Picture this: Your new startup is going well. The concept is strong and you’ve secured funding. Now you’re ready to grow your staff.
But something strange happens when you start recruiting. The people who are most qualified for your organization simply aren’t applying. Meanwhile, those who do apply ask for higher salaries than they would if they were considering similar positions at other organizations.
Still, you need to hire team members, so you move forward. The result: you pay more for employees who are less qualified. It’s hardly a firm foundation for your new venture.
Absurd as this situation may sound, it’s a common experience for Black entrepreneurs. Lundquist College assistant professor of management Peter Younkin used a series of postings for fictional startups to collect empirical evidence of the phenomenon.
“Founders have to make dozens of tough decisions, and they’re often left wondering which ones accelerated their success and which brought them to the precipice of failure. We wanted to give them more than just their gut intuition to rely on, and to offer empirical evidence for how a single decision—revealing your race—can affect the quantity and quality of employee applications,” said Younkin.
Younkin’s work also shows that simply getting initial funding is more difficult for Black entrepreneurs. A study that looked at more than 7,500 crowdfunding projects revealed found that prospective investors unconsciously gave a lower rating to the one they believe was founded by a Black man.
During times when social injustice is in the spotlight, prospects get worse for Black entrepreneurs. Looking at the performance of crowdfunding projects before and after the 2014 shootings in Ferguson, Missouri, that sparked the Black Lives Matter movement, Younkin found that support for Black founders dropped significantly in the wake of the protests.
In a recent paper that won this year’s Lazaradis Institute Award for Paper Published in the Journal of Business Venturing, Younkin showed that consumers tend to expect Black founders to accept prices that are approximately 20 percent lower than those of white founders.
So, what’s an ambitious Black founder to do? Younkin’s work shows several ways to short circuit the unconscious bias that can slow down Black-led ventures.
In the case of buyers expecting lower prices from Black-led startups, founders can reset these assumptions by starting out with a strong counter-narrative, for example stating how hard they’ve worked or how much they’ve invested in the product.
Black founders can also opt for the incognito route, simply removing indicators of their race in interactions with investors and prospective hires.
For founders who wish to stay true to their own identity, two related approaches have the power to change minds. Simply showing examples of other Black founders succeeding in their own ventures is enough to neutralize investors’ bias. Those with a track record of previous successes can take this approach to the next level, using their own past achievements and awards to make the case for future investment.
“Founding a successful startup requires tremendous effort, talent, a team of dedicated employees, and a significant amount of luck. But people do it, and we support them in doing it, because the returns are so important to us all: new products, new jobs, and new leaders to guide us into a new world. But we need to make sure that the game isn’t rigged, and that everyone has an equal chance to be ‘lucky’ if they are smart and dedicated. Or the rest of us will never see the most interesting products, our hometowns won’t gain the most jobs, and we’ll never find the best leaders,” said Younkin.
—Kit Alderdice, Lundquist College Communications