Why so few "minority-owned" start-ups?

A study by the Center for Venture Research at the University of New Hampshire has just released their study on 2010 Angel Investment. By definition this money went to start-ups.

Buried in the study is this:

Minority angels accounted for 2% of
the angel population and
minority-owned firms represented 6%
of the entrepreneurs that presented
their business concept to angels. The
yield rate for these minority-owned
firms was 19%, which for the fourth
straight year is in line with market
yield rates. However, the small
percentage of minority-owned firms
seeking angel capital is of concern.

I started writing an answer to this question, but I got so motivated I ended up turning it into a blog post. The full post can be found on my blog. Here’s a summary. I'm a Hispanic female.

I’ve wondered about this a lot. I've thought about all the usual reasons people say there is such a lack of minority-owned startups, but none of these reasons made much sense to me. Then about a month ago, it finally dawned on me. It's the culture. There are some cultures that are more entrepreneurial than others. For instance, as it has already been pointed out, Indians are considered a minority, yet they tend to be very entrepreneurial. Therefore, the general minority tag doesn't work. We need to separate each minority group and look at each independently.

Hispanics and African Americans tend to be less entrepreneurial than Whites. Probably because of the difference in cultures. The real issue comes from within the culture itself, and has little to do with external factors. Unfortunately, culture is intangible, which makes it very hard to point to specific notions within each culture that contribute to being one way or the other. The best I can think of is to look at what kind of behaviors are encouraged within each culture.

So my opinion is that this really isn’t a problem. It only becomes a problem when there is a big percentage of minorities that want to start a tech business, but can’t. However, a majority of people in certain groups just aren’t interested. And of the small percentage that are interested, their success rate seems to be in line with non-minorities.

In fact, the quote in your question backs this up:

The yield rate for these minority-owned firms was 19%, which for the fourth straight year is in line with market yield rates.

So,

What can be done to increase the number of minority-owned start-ups?

I don't think our society is doing anything to discourage minorities from starting their own business. In fact, there are plenty of programs in place to encourage the growth of minority owned businesses.

I believe we should do what we can to help those that want our help, regardless of race, color, religion, etc. Those that come from historically non-entrepreneurial cultures may need more help, and we should be willing to give them that extra bit of help.

I’m very interested in this topic, and I’d love to hear what you think (good and bad) about my thoughts.

What can be done to increase the number of minority-owned start-ups? Why does the number need to be increased? Is there some barrier to entry that puts minorities at a disadvantage, or is it maybe just something they're not particularly interested in doing?

Define minority...

or better yet, who isn't a minority?

For instance, there are 14 million Jews in the world, 0.5% of the world's population, a Mega-Minority, yet Israel (pop. 7 million) is second only to the U.S. in the number of startups (in absolute numbers, not per capita). Many Jews and ex-Israelis are leading U.S. startups.

I've also seen a lot of Indian owned startups in the U.S. - they are a minority too, aren't they?

It's true that in all my years in the U.S. I haven't come across many African-American or Latino owned startups. Is that the segment of the population you're asking about?

I assume there's a direct connection between access to good education and a childhood where parents nurture their younglings to being successful later in life. Many of the non-white minorities are still struggling with high rates of poverty, broken homes, despair with the "system" instilled since early childhood, high drop out rates from high school, high teenage motherhood rates and living in conditions that do not encourage education. These aren't exactly contributing in helping to create an entrepreneur. Poor inner city children don't have PC's/Internet. Suburban kids do. Big advantage

I think many minorities have struggled throughout history. There have been hard times, and through hard work and good decisions they have made a better life for themselves. Good decisions when you're talking about life and death and one's family, includes as less risk as possible.

When it comes to starting a company with extremely high risk, or finding employment with a steady paycheck and benefits, its no surprise many minorities choose to be employed rather than be the employer.

However within my own circle, I notice two very different personalities. One is the above, loves the consistent paycheck and lives a life other than work. The second personality has a true entrepreneurial spirit. Due to history and family or personal experiences, these people will do great things, or fail hard trying. They love being the employer and its a personal measurement of success for many of them. These individuals' lives usually revolve around their business(es).

To be more specific, with tech or web startups, it takes time for the culture to grow. As Ron mentioned he'd be more interested in writing code due to his personal experiences, culture and surroundings. Many minorities start in North America with little and build a life from there. As generations are added, the likelihood is high that this percentage of minority owned startups will increase.

In many "minority" circles I know, at least 2 out of 10 has started or owns a company. Many of them (and others who didn't make it) did not look for funding, they created a business with blood, sweat, and tears, so to speak, and the ones that made it did very well. I don't know if culture had anything to do with not obtaining funding, but it could be that in many of the countries that the "minorities" come from, the sense of entitlement is very low if not nil.

Apart from obvious factors, I think 'culture' and 'networking' does have an impact both on willingness to start and success of the start-up. If you have a friend or relatives with start-ups then chances are more that they advice you to start something or you get inspired by them. I think probably this explains why Indians are moving so fast with Pakistan left far behind and I guess it explains in the same way for other countries and communities as well.

Treating these "statistics" like an issue is the primary barrier to better numbers. Race is not a relivent discussion when the annonymous internet is the reference.