Investment Crowdfunding: A Solution To Help Close The Racial Funding And Wealth Gaps?

Bill HustonAlternative Finance, Community Capital, Crowd Investing


Entrepreneurship is driven by the entrepreneur’s ability to access the financing, support, and digital resources you obtain to impact your business’s success directly. In an ideal world, access to help would be equal,e maker’s output could be judged on comparable grounds. Unfortunately, as many black and business owners have found, this is not the case, and the effect of these materials weighs more heavily on us. We, as a community, are the fastest-growing demographic of entrepreneurs due to equal access to the needed resources, outcomes are vastly uneven. 

The Reality of The Racial Wealth Gap

There exists in the United States a vast racial wealth and financing gap that impedes the growth of Black-owned businesses. Understanding the breadth of the racial wealth gap is encapsulated by this quote from this article “In 2016, White households with college educations had a median of $268,028 in wealth while Black households with the same level of education had only $70,219.” This information is vital to understanding why even as Black professionals and entrepreneurs who can attain education and income parity, wealth creation still isn’t equitable for this sector of the Black community. 

The Disparities In Venture Funding 

The disparity between VC funding going to black entrepreneurs vs. their white counterparts is striking.  Funding to Black founders reached $1.8B in the first half of 2021. Total Global Venture funding, according to Crunchbase, was $288B, so this is .625%. Black female founders have received just 0.34 percent of the total VC spend so far in 2021, according to Crunchbase. The one bright spot is startups with at least one Black woman as a founder has raised around $494 million so far in 2021, surpassing the $484 million raised in all of 2018, the previous five-year high. 

Black Business Ownership Is A Driver of Black Wealth

According to a Study of Black Entrepreneurship, business ownership is a significant driver of wealth for Black Americans. Black business owners have 12 times the wealth compared to non-business-owning Blacks. Yet, as of 2017, Blacks made up 13% of the population, only 3.5% of US-based businesses were Black-owned. Meanwhile, 81% of companies that year were owned by Whites as they made up just 60% of the population. Expanding the opportunity for business ownership is critical for 40 million Black Americans and our economy at large.

Black Entrepreneurship Has the Ability to Close the Wealth Gap

Data proves that an increase in Black-owned companies contributes wealth to the US economy. The 2012 Survey of Business Owners by the Census reported that existing Black businesses contributed 1 million jobs and injected $165 billion in revenue into the US economy. Recent data from investment crowdfunding platforms and Crowdfund Capital Advisors has shown that investment crowdfunding is one solution to closing the funding gap for Black entrepreneurs. Investment crowdfunding can play a dual wealth-building role by providing business capital to Black-owned businesses and founders and inclusive investment opportunities to the Black community. 

Key Takeaways

The American Dream Marketplace is working with Black crowdfunding professionals and businesses to create a Black crowdfunding ecosystem by providing one online platform where Black-owned businesses can access state-of-the-art technology and network with Black professionals and business owners to learn and implement a Black community-wide investment crowdfunding ecosystems. The data is clear and consistent that the traditional funding system doesn’t work for Black entrepreneurs, but the emerging data points to investment crowdfunding as a capital democratizing tool. If you want to learn more about building Black wealth through business ownership and inclusive investing, create your personal and business profile on the American Dream Marketplace!