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.
For Black innovators, the lack of Black angels in the space relegates most Black startup founders to the unenviable task of roaming a landscape of primarily White angel investors that have closed networks and unfamiliar relationship territory to traverse. It’s akin to Black entrepreneurs cruising the streets of wealthy White suburban communities alone, hoping to be well-received. The result isn’t good. Black tech entrepreneurs receive just 1% of investments. That won’t change the catastrophically high unemployment rate, which has devastated Black America at double the rate of White unemployment for more than four decades.
In 1980, I was headed to the University of Houston as a freshman while Ronald Reagan was headed to the White House and ultimately into the hearts of American conservatives. Reagan’s political tip of the hat to the White private sector set the tone for a consistent mantra of smaller, less intrusive government and rugged individualism. Pulling oneself up by the bootstraps became a metaphor that characterized a new economic age of entrepreneurs. Entrepreneurship was viewed as key to elevating the economy out of the doldrums. And economic angels began to rise on the horizon, joining the risk capital sector that was, at that time, primarily comprised of venture capitalists.
Disconnected from Innovation Economy
I didn’t know anything about bootstrapping, angels, or venture capital back then. I had never heard of the risk capital sector and likely would’ve chuckled if someone had openly admitted he was an “angel.” Certainly, I had never heard of a Black angel, much less known one.
No one told me the nation was transitioning from a 20th century manufacturing economy into a 21st century innovation economy. No one advised me that the country needed job creators in order to accommodate the three million new jobs that job seekers like me were demanding every year.
I was stuck in a 20th century mindset, relegated to a lower socio-economic class that was completely disconnected from the knowledge of the changing economic landscape. And I was diligently following a path leading toward a maze of economic disappointment.
While I was busy drinking the Kool-Aid and swallowing the mantra that a mind is a terrible thing to waste, the private sector was rapidly cultivating a risk capital investment landscape and planting billions of dollars in the pockets of tens of thousands of high-growth White-owned startups each year whose founders’ minds were fertilized with positive incentives, resources, and networks. That ecosystem didn’t exist in Black America then, and still doesn’t today.
Tens of thousands of startups have cropped up over the past three decades, led by budding entrepreneurs with grand ideas, good advisors, mentors, resources, and strong networks. Meanwhile, I was meandering alongside the fields of prosperity admiring views of new developments from the ditch of disconnection, oblivious to the growth of a new global Innovation Economy.
Innovation Economy Needs Black Angels
Today, Black America’s innovators suffer from a lack of resources, investment, and mentoring. Its disconnected communities typically produce unsavory fruits of neglect. There is no expectation that the risk capital industry—built over the past 60 years minus the talent pools of minority communities—will suddenly shift gears and start the decades-long investment process all over again to till the ground of neglected urban environments.
In Black America, there is no “culture of risk capital,” which initiated and fueled an explosive process of job growth and wealth creation in Silicon Valley and other places nationwide that followed the Valley’s model of success in the global Innovation Economy.
It is time for Black America’s own high net worth individuals to become angels, to step up, flock … and fly. Not walk. We don’t have the luxury of time. We must immediately reverse our risk-averse culture and adopt a risk-astute attitude. High net worth African Americans must exponentially increase the numbers of Black angels and fly to the rescue of our stranded innovators, recognizing that the result will be an economic benefit to the entire nation.