Sheldon James is CEO of Bay Mills Investment Group and founder of the Black President’s Club. Claudio Rojas is CEO of National Angel Capital Organization.
As the country reopens, the issues at the forefront of public discourse have started to change. Conversations about lockdown measures have switched to vaccinations and boosters. Travel restriction rhetoric has turned into vaccination passports. And discourse around economic stimulus and support is shifting to economic recovery and growth.
While Canadians look forward to pandemic restrictions winding down, there are crucial learnings that should not be quickly forgotten. Over the past year and a half, the importance of an economic equity lens has been highlighted. The disproportionate effects of this pandemic on Black communities can’t be ignored – but this period of economic recovery could prove the perfect opportunity to explore structural fixes and course corrections for a more equitable future.
Black entrepreneurs can create the next generation of great Canadian success stories, providing jobs to Black communities and building Black wealth. Our business leaders and investors must commit to a concerted effort to create the next generation of Black presidents, chief executives and leaders. With the right support now, a well-nourished Black economy can create a wealth cycle for generations to come.
Canada has all the potential and resources to build one of the world’s best innovation ecosystems, but to unlock that potential, an equity lens is crucial. The disparities in funding for Black entrepreneurs remains an unresolved issue. It has been reported that less than 1 per cent of venture capital funding flows to Black-owned startups. And while this issue is multifaceted, there are areas where we can focus our efforts to see tangible results
Many Black entrepreneurs never receive growth funding from venture capital firms because of their lack of access to early-stage funding. When a company is in the ideation or prerevenue stage, it is in need of patient capital: investors who have an interest in the long-term growth of the company. Investors who are willing to open their networks and provide guidance to young founders. They need angel investors. Without this support, early-stage companies will continue to face systemic barriers to growth.
At all stages of company growth, Black entrepreneurs face unconscious biases and barriers to mentors with networks that can help them scale and grow. Growing a company, while already challenging, is harder than it should be. In order to achieve a successful economic recovery and unlock untapped economic potential, these barriers to capital need to be knocked down, or we risk losing many more great companies and, by extension, many more great jobs.
As we begin to focus energy on recovery and growth, members of the innovation ecosystem need to reorient their thinking around our support of Black entrepreneurs. The business case is there, and proven. Diverse companies, both in ethnicity and gender, outperform their equivalents. McKinsey’s business-case findings are compelling: In 2019, companies in the top-quartile of diversity outperformed those in the lowest by 36 per cent in profitability (slightly up from 33 per cent in 2017 and 35 per cent in 2014).
The potential unlocked by engaging more Black entrepreneurs is an opportunity for Canada, and the key to that is focusing on a frictionless early-stage environment. Angel capital has the ability to remove these barriers by putting entrepreneurs in close proximity to a wide range of investors with varying backgrounds and sector expertise.
Over the past year, we have identified a trend we are calling “the changing face of early-stage capital.” We are seeing more women and people of colour engage with early-stage companies, leading the change we want to see in the ecosystem. Initiatives such as The51 and Women’s Equity Lab have created new pools of capital and opportunity for female entrepreneurs, and the same needs to be done for Black entrepreneurs. The launch of Backbone Angels – a small group of investors supporting women and non-binary founders with a focus on investments in Black, Indigenous and women of colour-led companies – is a step in the right direction, but there is so much more work to be done. Now is the time for early-stage investors to focus on supporting and championing Black entrepreneurs.
Profitability is positively correlated with diversity. Black entrepreneurs represent one of Canada’s highest potential groups. Focus and investment now will lead to prosperity in the future. Support of Black entrepreneurs isn’t just a moral imperative, it is a golden opportunity.
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