Racial Inequities in Funding and Outcomes: The Data on New Orleans Startups

By Rob Lalka, Albert R. Lepage Professor in Business and Executive Director, Lepage Center.

To read the 2020 GNO Startup Report, visit gnostartupreport.com.

When we created the GNO Startup Report a year ago, we developed the very first ecosystem-wide dataset on New Orleans startups, leading to important new insights about what it will take to help New Orleans’s early-stage companies grow.  This research effort was widely supported, and then it was widely celebrated.  In fact, AACSB International announced earlier this year that it was one of the 25 best examples of “Innovations That Inspire,” from over 1,700 member organizations globally.

Even so, in public discussions about the data and in private conversations with our partners, we were honest that we’d come up short in year one.  That’s because our dataset didn’t fully represent our region.

We held ourselves accountable, explaining in last year’s report that “In our data gathering we have more work to do to ensure inclusivity.”  We believed that underrepresentation of BIPOC (Black, Indigenous and People of Color) in research is not inevitable, and that such bias in data is, quite simply, unacceptable.  Taking diversity and inclusion seriously matters deeply to all of us at the Lepage Center, both professionally and personally.  It’s written throughout our strategic plan and inscribed in our values: “We believe that diversity of ideas, people, and perspectives are strengths.”

We needed assistance from new partners, and many have joined in the effort to strengthen this research.  In alphabetical order, they are: the Hispanic Chamber of Commerce of Louisiana, the Meraux Foundation, the New Orleans Business Alliance, the New Orleans Regional Black Chamber of Commerce, NOLAVATE Black – New Orleans Black Tech Collective, Southeastern Louisiana University, St. Charles Parish Economic Development, Startup Grind New Orleans, Tangipahoa Economic Development, and the University of New Orleans.

Together, we have made progress towards more representative data in the 2020 GNO Startup Report, which we are releasing today.  In our 2019 sample, Black entrepreneurs accounted for 13% of respondents; they account for 24% of our sample in 2020.  This matches what we’d expect for a representative sample of Black-owned businesses. According to the New Orleans Data Center, Black-owned businesses account for around 24% of businesses in metro New Orleans.

Inequities in Funding: Both Debt and Equity

“Systemic inequity is an issue my company faces,” one of our respondents said unequivocally in last year’s report. Many of us have heard statements along those lines from New Orleans’ entrepreneurs, but without clear data, it was impossible to make unflinching assessments about inequities.  We now have the data, directly from New Orleans entrepreneurs.

As you will see in the Demographics and Diversity section (which starts on page 20 of the report), firms owned by BIPOC entrepreneurs are half as likely to receive debt financing via traditional bank loans as white-owned firms.

There is a similar disparity when it comes to angel investments.  BIPOC entrepreneurs receive equity investments in the earliest round less than half as often as white entrepreneurs.  These facts should deeply concern us, both as a community and for economic reasons.

The moral consequences of these disparities should be apparent to us.  We are residents of the port city that was once home to America’s largest slave market.  The legacy of so many injustices, as well as the inequities that clearly exist well into our present day, cannot be ignored.  We should not look away when the data stares us in the face.

Moreover, for the sake of our economy, we should be clear-eyed about what these inequities cost us. Research has shown that teams perform better, displaying less groupthink and more innovation, when they are both diverse and inclusive.  Addressing these discrepancies is not just the right thing to do.  It’s also the smart thing to do, from a business standpoint.

As we all grapple with the illnesses and deaths from COVID-19, a horrible disease which has disproportionately impacted BIPOC across our region, we should listen to and learn from our entrepreneurs about the challenges they faced even before the pandemic hit.

An Important Dialogue About New Orleans’s Future

All of us at the Lepage Center want this research to spur a needed dialogue about our city’s future, which might lead to new commitments to support our entrepreneurs.  Several announcements in recent weeks – from Mackenzie Scott’s multimillion-dollar donation to New Orleans-based Camelback Ventures (a GNO Startup Report partner) to Malcolm Jenkins’s new venture fund, Broad Street Ventures, to  JPMorgan Chase’s $30 billion commitment to advance racial equity nationwide – should already give us reason to hope.

There is so much we can learn from our entrepreneurs, and we need to have a more robust discussion among our economic development leaders about how best to support them.  In that spirit, we would like to invite you to a special event at noon on October 22.

You’ll have the chance to learn from two local entrepreneurs, Trivia Frazier (President & CEO, Obatala Sciences) and Otis Tucker (CEO, T.I. CONTRACTING / Trucking Innovation – dba).  They’ll be joined by Kelisha Garrett (Executive Director, New Orleans Regional Black Chamber of Commerce), Michael Hecht (President & CEO, Greater New Orleans, Inc.), and Quentin Messer (President & CEO, New Orleans Business Alliance) to discuss specific actions people in our region can take to promote racial equity in our startup and early-stage business community.  I’ll be moderating the Q&A, where honest questions from the audience – no matter how tough they may be – will not just be encouraged but, truly, expected.

Free registration for this virtual event, “Racial Inequities in Funding & Outcomes: The Data on New Orleans Startups,” is now open to the public via this form.

We look forward to welcoming you to take part in this important discussion.