Raising funds is not a one-size-fits-all solution. Black women may now be starting businesses at a record pace, but they’re still having to overcome massive obstacles in doing so.

Among Black women business owners, 66% describe access to credit and funds for expansion as one of their greatest financial challenges. Only 39% of their nonminority peers say the same, according to the Federal Reserve System’s 2016 Small Business Credit Survey, which is based on a convenience sample of businesses.

Black women also reported being less likely to receive some or all of the financing they requested and are significantly more likely to not apply for financing because they felt discouraged by a lack of credit opportunities.

Rather than turn to debt or equity financing to fund their businesses, many rely on financial reserves like their savings as the main source of startup capital.  According to the Fed survey, 31% of Black women business owners rely on personal funds to finance their businesses, whereas only 16% of nonminority women business owners say the same.

Much of those reserves, said Kathryn Finney, founder of digitalundivided and The Doonie Fund, which makes microinvestments in Black-women-owned businesses., come from “our own personal funds, maybe refinancing our mortgages, or taking loans from our 401(k), all things that impact our long-term wealth.”

That was the case for Denise Woodard, a former Coca-Cola executive. She was spurred to create Partake Foods, an allergy-friendly snack company, nearly four years ago in response to her daughter’s food allergies.

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Woodard started off with a Kickstarter campaign before raising capital from family and friends. In spite of the growing traction her products were getting and local placement in Whole Foods and Wegmans, Woodard was forced to empty her 401(k) and sell her engagement ring to keep the company going.

“It was definitely difficult,” she said. “It was coming in dribs and drabs of like $5,000 and $10,000 checks and not fast enough.”

But a breakthrough finally did come.

After being turned down by nearly 100 investors, Woodard received the ‘yes’ she needed from Jay-Z’s Marcy Venture Partners, which led a seed round of $1 million for the company last summer that also included her former Coca-Cola boss, Chuck Muth, now chief growth officer of Beyond Meat and The Factory.

She’s since raised new investment from Grammy award-winning singer H.E.R. along with additional funding from Marcy Venture Partners. And the company’s footprint has expanded to nearly 3,000 stores including retailers such as Target, Whole Foods, Sprouts and Wegmans.

Woodard is also trying to boost Black and brown representation in the food and beverage industry, with the launch of a fellowship program for students at historically Black colleges and universities to explore career pathways at consumer-packaged goods companies. She hopes the program can make the journey smoother and more seamless for others.

“As I’ve grown the company, I’m realizing that Partake has the opportunity to stand for something much larger than people with food allergies being able to partake, and just this bigger feeling of inclusivity and everyone having a seat at the table, regardless of their gender, race, socioeconomic class or food restrictions, this idea that everyone is welcome,” Woodard said. “I started Partake with a tiny picture, and it’s really broadened a lot since we’ve been in business.”

Changing the ecosystem

The country’s racial reckoning may have sparked some new efforts to rectify years of gross underfunding of Black women founders, but there were a number of positive forces that emerged even prior to 2020.

New funds, online communities, programs and alternative sources of funding are focusing on diversifying who receives startup capital.

One significant example, the New Voices Fund was launched in 2017 when Unilever acquired Sundial Brands, the maker of SheaMoisture and other skin care and hair care lines. Richelieu Dennis, Sundial’s founder and then-CEO, created the New Voices Fund to invest in companies run by women of color, and Unilever became an anchor investor as part of the partnership. To date, the fund has invested more than $60 million. Companies like The Honey Pot, The Lip Bar and Mielle Organics, all of which are now available in Target stores, were able to expand in part due to those investments.

Another effort, Founder Gym, founded by Mandela SH Dixon, is an online training program for underrepresented founders including Black women, which teaches them how to raise money to scale their startups. Several of the more than 90 Black women who have raised millions for their startups have been a part of the program, including Shani Dowell of Possip, as well as Olamide Olowe, who founded Topicals, a skincare brand for people with chronic skin conditions and Jasmine Shells, who cofounded Five To Nine, an event management platform.

Another such example, Black Girl Ventures, a nonprofit organization launched by Shelly Bell in 2016, has helped to scale more than 100 Black and brown women-owned businesses across 12 cities through its pitch competitions.

Don’t forget crowdfunding

Many Black women founders have also found success by tapping into alternative sources of capital such as crowdfunding.

Dawn Dickson-Akpoghene raised over $1 million in an equity crowdfunding campaign in 2019 for her company PopCom, which makes touchless vending machines for regulated products like alcohol, tobacco and cannabis. The founder of Ethel’s Club, Naj Austin, raised $25,000 by using crowdfunding to kickstart her company, a social and wellness club for people of color. She went on to raise more than $1 million from institutional and angel investors.

These efforts haven’t come just on the founder side. There have also been a number of initiatives pushing for more diversity among the investors who make decisions on who gets funded and why in the startup landscape. Organizations such as AllRaise, BLK VC and HBCUvc have focused on accelerating representation of Black and women investors to build a more equitable ecosystem in venture capital.

With these efforts combined, advocates like Maillian from digitalundivided hold hope that even beyond the moment of racial reckoning in 2020, Black women founders will still continue to thrive.

“We have a culture of embracing entrepreneurship as Black women and seeing other Black women continue to do it is what really makes the difference,” she said. “And signals to our peers and to future generations, what is truly possible.”