Places Where Underrepresented Founders Are Succeeding
Poor access to capital has long been a dream buster for minority entrepreneurs, but location could also play a role in helping determine whether underrepresented founders will succeed in their ventures, according to new data from LendingTree’s Minority Entrepreneurs Report.
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Using the census definition of minorities, Lending Tree analyzed firms with minority owners and the metro areas where strongest and weakest performers are located. Four cities in California were among the top spots, while Midwestern and Florida metro areas had a strong showing at the bottom of the rankings.
An online loan marketplace, Lending Tree is known for helping consumers comparison-shop for mortgage loans, but it also helps match consumers and lenders for small business loans.
“When we’re talking about how this particular demographic segment is doing, people in chambers of commerce, community members and politicians will be interested to know this information,” said
Four California cities ranked in the top 10 metro areas for minority business owners: San Francisco, San Jose, Los Angeles and Sacramento. Also in the top 10: Washington, D.C., Seattle, Portland and Atlanta.
San Francisco, which mandates a $15 per hour minimum wage, ranked No. 1. More than half the minority-owned businesses there – 56.7 percent – have been in business for more than six years. And 42.6 percent generate $500,000 or more in revenue.
The bottom 10 cities where entrepreneurs are struggling include two cities in Florida (Jacksonville and Orlando) and two in Missouri — St. Louis and Kansas City.
St. Louis ranked bottom of the list at No. 50 with 27.3 percent of minority businesses owners saying they’ve been operating for more than six years and 18.1 percent generating $500,000 or more in revenue.
Missouri is “a state that has been a hotbed of racial tension both historically and in more recent years,” wrote Lending Tree writer Melissa Wylie. “Although minority business owners in Missouri run successful enterprises, many say they continue to face biases and must fight assumptions that minority-owned businesses are inadequate.”
Analysts scored each of the 50 largest metropolitan statistical areas in the U.S. based on percentage of minorities who identify as self-employed, business ownership parity, percentage with revenues of $500,000-plus and percentage in operation for six or more years.
Founded in 1996, Lending Tree claims to have revolutionized how consumers shop for loans and how lenders reach new customers.
Moguldom spoke to Kali McFadden, senior research analyst on LendingTree’s minority entrepreneurs report, and Lending Tree writer Melissa Wylie.
Moguldom: Do you have data specifically about places where Black entrepreneurs are succeeding?
Kali McFadden: We didn’t break it down to Black (entrepreneurs) because in some instances the samples were too small.
Moguldom: Why is Lending Tree interested in data about the places where minority entrepreneurs are succeeding?
Kali McFadden: Lending tree has small-business lending platform so we’re interested in any of the economic factors that touch us and (help educate) the public regarding debt and loans and financing. The more people are able to use and are educated about those products, the better for us. You also want to make sure people are having positive experiences related to their debt products.
(Our small-business loan platform is) a quick way for people to find out accessibility for funding for their small businesses. It’s called SnapCap. The way small businesses are able to reach funding has gotten a lot easier in the last few years. They don’t have to go to banks anymore. The sophistication of lenders has increased. They’re able to figure out using data very quickly whether they’re able to lend money. You’re also likely to get multiple offers. We’d like people to be better armed when it comes to succeeding with that money.
Moguldom: Who else will be interested in your data from this report?
Kali McFadden: When we’re talking about how this particular demographic segment is doing, people in chambers of commerce, community members, politicians, will be interested to know this information.
Moguldom: Did you get any surprises from the results of this study?
Kali McFadden: Any surprises? I assumed that Texas would come out higher on our list because of the number of Latinos. I was disheartened to see the results of Missouri. In general, when we look at all businesses, there’s a “rising waters lift all boats” kind of thing — areas growing in general. Entrepreneurs who are in certain demographics that are underrepresented are doing better than in places where business may be shrinking. Places like Cleveland, Providence, Detroit are shrinking a little bit so it’s not surprising to find out that minorities would be affected too. If you look at a place like San Francisco or Silicon Valley, there’s so much money floating around for people in that world.
Melissa Wylie: It was surprising to see that Midwestern cities ranked so low because there are pretty diverse communities in Kansas City and Cleveland. They must not be doing very well. It was a little surprising that there weren’t more East Coast cities — that wouldn’t be my first guess.
Moguldom: Does Lending Tree’s research on student loan debt have any connection with places where entrepreneurs are succeeding?
Kali McFadden: Student Loan Heroes is one of our sites. In general, it can be hard to find data related to what happens after people graduate based on research I’ve done on student loans. Places with the most student debt– if anything, the places that are high on the list actually have more student debt. People are hypereducated in Washington, D.C. Also southern state capitals. I think the south is overrepresented among places that have high student loan debt per person.
Moguldom: Is it safe to say this Minority Entrepreneurs Report is about places in the U.S. where Black entrepreneurs are succeeding?
Kali McFadden: You shouldn’t assume that it’s safe to say this is about places where Black entrepreneurs are succeeding. In San Francisco, you’re probably talking about high representations of South Asians and South East Asians. We may break this down further for African Americans but we haven’t done it yet.