Sources of Capital for Black Entrepreneurs

Steven  Rogers; Stanley  Onuoha; Kayin  Barclay

Background Note | HBS Case Collection | May 2019

Sources of Capital for Black Entrepreneurs

by Steven Rogers, Stanley Onuoha and Kayin Barclay

Abstract

This note was written primarily for black entrepreneurs in order to help them raise capital. The second objective was to recognize the capital providers who are part of the solution to the problem of less than 2% of private equity capital and 1.7% of debt capital in 2018 being invested in black entrepreneurs. The note reviews the evidence that black entrepreneurs have less access to capital than do white entrepreneurs; examines the reasons for that disparity, which is primarily due to anti-black racism proven from scholarly research; reflects on the societal impact; and—uniquely—compiles a directory of entities that have funded black entrepreneurs.

Keywords: black entrepreneurs; access to capital; Capital; Entrepreneurship; Prejudice and Bias;

Language: English

Format: Print

19 pages

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Citation:

Rogers, Steven, Stanley Onuoha, and Kayin Barclay. "Sources of Capital for Black Entrepreneurs." Harvard Business School Background Note 319-117, May 2019.

Corey Thomas, the African American CEO of the company Rapid7, must decide if it is the right time to take the 15-year-old company public, as it stood poised to capitalize on what appeared to be the next frontier for digital technology markets—cybersecurity. In spite of positive industry trends, there were some nagging concerns that this might be a risky time in the public capital markets. The company had just completed an acquisition, and he had additional concerns that the public markets may not tolerate the inevitable early losses involved with the new acquisition. Moreover, the company’s principal financiers were venture capital investors, and an IPO or sale would represent an investment exit for them, and their goal is return maximization.

Essence, the first magazine aimed at African-American women, was created by four, young, Black entrepreneurs in the aftermath of massive racial and political upheaval in the United States in 1968. The venture was a financial, branding and cultural success. By 2005, the company was sold to Time Warner, Inc, the largest magazine publisher in the world at that time, for the highest price ever paid for a single-title magazine company. However, there is still debate about whether the last remaining co-founder, Edward Lewis, jeopardized the iconic Black brand by selling it to a white-owned company.

After a successful career in research and academia, Joel Dawson decided to pursue entrepreneurship in the semiconductor industry. As one of the growing number of African-Americans in the technology field, Joel Dawson co-founded Eta Devices in 2010 based on new technology developed at MIT to improve the efficiency of radio transmitter devices. Several years later, following the creation of a successful company, Dawson is now faced with the decision of should he sell Eta Devices? And if he decides to do so, what should be his asking price and terms? This case focuses on the exit stage of entrepreneurship and how to make rational decisions using tools such as decision trees.

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Sources of Capital for Black Entrepreneurs

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