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Building an Alabama Entrepreneurial Ecosystem

Focused on black business owners.

There is untapped economic opportunity in Alabama. There are more than 70,000 Black-owned businesses in the state. In 2017, Black-owned businesses in Alabama generated $2 billion in revenue. Yet, while African Americans comprise roughly 27% of the population, they make up just 11% of business owners here.

Those businesses are almost all solo entrepreneurships: 88% of Black-owned businesses in Alabama do not have employees. Their fragility was tested during COVID-19 when 41% of Black-owned businesses exited the market, while only 29% of white-owned businesses failed.

The global pandemic, the resulting economic downturn and calls for social and racial justice have combined to motivate many Alabamians to invest in our future. There is increasing appreciation and understanding for how to foster positive economic impact and close the racial wealth gap here.

While, in Alabama, African Americans comprise roughly 27% of the population, they make up just 11% of business owners.

Consider what could happen if Black-owned businesses employed the same number of people (on average 10) white-owned businesses (on average 23): Nearly 1.6 million jobs could be created in the U.S. and 273,000 more jobs in Alabama. In Alabama, it would result in about $2 billion more contributed annually to the state’s gross domestic product (GDP).

That kind of economic activity would go a long way toward closing the racial wealth gap in Alabama.

A formula to building the ecosystem

Black Business Woman

At Alabama Power Foundation, we recognize that businesses don’t grow in a vacuum. Alabama thrives when everyone – businesses, nonprofits and communities – works together to identify innovative, bold solutions to help solve the most critical needs of our state. For businesses to grow and take root, they need nourishment and nurturing in the form of an engaged ecosystem. That kind of collaborative partnership provides a variety of resources, from education and mentorship to access to capital.

Our formula to build and strengthen this ecosystem is to invest in four central areas: partnerships, technical assistance, education, and direct investments into businesses.

Like any good investment, this formula requires a certain amount of due diligence. Alabama Power Foundation is partnering with the University of Alabama’s Culverhouse College of Business, Babson College and Stillman College to conduct a five-year longitudinal research study to identify impediments to funding and growing Black-owned businesses in Alabama. That knowledge will allow for developing and delivering specific interventions and solutions that address:

  • Social, political, and economic barriers to sustainability
  • Access to financial and human capital
  • Biases inhibiting social capital
  • Difficulty of forming professional networks and relationships
  • Challenges accessing key markets

Meanwhile, there are plenty of strategic initiatives taking place in Alabama to foster and accelerate more economic opportunities.

Our formula to build and strengthen this ecosystem is to invest in four central areas: partnerships, technical assistance, education, and direct investments into businesses.

In 2020, Alabama became the 38th state to pass benefit corporation legislation. Benefit corporations track their impact on all stakeholders and are increasing in popularity across the country. Yet, there are gaps in information that impede the growth of the movement. For instance, there is no single directory of benefit corporations to allow for networking together.

This presents yet another opportunity to support the nascent growth of Alabama’s benefit corporations. We are anchoring an association of benefit corporations here, confident that through networking we will surface a multitude of investable opportunities and occasions to provide technical assistance for workforce development. That, too, can help close the wealth gap, as minority-owned firms are more likely to become benefit corporations.

For impact investments to be most successful, there needs to be a focus on the “readiness” of those we intend to support. The idea of “investment readiness” refers to the capacity of an organization to use investment dollars efficiently and effectively.

StateBook Alabama Household Income Data 2

StateBook Alabama Data copy

Continued investment by corporations and philanthropies in Alabama’s 15 Historically Black Colleges and Universities (HBCUs) will help ready the next generation workforce. A recent study by LinkedIn data notes the hiring-rate trend for HBCU alumni has consistently outpaced LinkedIn’s U.S. membership overall. Not only that, HBCUs are also the largest producers of science, technology, engineering and math (STEM) students going on to earn Ph.D.’s. This expertise is fueling Black-led business development.

For impact investments to be most successful, there needs to be a focus on the “readiness” of those we intend to support. The idea of “investment readiness” refers to the capacity of an organization to use investment dollars efficiently and effectively.

Often, grant dollars are needed to help achieve readiness for other investment. For instance, last year, Alabama Power’s parent company, Southern Company, was able to provide $1.75 million of grants to all of Alabama’s four-year HBCUs so they could acquire laptops, hotspots, data plans, and other tools to retain students, enabling them to continue learning virtually during the pandemic. The funds also supported the educational infrastructure, through IT support and staffing needs, professional development and training related to technology, and other investments in critical infrastructure upgrades to effectively deliver remote learning. These grants are investments in future members of Alabama’s workforce and are integral to ensuring a prosperous and inclusive economy.

StateBook Alabama Degrees Data

Developing a cohesive approach to support minority students coupled with increased investment in HBCUs will certainly augment positive economic outcomes across the state. Making more scholarships available gives students an equal opportunity to pursue their aspirations and earn degrees that can change the trajectory of their lives (as it did mine).

Happy Women

Meanwhile, Alabama’s entrepreneurial spirit and potential workforce remain strong. Out-of-state companies recognize this and are moving their headquarters to the state. And there are new social enterprises emerging every day that need seed capital to scale up.

Nourishing our ecosystem will seed and encourage more small businesses that require direct investment and will attract business to Alabama. By working together, we can build a more just and a more equitable Alabama, a place truly focused on closing the historic gaps between rich and poor, between Black and white, between those of privilege and those who, for so long, have lacked the resources to succeed.

Tequila Smith is president of the Alabama Power Foundation and executive director of the Alabama Business Charitable Trust Fund. Tequila is also vice president of Alabama Power Company’s Charitable Giving where she leads the company’s philanthropic, volunteerism and community support initiatives. She earned a BA in engineering and MBA from ... Read more

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