Black women are more likely to start a business than white men and white women, according to a study by professors at Babson College.
In the U.S., 17% of Black women are in the process of starting or running a new business, compared with 10% of white women and 15% of white men, found the study, which was based on data from a survey of 12,000 people.
At the same time, only 3% of Black women surveyed were running a “mature” business more than three and a half years old.
The reason for this disparity requires further study, said Babson College assistant professor of entrepreneurship Angela Randolph, who coauthored the research. Though part of the reason, noted Randolph, is that 61% of Black women entrepreneurs self-fund their ventures, even though 29% of Black women entrepreneurs belong to a household with total income greater than $75,000.
“If 61% of Black women start with their own funding, and Black women in particular start with more debt and less equity, they’re starting with a smaller amount,” said Randolph.
The lack of personal capital, along with less access to private funding or loans, means women in general, and Black women in particular, have less money to start and then run their businesses, said Randolph.
On top of lack of funding, study coauthor and Babson College entrepreneurship professor Donna Kelley said the industries in which Black women start businesses, such as the retail, health, and education sectors, tend to have lower returns and low barriers to entry, which means more competition.
The analysis also found that entrepreneurship rates were high among Black women between the ages of 25 and 34, said Kelley, while rates of entrepreneurship in white women and white men tended to peak around ages 35 to 44.
Kelley said Black women’s unemployment rate tended to be higher than that of non-Black women and non-Black men in their early twenties.
Higher rates of unemployment among younger Black women could be part of the reason more of these women are starting their own businesses, Kelley said.
“If you’re facing bias in employment and getting employment, or possibly promotions, and job prospects are not as attractive, creating and having more power over your career through entrepreneurship might be a better option,” said Kelley.
The research, a summary of which was published Tuesday in the Harvard Business Review, was conducted as part of the Babson professors’ work with the Global Entrepreneurship Monitor, a survey of entrepreneurship rates and attributes conducted in 120 economies.
Randolph said the results show that it’s important to reexamine how entrepreneurs can get access to resources.
“A lot of programs focus on starting entrepreneurship,” Randolph said. “There’s not enough that focus on how we help them sustain and grow.”
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