Black Women Entrepreneurs: Creating an Ecosystem

Carla Harris: Prior to 2020, American entrepreneurship had been on a 40-year decline. But according to recent data from the U.S. Census Bureau, entrepreneurship is on the rise once again. In 2021, aspiring entrepreneurs filed paperwork to start 5.4 million new businesses — the highest volume of applications since tracking began. This recent surge has been attributed to women and people of color, so for this special two-part series we've been honing in on the intersection of those two identities: Black women.

In part one, available in your feed now, we visited D.C. native Angel Gregorio at her Spice Suite to hear about how she dove head first into entrepreneurship and, along the way, developed a unique business model to support other Black women founders.

Angel Gregorio: I've gotten here by inviting other Black people to pop up and share space with me. And I did not know that out of that model of simply sharing space and inviting community into the space that I would create what I now call Black and , which is this idea of going back and forth with black business owners and particularly Black women.

Carla Harris: In part two, we're expanding upon Angel's principles of building a local business community to discuss Black entrepreneurship more broadly. While in Washington D.C., I met up with Melissa Bradley, a forward thinking business leader who has devoted herself to creating an entrepreneurial ecosystem where Black founders, including the rising tide of Black women business owners, can thrive.

Melissa Bradley: If you see a Black business that's a million dollars, know that that was a very different journey than a white company that was at a million dollars. And to really help level the playing field, know that when you look at business side by side, everybody's entrepreneurial journey is not the same.

Carla Harris: Melissa is an adjunct professor at Georgetown University's McDonough School of Business, and the founder and managing partner of 1863 Ventures, a national business development nonprofit accelerator and venture capital fund for historically underestimated individuals. The organization is on a mission to generate 100 billion dollars of wealth for founders by 2030.

Welcome to Access and Opportunity. I'm your host Carla Harris, and we're telling the stories of individuals working to drive change within their communities. We provide context about systemic inequities and share tangible examples of how ideas around access and opportunity are being made real every day.

Carla Harris: Melissa Bradley, thank you so much for being here with me today. It's a pleasure to have you on the show. And can we jump right in?

Melissa Bradley: The pleasure is all mine. Let's go.

Carla Harris: Alrighty. So we'll get into your work as an innovator, investor, and advisor through 1863 ventures. But first let's talk about your own entrepreneurial journey. Tell me about the first company you founded and the process of getting it up and running.

Melissa Bradley: So that's a quick story, because I think it was one that sparked everything of where I am now. I, like most people, wanted to make a lot of money. Went to Georgetown, was a finance major, got my first corporate job. It was okay. And I was like, There's gotta be something better. And so I decided to start a financial services company, which signals that I'm over 50, so it wasn't fintech. And the idea was how do I repair what I was doing because I was working for Sallie Mae, and I felt bad about just putting all those loans on people. So the vice president of the department signaled to me six months prior that we were gonna be reorganized. And I was like, I don't wanna be reorganized. Let me take that money and start my business. Got terminated, took the package, had my business plan ready to go. Go to the SBA, drop off my paper, Kinkos-bound. Come back the next week, woman says, “You're not going to get a loan.” And I was like, “Why?” She goes, “Three reasons.” I was like, “I got this. Bet.” She goes, “You're Black, you're a female, and I don't know any successful Black women in financial services.” I said, “Well, I can't change any of those.” I mean, I could, but I'm not. And so when I walked out of that office and I was on the 11th floor, by the time I got to the bottom, I said, “If I'm ever successful, I will do whatever I can so this never happens again.” Fast forward, I ended up selling the company and realized that there wasn’t a whole world of opportunity for other people like myself who were trying to be entrepreneurs, and it was nothing to do about their skills, nothing to do about their intent or passion, it was about the system telling them “No.”

Carla Harris: Wow. So since then, you've gone on to successfully start and exit several companies. How did running your own businesses progress into wanting to help other entrepreneurs find their way? Cause it was more than just investing.

Melissa Bradley: Yeah. You know, I think one of the things I realized after I sold the first company, I didn't know what I was doing. I didn't know what I was talking about, and I left a lot of money on the table for myself and for the community. And I also, as I spent more time and also became professor in teaching this work, I realized that most programs in this country focus on startups, which is great, but there's a reason why most businesses fail within five years because there's a difference of being a founder than being a CEO.

Carla Harris: Absolutely.

Melissa Bradley: And so I realized quickly that a lot of friends of mine who had started businesses had no idea around how to hire, did not understand culture, did not understand processing systems. They knew how to fundraise, but they didn't know anything about finances. And so over time I found myself giving this advice one-on-one and then decided there's gotta be a much bigger, better way to be able to systematize how do we help de-risk entrepreneurs, particularly those that look like me?

Carla Harris: Yeah. And let's talk about it. What made you create 1863 Ventures?

Melissa Bradley: It started as a project. So as a professor, I always take students during the summer and get them to do something that's socially oriented. So one summer we had a bunch of students and they had to come up with an idea to help the community. They decided to put on a pitch competition in Ward 8, so Southeast D.C. And so I said, “Okay, you guys have to organize it, put it all together. Go get some money, make it happen. Get people to show up, but just understand what does that take.” We did it on a Friday and a Saturday. We expected maybe 60 people. The first day we had 147. The second day we had 167. I know that cause we ran out of lunch. We only had a $5,000-sponsor, and so we ran out of food. But people showed up and said, “We've been waiting for somebody to come help us figure out what is our path to wealth creation.” And so when it ended, they were like, “Okay, well now what?” And I was like, “Okay, peace out. I'm going back to teach. This was a great weekend experience.” And the community called me on it and said, “No, you've started this. You've got to finish.” And so what was a two-day event turned into a three-year project, which was to get the District of Columbia to be able to invest beyond small grants and businesses. We found million-dollar businesses that showed up to our event. I said, “Can I make a bet with you? If I find 500 businesses that are really growing, will we shift this whole grant making and really think about investing in entrepreneurs?” And the city said, “Sure.” So we gave ourselves three years to find 500 businesses. We found 527 in 18 months.

Carla Harris: Yeah, I can believe it.

Melissa Bradley: And so what I thought was gonna be a three-year project turned into a 10-year plus vision to create 100 billion dollars of wealth by and for New Majority entrepreneurs.

Carla Harris: Wow, go on Melissa.

Melissa Bradley: And for us, New Majority entrepreneurs are those that have been historically overlooked, underserved, Black and Brown entrepreneurs, sector agnostic with a desire to create high growth businesses, but more importantly, create jobs in our communities.

Carla Harris: So I'd like to zoom out a bit and establish the context for why it's crucial that companies like 1863 Ventures exist. According to your research, it costs at least a quarter of a million dollars more for a Black founder to create the same exact business as their white peers. So let's unpack that stat. What barriers to business creation were you finding sustain and even exacerbate this gap?

Melissa Bradley: So I think part of it is very much intentional and systemic, and part of it I think is just ignorance. I think there's direct costs that contribute to that. You and I both know in the world of finance, it is legal to charge someone a different interest rate because of perceived risk. So we found that we are anywhere between one to three percent higher on a loan, if we're able to get it. We also know in talking to many of the traditional accelerators that they would not let Black or Brown people in because oftentimes they didn't have a co-founder. Well, I know when I started my first business, my friends were like, “Well, I better keep my job because if this don't work, Melissa, you're gonna need help paying your rent.” So we oftentimes are solopreneurs, and so we don't get into those programs. But when we don't get into those programs, we lose 50 to 100 thousand dollars in free credits. We lose free legal and accounting, so that's a set of indirect costs. And then we also know that we are churning anywhere between three to five times more through coaches who don't understand the cultural relevance of our businesses and our communities. And they tell us they're bad. And so all of that means that if you see a Black business that's a million dollars, know that that was a very different journey than a white company that was at a million dollars. And that statistic to me was important, one, to really help level the playing field so that when you look at business side by side, know that everybody's entrepreneurial journey is not the same.

Carla Harris: I couldn't agree more. And so I just want to make sure that I amplify one point. It's not that it will cost the entrepreneur $250,000 more because they're of color. It's what they lose–

Melissa Bradley: That’s correct.

Carla Harris: Because of the journey.

Melissa Bradleuy. It’s an opportunity cost.

Carla Harris: And I just wanted to make that clear because that opportunity cost, that missed money and missed help is real. And it will take you time. And we all know time is money. So if it's going to take you longer, that's the opportunity cost of what you're not earning.

Melissa Bradley: That’s correct.

Carla Harris: Because you didn't get the right help very early on.

Melissa Bradley: That’s right.

Carla Harris: Let's talk about some of the exclusionary practices that leave behind Black and Brown-owned businesses, and I'll get us started with one. One of the things that we heard in some research that we did in White Paper about three years ago was that these entrepreneurs, when they show up at the desks of VCs or when they apply for some of these accelerators, they don't get feedback. And as I say all the time, “You can't fix it, if you don't know that it's broken.” So that's one barrier: you don't know what's wrong as you're going into your next meeting. What are some of the other barriers that you've seen?

Melissa Bradley: I think the other barriers are the ones we know about: lack of access to capital, right? In terms of how we underwrite and what is perceived risk. I think many of us have more student loans and so therefore our risk tolerance to be able to go out and say, “Well, I don't, you know, I don't have any bills to pay this month. Let me take that and put it into my business.” I also would say, I think lack of support. You know, I have to say, I love my mom. She's 94. The only job she knows I have is when I work for President Obama. That was the first time she was able to say to her friends, “Look, my daughter got a job.” Other than that, she's like, “I don't really know what you're doing. Like, I know you get dressed to go somewhere every day, but what do you do?” And so I do think that that familial pressure, and particularly of not having precedent or a proxy of like, it's okay to be an entrepreneur. And then let's be honest, right? We are all grown up told we have to be 150% better than everybody else. Entrepreneurship doesn't usually fit in that scheme.

Carla Harris: That's absolutely right. And as I said to someone recently, and I really unpacked this over the pandemic, you're told in our communities that you got one shot. And if you know that you have one shot, you're going to be very careful with that shot. Therefore, if you keep going down the line in that thinking, it has to temper your risk appetite. Cause you don't wanna lose that one shot. And if you're an entrepreneur, you do have to have a healthy risk appetite to go out there to fail, to go out there and try again, try again, try again until you actually get it right, because innovation is born from iteration.

Melissa Bradley: Absolutely.

Carla Harris: So you have to keep doing it.

Melissa Bradley: Absolutely.

Carla Harris: So in the time you’ve spent on supporting founders of color, how have you seen the entrepreneurial landscape evolve? How have you seen the face of entrepreneurship change?

Melissa Bradley: So I'm happy to say we finally arrived. I think for a long time, Black entrepreneurship has been key to our community. We know it existed and that it was burned down and torn apart because it scared people. I think what happened is that, that tragedy really said to folks, This is dangerous for me to pursue entrepreneurship. And so I have always known people always had that side hustle, in part because they weren't getting paid what they needed to make in their real jobs. And so I would say that entrepreneurship has been a throughline within the Black community. Whether it's a side hustle of selling cakes out the back of your car, or mixtapes or whatever the case may be. I think what's changed is that now, particularly post-George Floyd but even before then, there's a recognition that entrepreneurship is okay. Right? There were enough people making enough money. You had all these tech companies that are now worth more than your standard company. The challenge was we never said it was okay for people of color, but we said it was okay. Then I think statistically we know there was a 40-year decline in entrepreneurship because white men weren't starting them. And then here comes COVID. Right? And here comes George Floyd. Fastest growing segment of entrepreneurs are people of color, particularly Black women. And then you have the research that says, you know, 16 trillion dollars lost in racism. So I think that there's been a macroeconomic current that has said entrepreneurship is okay, and we have been validated in that space. So I think those are some of the big things that have changed.

Carla Harris: And let's talk about some of those stats. Black women as you said have been the fastest growing segment of entrepreneurs. And according to a 2021 report in the Harvard Business Review, 17% of Black women are in the process of starting or running new businesses compared to just 10% of white women and 15% of white men. And I wanna dig into the “why?” One, you obviously have already said that it's been legitimized, but what other cultural and economic factors do you think are driving women to run towards entrepreneurship?

Melissa Bradley: You know, I think a lot of the entrepreneurs we work with tend to be older. We are probably averaging around 35 to 42. So there are folks who've been in corporate America, and I think have hit that glass ceiling more than one time and have said, “It's time to go.” And I think that's important because they're not folks who are just risking everything. They understand what does it mean to be in the business environment. They understand the P&L and they feel like, Hey, I might as well be the determinant of my future as opposed to someone else. I think that's one. I think two, you know, again post-COVID, post-George Floyd a lot more money out there. You had over 100 billion dollars flow in terms of grants and then also investments in Black general partners. So now there's an environment that says, “Hey, I actually can access capital.” You even had banks say, “Hey, this is a viable market for me to be able to invest in.” And I think the other piece is the markets themselves opened. Right? Even before George Floyd. Right? Amazon, whether we love it or not, created a space where we didn't have to fight for shelf space. And so we had distribution outlets. Then of course, post-George Floyd, all the major retailers, “Let's get more Black people in here.” Right? And so I think all of those things created this perfect storm to say now is the right time to be able to start a business and have a pathway to recognize that infamous J-curve that a lot of times we don't get to.

Carla Harris: Right. So let's talk a little bit about that. There are studies that also say only 3% of Black women are actually running mature businesses, and as expected a major reason for this gap is due to inadequate funding and key tools for scaling their businesses, which we've already talked about. But, you know, I have a theory. I haven't done the White Paper, I haven't done the research yet.

Melissa Bradley: Okay. It’s coming.

Carla Harris: Right. But women and women of color, in particular, I believe sell their businesses way too early because of the perceived or real difficulty of raising money. When you go out there and say, “I'm going to do my seed, my A, my B, my C,” and somebody comes and offers you an eight-figure price for your business, and you say “Eight million dollars or 14 million dollars versus the journey that could be anywhere from three months to a year of raising 30 million or even raising 10? Okay, I'll take it.” I mean, is that similar to what you've seen?

Melissa Bradley: Absolutely. We just did a study last year called Beyond Five because everybody says more than 50% of businesses fail within five years. And I'm going, but all of our Black businesses have been here a long time. So we looked at over a thousand businesses and found that Black businesses are lasting at least 8.5 years. The challenge is we're lasting, but there is no correlation between our longevity and access to capital. So we're not maturing. We're existing. But we're not maturing. And so I do think that one, people are saying, Look, I have risked everything, because one of the things that we also found in this study is many of them were taking out their pension funds. They were leveraging their homes, which is counterintuitive that entrepreneurship is a pathway to wealth. And so I think we have entrepreneurs who are getting to that point of capital, and when that potential exit comes, they're going It's not just what I've given away on the cap table, and they have to do a reality check of What can I do and how much longer can I do this? Because yeah, we're all getting venture capital, but they're still probably a 20 to 30% amount of our businesses that we're still self subsidizing. And so I think because we have not pulled back the covers and realized that entrepreneurship is a team sport, it is not as sexy for everybody, that we have to make those hard decisions. And I will say though, that in those examples where people have sold or “sold out”, as some people have said it, what they have gained is the leverage and the power to make commitments to their community. Right? When Richelieu Dennis sold his company, he made sure that money was set aside to invest in Black businesses. Monique and her husband now have sold Mielle. They have made sure that the company paid to set aside money to help their businesses. So I think we have to be mindful that oftentimes we have to take a step back and not keep going far in order to help ourselves but, more importantly, to create a pathway for others to follow.

Carla Harris: And let's talk about that. The playbook point is that we have to stop vilifying those who get to the point where they have an attractive asset that can be sold for a manifold return, and they can do it again. I mean, there's a multiplier effect to what Rich did, you know, what? Over 10 years ago? Look at the companies he's now funded. There's going to be a multiplier effect to what Mielle has done. There was a multiplier effect for Carol's Daughter. And each of them got so much criticism, but in fact they are amplifying the original dream and creating so many roots and tentacles that have made us more successful in the community and have funded other businesses.

Melissa Bradley: They’re paying it forward.

Carla Harris: Absolutely.

Carla Harris: Let's go back to 1863 Ventures for a bit because in fall 2020, you launched the investment fund. What circumstances led you to expanding the company's operation in this way?

Melissa Bradley: I think a couple of things. Our accelerator was designed to de-risk our entrepreneurs, so they were really ready and to connect them to markets. So we had relationships with all the major retailers. So our companies were ready, they were growing. And I said, “Well, if we do all that, the money's going to come.” But the money didn't come. Money from banks didn’t come. money from CDFIs were taking too long. Like, nobody was moving fast enough. And so finally I said, “Okay, let's just start a fund.” And so we did. And we've been, knock on wood, very successful. We've had two exits. We provide both equity and revenue-based financing so that we're non-extractive, so we've gotten several loans paid back. We're a co-investor with people like Serena Ventures and many others. And we found that oftentimes we’re the only source that would ever even take them seriously, which is really frustrating.

Carla Harris: Wow. Even today?

Melissa Bradley: Yeah.

Carla Harris: So let's talk about the not so secret sauce as to what you're doing differently and how the model is different?

Melissa Bradley: So we spend time. So you have to have gone through our accelerator program. So we get to date you before we get married. The second thing is we really dig under the hood. Our diligence process is probably more rigorous, they say, than others because we recognize that this is probably going to cost us more. We are there side by side, so we take a board seat. That is a requirement. We see ourselves as helping the business grow. We see ourselves helping you with sales. We do biz dev. We do whatever we need to, to roll up our sleeves. We spend a lot of time with them in terms of de-risking, working with their staff. We also help them find markets. We make phone calls and say, “Hey, where do you need to be?” We also check in with them once a month, not quarterly. We tell them that, “Don't call us when you need money, call us when you don't need money.” We spend a lot of time with them on scenario planning because we find that the money is lost when you make the wrong decision and you have no way to come back. So we spend a lot of time helping them model and so I would say we're pretty active. We believe entrepreneurship is a team sport. And it's not because we don't trust them, but we think the more minds you have around you, the more opportunities for feedback, the better the end result’s gonna be.

Carla Harris: and I couldn't agree more. And you know, I think the entrepreneurs that we're talking about, especially in this New Majority, need the extra support. So what are some of the changes you think need to happen in the field today in order for us to have a shot of catching up sooner rather than later?

Melissa Bradley: At least three things. One is we need more data.

Carla Harris: Agreed.

Melissa Bradley: You know, I think that there's not a lot of understanding of our pathway, of our journey. We're not highlighting successes. I think we're not always having the right conversation around who “sold out” as opposed to, “Wow, let's celebrate how far they got.” So I think that's one. I think two is changing the narrative and painting not just people who've made a hundred million dollars but how do we get more visibility to a Richelieu Dennis? How do we get more visibility to Monique Rodriguez and how do we give them the space to tell their story? Because I think that too often we don't talk about how hard it is. And so we've gotta be able to have more honest conversations. The third thing is we've got to educate people and we've got to shift this definition of risk. That risk should not be defined automatically at race and gender. But what is the business proposition, which goes back to data because I think people underestimate how much purchasing power exists in our community and how much other communities want to be a part of what we have.

Carla Harris: Yeah, there's a lot to learn. And I would agree with you about the data. One of the things that, you know, you've heard me say is, “Those who don't get it, will hug the data.” So the more data that you put out there, the easier it's going to be for people to learn this. So what excites you most about Black entrepreneurship and what keeps you motivated to be involved in its evolution?

Melissa Bradley: So what excites me is I think we finally have the cline in the headwinds that entrepreneurship, and particularly Black entrepreneurship, is now conversation from the dinner table to the corporate boardroom. The second thing that excites me is that we as a people, I think, are experiencing a greater level of risk tolerance because we're now coming together as a community. We don't only do this cause we want to be wealthy. We do this because we recognize what it means for our community. It's like, Yes, I'm going to be successful, but I understand that I have both the privilege, the opportunity, and somewhere our mamas and grandmas will say your obligation to bring everyone else with you. And so I think there's just an innate opportunity for us to figure out how do we find those one or two folks who understand that entrepreneurship is a team sport, who really wanna give back, who are willing to share their connection and see it as a plus and not a distraction. I think the other thing is that people are willing to give back. You know, you are always out there on the road. Rich is out there on the road. I think the fact that we recognize

Melissa Bradley: e have to be the one that creates a circular effect of being honest, being transparent, giving back, and bringing people along. And I think the data says it: what excites me is that the future of entrepreneurship is Black.

Carla Harris: Wow. Alrighty. That's enough to be excited about.

Melissa Bradley: Yes.

Carla Harris: Melissa Bradley, thank you so much.

Melissa Bradley: Thank you, ma'am. Always a pleasure.

Carla Harris: I'd like to thank Melissa Bradley again for joining me on Access and Opportunity. This was the second episode of our two-part "Black Women Entrepreneurship" series. If you missed it, part one is available in your feed now.

There were many topics covered during my conversation with Melissa that got me fired up, particularly Black women prematurely selling their businesses. To keep the conversation going, a future episode of Access and Opportunity will be dedicated to Black women founders and the timing of their exits. So stay tuned for more. And thanks for joining me through this exploration of entrepreneurship through the various perspectives of Black women business owners.

What did you think of today's episode? Send us your thoughts at carlapod@morganstanley.com. And to continue learning about individuals working to drive systemic change within their communities, subscribe to Access and Opportunity on Apple Podcasts or wherever you listen. Thanks for coming along.