesitancy,” Jones-Brown said. “But if I have one of my men speak up and talk, I feel like (customers) listen more, and they gravitate to their words. Even if they know that I’m the CEO, the guy starts speaking and everybody’s looking at them. They forget all about me.”
Ennis says another barrier to getting funding as Black entrepreneurs is the lack of experience in knowing how to make a business successful, structuring companies and how to acquire venture capital.
“A lot of our companies are first generation, so we’re just learning how to do business,” Ennis said.
Looking ahead
According to Jennifer Palsey, senior project manager for the Georgia MBDA Business Center, it is important for Black entrepreneurs to both know that despite the difficulties, there are still lenders committed to supporting them.
“There are a lot of opportunities for financial institutions to do a better job of making sure that our companies get the adequate funding that they need,” Palsey said. “But there are many community-based lenders out there that are processing applications by the pure nature of why they were formed.”
Jones-Brown notes, however, that in addition to acquiring funding, the key to sustaining their companies is having the business to keep the doors open.
“We definitely need the funding, but I feel like the biggest thing that Black businesses need is an opportunity for customers and for sales,” Jones-Brown said. “We’ve raised almost $5 million today, but if we’re not able to 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 Black women-owned companies mature and survive longer than five years, according to statistics from JPMorgan Chase.
“We need to really focus on getting a lot of our money through sales, not just from investments and grants and non-dilutive funding,” Jones-Brown said. “That’s wonderful to get you started, but we need business. We are in business to make money.”
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