Building an Inclusive Entrepreneurial Ecosystem

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North Carolina has emerged as one the nation’s premier destinations for both population growth and business development. The gains are impressive both in terms of the influx of talent and business recruitment.

Post-2020 census population estimates reveal North Carolina was the nation’s fourth-most-attractive migration destination during the pandemic. An estimated 253 net newcomers arrived daily between April 1, 2020, and July 1, 2021. People of color – African American, Asian, Hispanic and mixed-race individuals – constituted three-fourths of the state’s net growth during this period, creating a diverse pool of talent to propel the state’s economy forward in the years ahead.

At the same time, North Carolina has earned the reputation as the best place in the country to do business – underscored by recent business recruitment successes across multiple economic sectors. Six major firms – Apple, Boom Sonic, Google, Toyota, VinFast and Wolfspeed – have agreed to build new facilities in the state, promising an estimated 18,000 new jobs by 2030.

The state’s attractiveness as a destination for both business and diverse talent has created huge demand for new residential and commercial developments, as well as infrastructure investments to ensure the efficient flow of information, goods and services. To meet the supply chain demands undergirding plans for expanded residential, commercial, retail and industrial development, there is an urgent need to reassess the capabilities of local entrepreneurial and small-business ecosystems to ensure that the state’s diverse population of aspiring entrepreneurs and small-business owners has equitable access to business opportunities undergirding the state’s newfound prosperity.

We recently completed a minority entrepreneur and small-business needs assessment for Chatham County, which will host several of North Carolina’s newly recruited businesses. We interviewed elected officials, county and municipal government staff and entrepreneurial support organization leaders, as well as small-business owners and nonprofit leaders in the African American and Hispanic communities. Such diverse perspectives were important given the county’s stark pattern of both economic and racial disparities.

Our key informant interviews revealed that minority entrepreneurs face major barriers or hurdles in garnering access to an equitable share of the county’s newfound prosperity. These difficulties include accessing small-business assistance resources, gaps in the entrepreneurial resource network, and distrust of governmental officials and entrepreneurial support organizations. Several key informants said the county’s entrepreneurial ecosystem was underdeveloped and challenging to navigate, especially for minority entrepreneurs and small-business owners.

One county government official specifically stated:

Our regulatory framework … is an impediment. … We don’t have an organized process for engaging with … minority businesses. … Walking in the door is going to be completely confusing and I think that is a disincentive for home businesses trying to navigate how to start. We really need to do a better job of trying to figure how to set up a process for somebody [to] navigate how to become successful. And that’s what, really, we need.

If minorities aspiring to start or expand a business consulted the county’s website, the official stated emphatically:

They’d be overwhelmed. … We need … to reformat everything. We have a ton of information, but we don’t … have it set up to navigate. … Nothing’s connected – planning department, building inspections, fire marshal, central permitting, water department … our websites are not interconnected. … There’s no one stop where they can go to the website and [find what you need to do] to start a business.

He elaborated by stating:

You might find something that says how to start a business but it’s only going to get you to a certain point. … Trying to navigate how to actually go through that process, it’s not going to help you. … It’s almost like it would be better if we had [dedicated] staff that would be the one to go to [for small business assistance].

In a statement that was emblematic of the distrust that exists along racial and ethnic lines in the county, another government official we interviewed said:

We rarely hear from minorities who want to start a business in the county. … Most of the people that we are interacting with who are starting businesses are going to be white … honestly, to be frank with you about that. … From a small-business standpoint it is … rare that we ever encounter minorities who are reaching out to the county for starting businesses.

Expressing yet another concern, a minority community leader we interviewed – a long-term advocate for minority businesses – said:

What worries me is that our folks [may not] be prepared and ready for [those opportunities]. … If they’re not, what will happen is folks from surrounding communities … will get those jobs, will get those subcontracts, will get the opportunity because our folks aren’t prepared for it.

He continued by stating:

I don’t even think they [minority entrepreneurs and small-business owners] understand the magnitude of [an ongoing project]. I don’t think they understand the magnitude [or] are even thinking about [another] plant [that is] coming. … What contractors and subcontractors are they going to need? I don’t think they are aware of the subcontracting needs. They’re not doing … proposals because they don’t know what the needs are.

Another minority community leader agreed, stating:

I think … they’re not savvy. … They don’t know what they don’t know and so they miss opportunities that are right there that they just aren’t aware of. … I think there is an opportunity for somebody to [create] a list of what the opportunities [are] and who can meet the needs. … I have to believe that people aren’t getting work because they don’t know the opportunity is there.

Our key takeaway from our interviews is that this county desperately needs an entrepreneurial and small-business ecosystem that is both inclusive and equitable. Given the historical legacy and contemporary manifestations of a stark racial divide within the county, we recommend that local officials embrace a place-based approach to creating such an ecosystem. Such an approach strives to develop support for not only all types of businesses – including historically underutilized enterprises in various stages of development – but also communities suffering from a history of neglect and disinvestment. It creates accessible makers’ spaces, incubators, accelerators and coworking spaces with open doors for historically marginalized groups and communities who need access to both intellectual and financial capital to launch, grow and sustain successful business enterprises.

Committing to a place-based approach to developing an inclusive entrepreneurship and small-business ecosystem will require the county to:

• Conduct a comprehensive audit of existing government policies, regulations, procedures and practices to identify any barriers or inequities that specifically disadvantage historically underrepresented entrepreneurs and small-business owners in the local community.
• Develop an inventory of existing entrepreneurial support organizations, leverage influence and resources to break down silos and build connections among existing entrepreneurial supports, and fill revealed resource gaps in the local entrepreneurial and small-business ecosystem.
• Invest in a dedicated website to serve as a one-stop digital entrepreneurial hub,  providing local entrepreneurs, small-business owners and local community leaders with electronic access to the network of entrepreneurial support organizations and other resources, including diverse sources of capital needed to create, grow, maintain and sustain thriving businesses and communities. The goal in having such a website is to enable local entrepreneurs and small-business owners to “access support and resources without having to be fully dependent on municipal efforts.”
• Adopt a mission-driven innovation approach to minority entrepreneurship and small-business development. Rather than relying solely on minority entrepreneurs to come up with their own venture ideas, the mission-oriented approach proactively stimulates and facilitates market-driven innovation by directing aspiring entrepreneurs and small-business owners to specific opportunities and challenges that require small-business solutions.
• Capitalize on the approach by using contracting and procurement forecasts to provide minority entrepreneurs with keen insights into where propitious entrepreneurial and business development opportunities exist in the county.
• Lead by leveraging the county’s government procurement and contracting opportunities to grow minority businesses and encouraging existing anchor employers as well as newly recruited businesses to leverage their supply chains to facilitate homegrown minority business development.
• Sponsor startup pitch competitions, reverse pitch competitions and/or innovations challenges in historically marginalized communities to market and generate minority interest in forecasted contacting and procurement opportunities.
• Invest in an inclusive supply chain management system – that is, a best-in-class e-procurement platform – to connect minority entrepreneurs and small-business owners with education, training and networking as well as access to government and private sector contracting and procurement opportunities.
• Support this mission-driven innovation approach by launching an Equitable Development Venture Fund – an investment vehicle dedicated to providing startup and growth capital to support minority-owned, mission-driven entrepreneurial ventures and small-business enterprises.
• Partner with trusted-messenger organizations in the African American and Hispanic communities and develop a multichannel communications strategy, and plan to ensure that information flow regarding available entrepreneurial supports and resources as well as business opportunities is disseminated via a trusted messenger/trusted messaging system. Such a system will go a long way toward eliminating longstanding distrust of existing institutions.
• Invest in impact investment training for county government staff and invite staff from other local entrepreneurial support organizations to participate so that all of the stakeholders in the county entrepreneurial ecosystem have a keen understanding of the diverse pools of capital and the equity tools that can be leveraged to promote and facilitate minority business development – and inclusive and equitable, placed-based community economic development more generally.

Adopting and successfully implementing these recommendations should create equitable opportunities for African Americans, Hispanics and other historically marginalized groups to leverage their entrepreneurial desires and acumen in the county’s booming marketplace – thus making the county a more inclusive place to live, work, play and do business.

About the Authors

James H. Johnson, Jr. is the William Rand Kenan, Jr. Distinguished Professor of Strategy and Entrepreneurship in the Kenan-Flagler Business School and Director of the Urban Investment Strategies Center in the Frank Hawkins Kenan Institute of Private Enterprise at UNC-Chapel Hill.

Jeanne Milliken Bonds is a Professor of the Practice, Impact Investment and Sustainable Finance in the Kenan-Flagler Business School and the Department of Public Policy at UNC-Chapel Hill.

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