Black and minority-owned businesses in the UK are at risk of dramatic setbacks in the wake of Covid-19 crisis, many sit out of reach of the government’s support schemes, a new report by Extend Ventures and Your Startup Your Story (YSYS) finds.
Nearly half of businesses surveyed for the report, Impact of Covid-19 on Black and Ethnic Minority-led businesses, did not access or expect to qualify for any government support scheme. When asked what type of financing they were seeking, only 2% cited state aid, with 39% seeking angel/VC investment, 32% seeking grants and 12% loans. One of the recommendations of the report are that government should drive and promote awareness of the emerging and growing Black and ethnic minority entrepreneurial ecosystem, as it did for the tech startup ecosystem in 2011 with the launch of Tech City.
“All the Black and ethnic minority-owned businesses older than 9 years featured in this report, have established, grown and supported themselves without external institutional investment or government support,” said Erika Brodnock, founder of Extend Ventures. The financial resilience of the emerging businesses despite the current uncertainty was notable with many having a low expectation of receiving government support the report showed the following:
- 65% have more than 6 months runway
- 47% have more than 12 months runway
- 48% did not access or expect to qualify for any government support scheme
- Only 2% of businesses were seeking state aid, with a further 32% seeking grants
“For too long, minority entrepreneurs have remained unsupported and have needed to ‘fend for themselves’. We need to ensure this isn’t going to be the same for newer businesses. However, the immediate signs aren’t good as we see that a growing number of these companies are ineligible for existing support packages and risk failing as a direct result.”
Respondents said the pandemic had primarily impacted their cash flow, revenues and client retention. Despite the uncertainty, these businesses have shown resilience, with 65% saying they had more than 6 months runway, and 47% more than 12 months runway.
The report is the first comprehensive assessment of the UK’s black business landscape in the wake of the Covid-19 crisis. The survey was conducted by Extend Ventures and YSYS, in collaboration with the community organisations CGV, 10×10, Kwanda, BYP, Colorintech and BGV. As a consequence of the report, these organisations will place greater emphasis on supporting entrepreneurs in areas such as mentoring, coaching and mental well-being.
Staff retention has been a strong focus through the crisis as businesses have worried about loss of income and clients. The report found that: one fifth of respondents said Covid-19 had impacted their client pipeline, 18% said their cash flow had suffered. 3% had furloughed employees but only one business had temporarily dismissed any employees. 36% cited loss of income as their primary concern, 22% customer retention and 14% cessation of trading
“It’s important that during one of the toughest times in recent history, the government does not ignore the voices of Black and ethnic minority-led startups,” said Deborah Okenla, founder and CEO of YSYS.
“It’s only by capturing and understanding how these startups have been impacted by COVID-19, that we will be able to design effective solutions which strengthen the economy and ensure all founders have the resources to survive this uncertain period. However, capturing and monitoring this data needs to be intentional and not an afterthought.”
Other key highlights
- There is a nascent ecosystem of young, self-funded and seed stage startups at risk of being dramatically set back as the businesses sit out of reach of government support schemes.
- All the respondents have fewer than 10 employees
- 68% of businesses were started within the last 5 years
- 92% of startup businesses are seed stage or earlier, with 39% seeking third party investment
- The government should request and publish reports on diversity access from all government-supported business measures and programmes.
- Promoting the Black and Ethnic minority ecosystem should be added as a policy priority for the All Party Parliamentary Group for Entrepreneurship.
- Venture Capital firms should be encouraged to add scouting systems that proactively seek out diverse startups, following the lead of the likes of ADA Ventures and Backed VC. These firms should also open “office hours,” mirroring what is being done for female founders, e.g. Playfair Capital and Tech Nation.
- The government should encourage ethnically diverse representation on funding decision making bodies. A good first step would be broadening or replicating the Investing in Women Code to include other underrepresented founders.
Extend Ventures is a team of serial entrepreneurs, strategists, investors and bankers committed to democratising access to the funding and support required to build scalable businesses for underrepresented entrepreneurs and founding teams. Proudly supported by TechNation, Capital Enterprise, and Fresh Business Thinking (home of the Great British Entrepreneur Awards).
Your Startup, Your Story (YSYS) designs and delivers entrepreneurial and employment programmes to support diverse talent to launch startups, develop new skills and kickstart their careers. With each of their programmes, FoundersDoor and TalentDoor, they partner with organisations committed to hiring and investing in diverse talent. Since 2017, YSYS has provided over 10,000 individuals with opportunities in tech across the UK, and has worked with companies such as Google, Linkedin, Niantic and the Financial Times.