The University of New Hampshire Paul College Center for Venture Research says that in 2013, minority-owned tech startup firms represented just 7% of the entrepreneurs that presented their business concepts to angel investment groups.
Overall, the tech startup sector is largely dominated by White or Asian men. And despite the fact that Blacks and Hispanics could very well make up the majority of the American population by 2040, combined, they represent just 3 to 6% of the tech workforce (PBS.org). However, there are a number of organizations such as Code2040 and Focus 100, seeking to increase the number of minorities in the tech sector, both as employees and founders.
Access to funding is one of the issues that minority tech entrepreneurs cite as a barrier to increasing the number of Blacks and Hispanics launching technology startups.
In my work with technology startups and tech entrepreneurs from all races and backgrounds, I am frequently asked about the availability of government grants that enable minority entrepreneurs to start their own businesses. Grants differ from loans in that unlike a loan, grant funds do not have to be paid back. They also do not dilute equity. And thanks to unscrupulous marketers, there is a perception among minority startup entrepreneurs that Federal grants for businesses are a ‘pot of gold’ waiting to be had.
According to the US Office of Management and Budget (OMB), each year the Federal government gives out approximately $500 billion in grants to support a broad variety of programs including community development, education, transportation, environmental protection, economic development and many others. Federal government grants are awarded in 21 categories administered by 26 different agencies that publish more than 1,000 different grant opportunities each year.
Unfortunately, perception is not reality. Of the $500 billion in grants awarded each year, just slightly more than five percent (about $25 billion) was awarded directly to for-profit companies, the rest of the funds were awarded to states, local governments, governmental agencies, nonprofit organizations, universities, schools and school districts to carry out activities for the public good.
When the federal government does provide grants directly to businesses (minority or otherwise), the majority of them are awarded to support research and development activities, mostly related to technology, energy, healthcare, public safety and criminal justice, among others.
And despite what some slick, unscrupulous marketers would have you believe, none of the $25 billion was awarded to start a business and none of the funds were awarded to pay off business debts. Governmental agencies don’t just give away ‘free’ money without any strings. Government grants always come with strings attached and require a great deal of responsibility and accountability.
Contrary to what many of these shady promoters say, the federal government doesn’t have billions of dollars in grants set aside just for women, minorities, single fathers or anyone else who wants to start a business.
Anybody who tells you otherwise is lying to you. It’s that simple and it doesn’t matter where you saw the ad or how official it looked, the answer is always the same.
But the news isn’t all bad for minority tech entrepreneurs and startups.
There are quite a few state and local programs across the US that offer incentives and some grants to encourage minority-owned startups and existing small businesses to relocate or expand in economically distressed communities. They do not, however, provide grant funds to start a business. Check with your city, county or state to see what kinds of grants or incentives might be available in your area.
For those of you seeking funds to launch a business, there are an increasing number of programs that provide assistance to minority-led tech startups. For example, the Catalyst Fund, which is a $20 million fund focused on investing in early stage technology startups led by minority entrepreneurs. There are also foundations and corporations that provide financial assistance to minority tech startups, including the FedEx Small Business Grant Contest, Miller Lite Tap the Future Fund and the Dare to Dream Grant Program, among others. Business plan competitions can also be a source of startup funds for minority tech entrepreneurs.
Regardless of the source, it is important to understand that grants cannot be obtained just by ‘asking for them’ or ‘sending a letter’ as is often said by certain loud-mouthed television marketers.
To get a grant you need to prepare and submit an often times very complicated proposal. In addition, there is a tremendous amount of competition for grant funds and most proposals that are submitted do not get funded. For instance, the National Science Foundation receives about 40,000 grant proposals every year and only funds about 1,000 of them. By some estimates, in some of the most competitive grant programs as few as 3% of all proposals submitted will get funded. Winning a grant award requires a lot of hard work and preparation.
I don’t tell you any of this to dash your hopes or disappoint you, I just want to set the record straight and do my best to make certain you don’t have any false expectations about business grants for minority technology startups. If you are a minority and you already have an established technology firm and you are interested in finding out if there are any federal grants available to support your endeavors, you can start by visiting Grants.gov. This is the official portal where you can find information about all federal grant opportunities. Click the tab “browse eligibilities” and click on the “small businesses” link to find federal government grants that are available to for-profit companies.