The State Of Underrepresented Entrepreneurs In DEI Clawbacks

Serial entrepreneur turned investor Felecia Hatcher is no stranger to building in the midst of uncertainty. She recalls the time she and her husband started a gourmet popsicle and ice cream catering company in 2008, in the midst of an economic downturn.

“If I would have known that we were in the middle of an economic downturn in probably one of the worst times to start a business, I probably would have never started,” she says. “But it also created a lot of unique opportunities. Silver lining exists only during economic uncertainty.”

Today, Hatcher is CEO of Pharrell Williams’ organization Black Ambition, which invests in high-growth startups founded by Black and Hispanic entrepreneurs. All the while, it’s underrepresented entrepreneurs that continue to grow. Black-owned businesses have experienced a 14% bump in new creation since 2020. Latino-owned businesses made for 36% of debuts in 2023, according to the Census Bureau.

“We are almost 20 percent of the population, with a $3.2 trillion dollar purchasing power,” says Rocio van Nierop, co-founder and CEO of Latinas in Tech about the Latino population. “It is time to flip the script and own our power.”

However, in the broader ecosystem of unfulfilled promises made in the name of DEI, paired with economic risks in 2024, underrepresented founders face a non-negligible level of uncertainty moving into the rest of the year.

Following George Floyd’s murder and pressure on Wall Street in 2020, 50 of the largest U.S. public companies committed almost $50 billion to address racial inequality, according to The Washington Post. A McKinsey report cited that racial equity commitments had reached $340 billion by fall of 2022. But an analysis published 14 months after George Floyd’s murder reported that 37 of the 50 largest companies had deployed only $1.7 billion.

“A lot of entrepreneurs were put on this really high cliff [in 2020]. There was a huge injection of cash and opportunities, and now in a lot of ways, those things have quietly gone away,” says Hatcher.

A rejection of affirmative action opened the door for initiatives serving underrepresented communities to be questioned at large across funds, programs and businesses.

Among the challengers of DEI have been conservative organizations like the American Alliance for Equal Rights which sued the Fearless Fund over $20,000 small business grants for Black women.

“We have missed out on upwards of eight figures in potential investments that were coming through prior to the litigation,” said Fearless Fund CEO Arian Simone in a CBS News interview in February. “Right now, we are looking for anybody that does believe in DEI and believes in funding programs like this. We’re looking for corporations to step up.”

Another group, America First Legal, filed a lawsuit against Hello Alice, a platform for business owners, calling its grant program for Black-owned small companies discriminatory.

“We are not changing anything. If we change preemptively, they will also win,” Hatcher says of her work with Black Ambition. “We are very specific and intentional about who we serve and we’re not changing anything right now. I implore all my peers to hold the line and to not change.”

Despite the new generation in business, it is underrepresented founders who continue to experience challenges in accessing capital to grow. When it comes to loans, White business owners are more likely to be fully approved for loans compared to Hispanic individuals, who do so at a 38% rate, or Black business owners, who do so at a 20% rate, according to Bankrate. Access to investment looks similarly bleak. Black founders in 2023 nly got only 0.48% of all venture dollars. Latinos get less than two percent of this pie.

“The numbers are showing that entrepreneurship in diverse communities is significantly growing,” Hatcher said. “The problem is no longer that we aren’t starting businesses – the problem is that there are all these interruptions that are happening in us growing the businesses.”

What founders need? Hatcher contributes real mentorship, representation within corporations and healthy relationships with money, in addition to the big unlock: access to capital.

In the last three years, Black Ambition has invested in more than 100 Black and Hispanic-led companies that have gone on to raise more than $95 million.

“These are the companies that have been overlooked, and look at what $10 million in investment has done – almost a 10X return on that,” Hatcher says. “Wouldn’t you want to be a part of the upswing and share in that success?”