7.08.2009

Thoughts on Minority Entrepreneurship


Just returned from a summit on minority entrepreneurship, hosted by the US Department of Commerce's Minority Business Development Agency. I'm brimming with thoughts - no answers, just thoughts:



1. I really think big for-profit companies should think about supplier diversity offensively rather than defensively. A defensive approach says, "We're going to get killed in the media and by interest groups if we have low participation rates for minorities; we better throw some business in their direction." An offensive approach says, "It's a multinational, multilingual economy, and if we don't go global, we go home. So sourcing from companies who represent a variety of races and ethnicities can be a competitive advantage for us."

Unfortunately, I see too many for-profit companies playing defense instead of offense. And I see too many minority groups appealing to those same defensive responses rather than positioning themselves to help companies think offensively.



2. Any good MBE (Minority Business Enterprise) program has to make sure it doesn't cripple a minority owner from selling his or her business for a lot of money to a non-MBE (i.e. a larger majority owned firm or a publicly traded firm). Building a business so that it has value enough for someone to want to buy it from you is one of the great ways Americans build wealth, and we have to make that available to entrepreneurs of color if we are to address the huge economic disparities in this country.

Unfortunately, too much of the system currently disincentivizes both the buyer and the seller. Consider a successful MBE who, among other customers, has a really big federal contract. Every year, he or she fulfills that contract, and that federal agency is able to "count" that contract among their MBE numbers. One year, the MBE sells to and is subsumed by a publicly traded company. He or she is available to continue to fulfill the federal contract under the auspices of the parent company - and, with the physical and intellectual resources of the larger parent company, he or she would probably do an ever better job - but because the contract is now not technically going to a MBE, that agency's MBE numbers go down. In this scenario, the agency may be disincentivized in renewing the contract with the MBE, and for that reason, that MBE may be reluctant to sell to the publicly traded company, and the publicly traded company reluctant to buy the MBE. Not good.



3. There's been a lot of talk, at this conference and elsewhere, about emerging opportunities in our economy, and how can we position minorities to participate in them. Familiar industries include digital health records, infrastructure, clean energy, nanotech, and cloud computing. All well and good to think about how minorities can access on-ramps to these key growth sectors.

But consider how high the barriers to entry are: all are either high capital intensive and/or high knowledge intensive. In other words, these are hard businesses for anyone to start. In contrast, Web 2.0 has relatively low barriers to entry; perhaps I am being naive, but Web 2.0 strikes me as something that just requires creativity and contacts, which seems far easier to access quickly than hundreds of millions of dollars in capital or fleets of PhDs. I'm not saying let's give up on those other growth industries; I'm just suggesting that there might be too little discussion on how to help minorities access the creativity and contacts needed to succeed in Web 2.0. Why is that?



Back at home, I am proud to maintain my affiliation (10 years as a staffer, now as a board member) with The Enterprise Center, which sent three representatives to this summit and which continues to astound me with its energetic efforts to accelerate minority entrepreneurship all across the region. Here's hoping we can take all of this information we obtained and bring it to bear on the day-to-day of growing minority firms and helping them create jobs and wealth in the process.
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