Where are all the BIPOC Entrepreneurs in Canada?
Entrepreneur. What image comes to mind when you think of that word? Perhaps a Zuckerberg-esque, T-shirt wearing tech genius in his mid-twenties. Maybe a duo of university drop-outs utilizing their computer programming skills to fulfill their dream of making computers small enough for people to have in their homes and offices. The image you envision when you think of an entrepreneur likely doesn't borrow traits from Madam C.J. Walker, whose hair-care business led to her becoming the first American woman millionaire. You most likely don't picture Michael Jordan, who used his success as a basketball player to build a best-selling footwear brand.
Steve Jobs. Elon Musk. Jeff Bezos. Why is it that the figure of the white male has become the pinnacle image associated with entrepreneurship? In 2013, economist Ross Levine and London School of Economic professor Yona Rubinstein released a working paper that explored the demographics, personality traits and earnings of entrepreneurs. They found that entrepreneurs are "disproportionately white, male, and highly educated". Big surprise.
While entrepreneurial activity is on the rise, Black, Indigenous and People of Color ("BIPOC") entrepreneurs remain underrepresented within the startup sphere. This underrepresentation of BIPOC entrepreneurs extends beyond the borders of any one country in particular. In Canada, although 1.2 million Canadians identify as Black, a 2015 survey conducted by Black in Canada found that there are only 2,000 Black-owned businesses of "significant scale" within our borders. Strikingly, I was unable to find any published statistics regarding the prevalence of Indigenous-owned businesses in Canada. It is obvious that there is a systemic issue that results in the underrepresentation of BIPOC entrepreneurs within the start-up sphere in Canada. The question remains, however, as to why such under-representation exists?
Well for one, you need money to start a successful business. One of the most significant challenges that BIPOC entrepreneurs face is securing capital to back their endeavors. Many early-stage growth companies and start-ups receive their financial backing in the form of venture capital. Due to the reliance many growth companies have on venture capital, venture capitalists act as gatekeepers for the success of start-ups. Although diverse founding teams, defined as a group with at least one founder with a non-white perceived ethnicity, have earned a 3.26x median realized multiple on IPOs and acquisitions, 30% more than the 2.5x realized multiple for all white founding teams, there is still a severe funding gap between BIPOC and white entrepreneurs. For example, venture capital funding for Black American women entrepreneurs accounted for 0.2 percent of all venture funding in the US in 2018. Again, I was unable to find comparative statistics regarding the financing of Indigenous Canadians.
Despite the clear financial evidence indicating that investing in companies founded by BIPOC entrepreneurs is a good move, the funding gap between white and BIPOC-led companies is prevalent. This can be attributed to unconscious bias. Venture capital investment decisions are likely to be subconsciously influenced by familiarity bias, or the preference of an individual to remain confined to what is familiar to them. If an entrepreneur reminds a venture capitalist of Zuckerberg, Musk, or Bezos, familiarity bias creeps in to increase their perceived trustworthiness and the view that the company is more likely to be a sound investment.
The geographic remoteness of many Indigenous populations further exacerbates the problems BIPOC entrepreneurs face when trying to obtain capital to finance their businesses. Statistics Canada indicates that around 60% of indigenous peoples live in rural areas. The vast majority of rural Indigenous communities do not have a bank within their boundaries. Collectively, the four major banks in Canada have less than 50 aboriginal branches, banking outlets, or banking centres located on-reserve. Section 89 of the Indian Act prohibits the use of reserve land as collateral, and banks are reluctant to provide loans if assets cannot be seized in the case of a default. As you can see, there are a number of factors that contribute to the racial funding gap for entrepreneurs.
Oh yeah, and there's racism. Although sometimes not overtly obvious, systemic, anti-BIPOC racism resulting from biases is ingrained in the business sphere. It is easy to quantify the barriers that BIPOC entrepreneurs face in the financial realm. However, in addition to the barriers in obtaining capital to back their ventures, BIPOC entrepreneurs face a multitude of social barriers that are difficult to quantify. Building a strong network of business personnel tends to lend an image of legitimacy to an entrepreneur. If you surround yourself with successful people, you are more likely to be perceived as successful. However, the systemic anti-BIPOC racism that exists in offices and executives suites restricts BIPOC access to high level positions within companies. For example, a Ryerson University study on diversity of companies in Vancouver, Montreal, Calgary, and Toronto was released in June and indicated that Black people held only 13 out of 1,639 board positions at the companies involved in the study. If your access to executive positions within a Company is restricted, it is difficult to build a network of high-level, well-respected business personnel. Additionally, as a direct result of inequitable government support and funding to indigenous communities, only 48% of on-reserve indigenous peoples graduate high school. In a society where the corporate world relies so heavily on educational background, social access to corporate networking for Indigenous business-owners is heavily restricted and largely absent.
Systemic racism, combined with statistics that show that BIPOC entrepreneurs are less likely to receive financial support at the venture capital level, have made the start-up world as inaccessible as ever. In the aftermath of George Floyd's murder at the hands of Minneapolis Police Officers, difficult conversations about systemic racism in the entrepreneurial world are no longer avoidable. Instead of merely taking performative measures such as posting a black square or writing about support for the Black Lives Matter movement on their social media, entire industries must be challenged to review how their actions contribute to the underrepresentation of BIPOC entrepreneurs in the start-up sphere. Rather than echoing Doug Ford's sentiment that "we don't have the systemic, deep [racist] roots that the [US] has had for years”, Canadians need to recognize that Canada is not immune to the systemic racism that plagues society and stifles BIPOC entrepreneurship in the US.
Innovation is a key facet of entrepreneurship. To function successfully, innovation demands inclusivity. Taking time to inform yourself of the barriers that BIPOC entrepreneurs face is a good first step. After reading this post, I encourage you to research BIPOC entrepreneurs who have been successful in spite of the multitude of barriers they face in obtaining their success. I have provided a list of BIPOC entrepreneurs below. Hopefully, in going through this list, the image that you perceive when you hear the word "entrepreneur" will be changed.
Blog posts are by students at the Business Venture Clinic. Student bios appear under each post.