Investing in Diversity & Inclusion

Pushing for Racial Equity in the Innovation Economy

As the innovation economy grows poised to drive job creation in the next several decades, the need for racial equity in funding and support still stunts progress. Black Americans continue to participate in the innovation economy at lower rates than white Americans, highlighting a gap that hurts both individuals and the economy as a whole.

Assessing the Racial Wealth Gap

On average, white households hold about 10 times more wealth than Black households. Correcting the racial wealth gap could result in 4% to 6% GDP growth by 2028. For leaders like Black Innovation Alliance (BIA) cofounder Kelly Burton, bridging that gap hinges on resourcing the organizations that offer that support.

“We need to have anchors that are well-supported so that we don’t see attrition because the founder needed a real job,” she said in an interview.

Burton is an entrepreneur herself: she founded the social impact research firm Nexus Strategy Group and the Founders of Color network before partnering with Black and Brown Founders’ Aniyia Williams to launch the Black Innovation Alliance last year. BIA is an umbrella group for organizations supporting innovation by and for Black people with a mission to “ensure that Black ownership is increasing through equitable participation in the innovation economy.”

“What we push is systems change,” Burton explained. “For existing spaces, that looks like change or reform. But the innovation economy, tech, entrepreneurship—that’s a burgeoning space.”

New pushes for racial equity have provided some tailwinds for a more equitable approach to the innovation economy.

Building Innovation Capital

Innovation requires the intellectual capital to creatively solve problems as well as the financial capital to iterate and scale solutions. On both counts, longtime racial inequities in the United States have created significant hurdles for Black entrepreneurs and inventors. More than a quarter of Black entrepreneurs who responded to one Kauffman Foundation survey reported that a lack of access to capital hurt their profits, reflecting that entrepreneurs of color receive less than 1% of venture capital funding.

The lack of funding extends to the incubators, accelerators, and other networks that support entrepreneurs of color. “If you see a Black-led tech startup with Y Combinator or TechStars, chances are they’ve been through two to five smaller incubators that are largely Black- or brown-led but do not get the same resources or chance to shine,” Burton said.

As for intellectual capital, a groundbreaking 2014 study identified that the peak year for Black-owned patents per capita was 1899. Patenting activity among Black inventors steadily declined in the United States between 1870 and 1940 alongside the rise of segregation and racially motivated violence. That decline fed a generational gap, as children who grow up exposed to innovation are substantially more likely to become inventors themselves. From 1970 to 2006, Black inventors were awarded just six patents per million people compared with 235 patents per million for all American inventors.

Beyond intellectual and financial capital, another element influences innovation: risk. This includes the risk of failure.

“Nine out of 10 VC-backed businesses fail to go public,” Burton pointed out. “We need to give Black kids a space to try and fail in ways that don’t reinforce negative stereotypes . . . The messaging they’ve received over the course of their lives is ‘you have to be ten times better in order to just land where your white peers land.'”

Supporting Black Innovation

New pushes for racial equity have provided some tailwinds for a more equitable approach to the innovation economy. BIA launched in June 2020, just as protests over the murder of George Floyd spread across the country. Businesses and investors alike responded to the protests with promises for increased funding or other support. Burton and Williams launched BIA as a way to triage the different offerings for Black innovators. In early April, they announced a partnership with Village Capital to boost the work of entrepreneur support organizations led by and focused on communities of color through a new accelerator program called Resource.

“The innovation economy is bigger than just tech startups—all businesses need to be tech-enabled at every stage,” said Burton. “How can we help Black-owned businesses understand and appreciate that everything is driven by tech?”

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