Black angels remain a mystery despite the fact we live in a 21st century global Innovation Economy. Seldom are they seen in public, and they’re equally invisible to journalists and photographers alike. Coverage of them in national media is rare and most of the American public has difficulty conjuring any image to associate with the term.
Yet, despite pervasive ignorance about the existence of Black angels, their fragmented flat-footed pounding of the American landscape escalates economic tremors caused by the latest recession. Today, Black unemployment remains consistently and unacceptably high, Black-owned businesses contribute a paltry fraction of a percentage point to the nation’s GDP—and those economic problems will not change until Black angels learn to fly.
There’s a simple formula for job growth and wealth creation in America. It starts on two opposite ends of a single path. On one end, there’s a risk-taking innovator who gives birth to a new idea or improvement on an existing one.
Bootstrapping is the initial funding process entrepreneurs experience in the seed stage wherein they cultivate their idea and invest their own money, time, and efforts into moving their idea forward. Bank loans, second mortgages, and credit cards all are part of this phase. Entrepreneurs will often ask family and friends to help or invest. That’s standard for bootstrappers.
At the other end of the spectrum is another risk-taker: the investor. The investor seeks trustworthy people with good ideas, in order to support their efforts while reaping a profitable return at some point in the near future. Such investments are very high risk.
What are Angels?
There are two basic types of risk capital investors: Venture Capitalists and angels. These “risk capital” investors provide billions of dollars of funding to both startups and growth-stage companies each year. Since 1980, nearly all net new job growth in America has been due to companies five years old and younger, most fueled by risk capital investments.
Venture capitalists differ from angels in that they often manage other people’s money within a fund, typically invest at later stages of a company’s development, and often seek to sell the company within a few years.
Without help, most companies will never reach the threshold that VCs require for investment. That’s where angels come into the equation.
Angels are individual investors using their own money to bet on the success of entrepreneurs at the seed and early stages of the company. They often form groups that help in conducting due diligence on companies in which they are interested. They can create funds and also invest individually. Usually Angels invest in companies targeting industries in which they have a strong interest and knowledge, as well as a close geographical proximity. Angels help get startups and early stage companies off the ground when the founders have reached the limit of their bootstrapping capability. For Black entrepreneurs, that limit is often very early in the process due to lack of family resources and strong networks.
Need for Black Angels
Given that nearly all net new jobs are produced from the innovation ecosystem of entrepreneurs and risk capital investors, it should come as no surprise that nearly all net new jobs created in America benefit primarily those connected to the ecosystem.
The fact that politicians promote a magical recovery of the manufacturing sector as the best approach to addressing historically high Black unemployment demonstrates a profound disconnect. Manufacturing has transitioned dramatically over time into an “advanced” manufacturing sector that doesn’t employ nearly as many Americans as it did decades ago. And even then, Black unemployment was still twice the rate of White unemployment.