Much has been said about the racial wealth gap, its origins, and its implications (read more about that here). But less has been said about the importance of entrepreneurship as a unique variable in solving the wealth gap. A recent report on the economic implications of closing the wealth gap by McKinsey found that by closing the racial wealth gap, the U.S gross domestic product could be 4-6% higher by 2028. In other words, if we don’t take action, the U.S. economy will miss out on approximately $1-1.5 trillion between 2019 and 2028.
In fact, only 7% of Black Americans’ assets are in business equity compared with 16% for White families. Aspen Institute also found that only 3% of Latino-owned businesses have generated $1 million in revenue, and Latino entrepreneurs face structural barriers to grow their businesses, resulting in the U.S. economy missing out on 9.5 million jobs and $1.38 trillion.
Underrepresented entrepreneurs face unique structural barriers to succeeding in tech entrepreneurship, all connected to or impacted by the overarching racial wealth gap. We have less access to a “friends and family round” of capital because we have less intergenerational wealth, we have less access to elite networks with money and have less experience in tech at elite companies like Google and Uber, and we have more to risk when opting to become entrepreneurs because our families have less economic stability.
If left alone, the status quo means that tech will continue to be White and male unless we create real opportunities for diverse entrepreneurs.
While there is no silver bullet to solve a problem that took centuries to create, we are in an age of technology and innovation in which we can leapfrog time and make real progress in closing the gap. The premise is two-fold. First, increasing the number of diverse tech entrepreneurs increases the chance for them to scale and sell their companies, hence creating long-term wealth not only for their families but their employees and the investors on their cap table. Second, financial technology, or fintech, is lowering the barriers to building wealth by making financial services such as banking, lending, investing, and financial planning easier to access.
Those of us at the intersection of tech and finance have a unique opportunity to build companies that become part of the solution. I founded My Money My Future, a comprehensive personal finance platform aimed at multicultural millennials, to fill the massive White space left by financial institutions. Yet as someone who is part of the very demographic I write about, I have faced the same challenges in raising venture capital in an exclusive, male-dominated industry. I have few networks, less capital investment, and fewer opportunities to scale, meaning unlike other fintech founders, I risk losing all my wealth in this endeavor. We are in an unprecedented time. From the demographic shift to the influence of technology, it’s our time to move the needle.