Black-owned businesses should go public

Black-owned companies represent only a small percentage of American businesses, yet the top 100 of them generated over $30 billion in revenues in 2018. Studies have shown that the most successful minority-owned business have overcome obstacles by leveraging relationships, including relationships formed with people who can help them navigate unfamiliar processes. By providing access to institutional wisdom and mentorship, our firm can help smart, motivated black visionaries fulfill their dreams and level the playing field by going public.

Pursuing an initial public offering, direct public offering or direct listing, can be the next logical leap for any promising entrepreneur. Doing so opens entirely new opportunities and potential for growth. But this increasingly popular path to success has been far less traveled by black entrepreneurs than by whites. We think that we can change that.

In choosing to go public, entrepreneurs are able to raise capital from their own community without having being beholden to venture capitalists, while provide their original investors with greater liquidity and gaining the opportunity to list their existing shares to trade on a public exchange. It’s a low-cost, low documentation way to raise interest-free capital from the public and an advantage that an increasing number of entrepreneurs are taking advantage of — and a disproportionate number of whom are white.

Studies confirm the significant disparity. Not only are almost all of the CEOs of America’s 500 largest companies white, but the same is true among entrepreneurs. Though America is an increasingly diverse country, the Annual Survey of Entrepreneurs reveals that among firms starting with a minimum of $100,000 in capital, only one percent are black-owned. White ownership leads with an overwhelming 82 percent, followed by 13 percent Asian ownership and 4 percent Hispanic ownership. Not only does this have an impact on who holds wealth in the United States, but the under-representation of people of color among entrepreneurs trickles down to the work force. Boosting entrepreneurship among people of color and increasing the number of black-owned publicly listed companies would also boost job creation within the black community.

Special purpose acquisition companies are only interested in very large or otherwise compelling businesses which will attract institutional investors, capital, talent and trading volume. As a consequence, earlier stage companies need to rely on the direct listing process to go public, rather than on a SPAC transaction.

There are multiple and insidious reasons for the existing disparity, and closing the gap requires a real commitment to change and a willingness to make the necessary tools available to those who have not traditionally had access to them. Recent regulatory changes such as the JOBS Act has cleared the path for black entrepreneurs to leverage a broader audience of investors while raising capital, but it is our belief that entrepreneurs of color need additional support from companies like ours, that can help them take the next logical step. It is our business to assist companies in their efforts to pursue an initial public offering, direct public offering or direct listing, and we can assist black entrepreneurs through the complex process of becoming publicly listed if and when appropriate for their business.