There are currently 2.5 million businesses owned and operated by African-Americans, according to the U.S. Census’s most recent survey of business owners.
Although black entrepreneurship is on the rise, black founders are still receiving less VC funding than their white peers and have limited access to capital. Less than 1% of black founders receive funding, and this lack of capital leaves many black-owned business to be operated by one person, limiting their ability to hire other employees in order to grow and build their businesses. As cost of living soars, underrepresentation and limited support for these business continues for many of these black enterprising professionals in tech hubs like New York City and Silicon Valley. However, others are thriving in the Southeast.
A recent report by Blacktech Week that used data from the U.S. Census Bureau Statistics Data and Kauffman Foundation’s 2017 Index for Startup Activity revealed that the top three cities where black-owned businesses are thriving are Memphis, Montgomery, Alabama, and Atlanta.
With a large number of African-Americans residing in the Southeast, a low cost of living, an increase in incubators like Atlanta’s Digital Undivided popping up in Southeastern metro cities, along with support a historical lineage of supporting their own, black entrepreneurs are finding their niche below the Mason-Dixon line.
Mandy Bowman, the founder of the Official Black Wallstreet app and website, which has a listing of over 4,000 black-owned businesses in the U.S. (and has been downloaded over 70,000 times), isn’t surprised that the Southeast is popular with black entrepreneurs. “The reason why these cities stand out so much is that the cost of living is much lower. The South also has a long history of entrepreneurship, especially through the Jim Crow era. People in these cities had no choice but to start their own businesses, and because of that history, I think it’s something that’s been ingrained in those cities. On top of that, these cities have a large African-American population, which is why there are many entrepreneurs in the Southeast.”
There’s also been an increase in new residents: In the first decade of the 2000s, there’s been a reversal migration of black Americans moving to the South. According to USA Today, “From 2005 to 2010, the average result each year was a gain for the South of 66,000 blacks. Many came from the Northeast, but the flow also includes the Midwest and West.” As the South attracts college-graduate crowds and retirees to economic opportunities, it’s also attracting entrepreneurs to grow their businesses. There are also over 1,600 listings of black-owned businesses in the Southeast on the Official Black Wall Street app. Here’s a look at why these three cities are the top choices for black entrepreneurs.
Memphis reigns supreme as the top city for black-owned businesses. It offers more than great BBQ and music. The city’s low unemployment rate in comparison to Atlanta and Montgomery supports a healthy economy to start a business. Nearby Bluff City also boasts a higher percentage of black-owned businesses than Atlanta, while having a lower cost of living index.
Brooklyn native Ekundayo Bandele moved to Memphis in 1994 and found a “thriving black intellectual and cultural community” where his love for theater flourished through his playwriting and eventually led him to become the founder and executive director of Hattiloo Theatre.
“The city invested in Hattiloo Theatre, which gave us $1.5 million to help us build our infrastructure. We started as a community theater and have worked our way to the top. The generosity of the Memphis community to volunteer their time and talent helped make Hattiloo successful. The philanthropic community of Memphis understands the equity in Memphis,” he says. His only drawback is access to talent. “Since Memphis is not categorically a theater town, there aren’t as many technical theater people in terms of theater arts,” he says.
Brit Fitzpatrick, the founder and CEO of MentorMe, chose to move to Memphis because of its affordability. “The biggest advantage to starting up in Memphis as opposed to Silicon Valley is that it’s more affordable. Having raised a relatively small amount of money, I was able to stretch it a little further,” she explains. Proximity to other cities also makes Memphis a great choice for Fitzpatrick. “In the first two years of MentorMe, I traveled a lot to meet new customers, create partnerships, and find advisory board members. Memphis is a reasonable driving distance to cities I needed to hit.”
Although the city is in an early stage in comparison to New York City and San Francisco, “Memphis has a culture of hustle and hard work. I love that about the city. It makes it really conducive to entrepreneurship,” says Fitzpatrick.
Fitzpatrick participated in a pitch event where there was support for women in tech, and it reinforced for her the decision to develop her business in Memphis. Fitzpatrick feels the growing conversation around diversity in technology now draws people in the industry outside of traditional hubs. “The Southeast and Memphis have an opportunity to play a major role in the diversity conversation. Because of the shared demographics of minority-majority cities, larger companies should look to invest more resources and capital in this region,” explained Fitzpatrick.
Resources, access to capital, and lack of density are the cons Fitzpatrick faces while building her business in Memphis. “The tech community is smaller here than in a larger city, so the importance of networking throughout your region or getting connected with the tech community at large is higher. I had to prioritize it more than someone who is lives in a city with a more established ecosystem,” she says.
2. Montgomery, Alabama
Montgomery is the city where Dennis Wesley chose to start his business, On Time Taxi. This city houses nearly one-third of the businesses owned by African-American entrepreneurs, according to MadeInAlabama.com. “My reason for starting in Montgomery was because I knew it was less costly than starting in cities such as Atlanta and Birmingham. I started with one van two years ago, and now I have eight vehicles,” he explains. He is also in the process of launching a mobile app for his taxi service and expanding to Troy and Selma. “I started as the smallest taxi service in Montgomery and became the largest in two years,” he says.
Montgomery has provided Wesley with a fresh start after moving from Georgia. “Montgomery has provided me with that good old southern hospitality, which I don’t think you can get in metropolitan cities. I have customers that invite me to their house for dinner, work functions, and [people with whom I’ve built a] friendship,” Wesley explains. The relationship with his clients is one you won’t find with Uber and Lyft, helping to build loyal repeat customers.
3. Atlanta, Georgia
“In a given month [in 2016,] 430 adults out of every 100,000 inhabitants in Atlanta became entrepreneurs,” according to Blacktech Week. That’s why serial entrepreneur Maja Sly decided to call Atlanta home. Sly moved to Atlanta in 1998, and in four months had a full clientele and soon a salon in Buckhead that started her empire.
Sly calls herself an “accidental entrepreneur” whose journey led to the creation of her multiple businesses in the hair industry. After opening her first salon in 1998, she began her real estate venture that grew from her hair clientele. From there she opened her $50 weave salons, Walk-In Weaves (she now licenses the name for franchise owners).
Her businesses led WeTV to make her a cast member of the reality series Cutting It in ATL, which garnered the national exposure to launch her successful online Pretty Hair packaged hair business and a coaching and marketing service for hair salon owners.
The Kauffman index showed that out of every four new entrepreneurs in Atlanta, three of them took their chances because they saw a market opportunity. “When I moved to Atlanta, I knew I found my groove. The streets are paved with gold here. If you can’t make it in Atlanta, you can’t make it anywhere,” Sly explains. The low unemployment rate, a decent cost of living and city leadership like that of the newly elected mayor, Keisha Bottoms, makes Atlanta a popular metropolitan area for black entrepreneurs. Says Sly:
What I love about the city is that opportunities are everywhere. Unlike a lot of places, politics don’t dictate the way businesses move here. This is an entrepreneurial city, so entrepreneurs dictate how things move here and the customer dictates how things move here. We don’t have all of these bureaucratic guidelines and stipulations. It’s not a city that you are boxed out. You can move here and not know anybody and make a name for yourself very quickly.
The African-Americans in the Southeast are not new to building a business out of necessity to maintain a living, but as the continued benefits of building a life in the South attracts interest, the opportunities to create are endless.