Closing the Racial Wealth Gap through Entrepreneurship

Black entrepreneurs not only attain higher levels of wealth but also have higher levels of upward wealth mobility — the upward or downward movement of Americans from one wealth level to another — compared to those employed by another individual or entity.

Big Picture: Just 1% of venture capital funding goes to Black entrepreneurs.

The Black Economic Alliance — an organization focused on advancing economic progress in Black communities through improving economic outcomes in work, wages and wealth — is committed to closing this gap by fostering connections between Black entrepreneurs and the investment community.

David Clunie, the executive director of the Black Economic Alliance, says that businesses are uniquely positioned to be a key driver in closing this gap by helping elevate opportunities for entrepreneurship.

“Organizations like Capital One have a wealth of resources and can bring new opportunities to people from diverse backgrounds,” Clunie says. “This in turn can create stronger pathways to wealth building and better access to resources for all communities.”

As part of our initial $200 million, multi-year commitment to advancing socioeconomic mobility through the Capital One Impact Initiative, we are working with partners like the Black Economic Alliance to create a world where everyone has an equal opportunity to prosper through:

• Advocating for an inclusive society
• Building thriving communities
• Creating financial tools that enrich lives

Our collaboration will help the Black Economic Alliance create a center for Black entrepreneurship to build a direct network for startups to connect with investors in the venture capital space.

By the numbers: Lack of physical proximity to Silicon Valley and startup hubs is one of the factors that limits access to capital for Black entrepreneurs.

• Roughly 55% of Black people in the U.S. live in the South or Southeast.
• Approximately 75% of annual venture capital funding is given to entrepreneurs in California, Boston or New York.
• More than 28% of Black entrepreneurs report their profits are negatively impacted by lack of access to capital compared to just 10% of white startup founders.

“The current underinvestment in Black entrepreneurs is unacceptable and we need to turn that reality on its head,” Clunie says. “We’re looking to create a program to educate and incubate Black entrepreneurs so they can better interact with the investment community. This will give them the support necessary to compete and to bring their business ideas to market.”

Why it matters: Excluding Black entrepreneurs from access to capital ripples through the economy. Closing the racial wealth gap could increase U.S. GDP by 4 to 6 percent by 2028.

“We’re trying to elevate the conversation about what improving socioeconomic mobility for Black people means to the larger economy and what everyone’s role is in unlocking that potential,” Clunie says. “Our goal is to create a two-way street of relationship building between Black entrepreneurs and the investment community that will significantly increase deal flow for investors that are looking to do business with Black people now more than ever.”

Clunie says that launching careers in entrepreneurship will create a shift of moving Black people out of over-indexed industries that have been hit hard during the COVID-19 pandemic, such as hospitality and food services, and into growing industries like tech, advanced manufacturing, health care and construction.

“We want to help transition Black workers into growing industries that represent the future of work,” Clunie says. “Tech in particular is a field in which Black people face dramatic underrepresentation. This is due in part to the lack of pipeline in schools that Black talent is coming from in the highest numbers and the significant lack of diversity in the networks of leadership at many tech companies.”

Capital One is helping diversify the tech industry by mentoring the technologists of tomorrow with programs like Capital One Coders and Pursuit.

“It is essential that we support the largely untapped talent of entrepreneurs from the Black community to create a more inclusive and equitable economy,” said Theresa Bedeau, Community Impact and Investing Lead at Capital One. “At Capital One, we support small businesses through our partnerships with community-based organizations that help entrepreneurs from diverse backgrounds achieve improved access to capital and tailored small business support.”

In addition to contributing to mentorship programs to foster pathways for greater wealth building in the Black community, Clunie says that businesses can make an impact simply by getting out of their comfort zone and challenging the status quo.

“Companies are hungry for this talent, they just don’t know where to find it,” Clunie says. “Businesses should ask themselves what obstacles remain in place that block Black people from being hired and eventually breaking through to senior levels of management and how their leadership can proactively remove those barriers.”

^{David Clunie, Executive Director of the Black Economic Alliance, has worked to expand a more inclusive economy throughout his career in both the public and private sectors.}