The entrepreneurial landscape in America is experiencing a paradox. While new business applications are skyrocketing, startup bankruptcies are also on the rise. This trend presents both opportunities and challenges for Black women entrepreneurs.
The Startup Boom: A Double-Edged Sword
More than three million new business applications were filed in 2024. This number outpaces eight of the last ten years. July alone saw 420,802 applications filed. Currently, the monthly average is 92% higher than pre-pandemic levels.
However, this boom comes with a caveat. According to Carta, 254 venture-backed startups went bankrupt in the first quarter of 2024. This rate is seven times higher than in 2019.
Venture Funding Drought: Impact on Black-Owned Businesses
In 2023, startups saw the lowest dollar amount of venture funding since 2018. This funding drought is directly linked to the increasing rate of failed businesses nationwide.
“The number of company closures has been steadily rising for the past two years,” Carta stated. Black-owned businesses, often excluded from traditional financial support, are particularly vulnerable to this trend.
Black Entrepreneurship: Aspirations vs. Reality
A September 2023 Pew Research Center survey revealed an interesting statistic. More than 1 in 5 Black adults believe that “owning a business is essential to financial success.”
There are an estimated 3.7 million Black-owned businesses in the U.S. In 2021, roughly 3% of U.S. businesses were Black-owned. These numbers highlight both the aspirations and challenges faced by Black entrepreneurs.
Economic Factors Driving Bankruptcy Rates
Experts cite the overall state of the economy as the reason for declining VC funding. Higher interest rates and bank failures have made traditional lending less accessible.
This situation is particularly challenging for Black-owned companies. They have historically faced systemic racism and lack of access to resources needed for growth and survival.
Hope on the Horizon: Future Funding Prospects
Despite the current challenges, some experts remain optimistic about future funding prospects. Justin Izzo, senior data and trends analyst at DropboxDocSend, offers a hopeful outlook.
“If a company plans to raise money in the next six to eight months, I believe the climate will be better,” Izzo told Inc. This potential improvement could benefit all entrepreneurs, including Black women business owners.
