U.S. Black Neighborhoods See Stronger Growth in Startup Creation

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Predominantly Black communities, especially in higher-income neighborhoods of cities including New York City, Houston and Atlanta, have seen the strongest growth in new startups during the pandemic, according to a new study.

The research, using data from eight states from the Startup Cartography Project, also found that economic relief packages passed last year were followed by a surge in business formations in the following weeks -- even though the aid wasn’t specifically aimed at encouraging startups. The correlation is “striking,” the paper’s authors said.

U.S. Black Neighborhoods See Stronger Growth in Startup Creation

Previous studies have showed an acceleration in entrepreneurship across the U.S. last year after an initial slump in business creations at the onset of the pandemic.

What the new paper established is that startup growth wasn’t associated with “traditional hubs of business dynamism,” but instead centered in areas with a larger Black population, particularly with a higher income than average.

In New York City, for instance, Manhattan saw a drop in entrepreneurship compared with 2019, while the Bronx and Brooklyn experienced an increase in business registrations. In Houston and Atlanta, communities with a greater percentage of Black residents saw gains as well, according to the paper, published by the National Bureau of Economic Research.

Many factors can explain business formations, including people who lose their jobs and have no other choice to try to earn an income, and many startups don’t survive their first year.

Still, the findings stand in sharp contrast to the long existing inequities in access to startup capital for Black people in the country, the paper’s authors wrote.

The stimulus packages, which provided broad-based economic relief across all demographics and geographic lines, may have worked “against the persistent racial inequalities in entrepreneurship,” and changed the incidence and overall trend of Black entrepreneurship, according to the study.

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