The State of Black Entrepreneurship, 2005

Bruce P. Corrie, PhD

Concordia University-St. Paul, MN

Recent national reports document interesting trends in African American entrepreneurship.

1. The Global Entrepreneurship Monitor, 2003 found that Black Entrepreneurship is the highest among all groups in the USA. Total entrepreneurial activity for Blacks was 16.5 % compared to 10.8 % for Whites. Blacks had the highest rates for both opportunity based as well as necessity based entrepreneurship. Black entrepreneurs tend to be in age group 25-34 years.
2. According to another report, The Panel Study of Entrepreneurial Dynamics, a longitudinal study of 64,622 U.S. households:

• Black men and Black women are about 50 percent more likely to engage in start-up activities than Whites.
• Education significantly predicts nascent entrepreneurship for blacks: approximately 26 of every 100 black men with graduate education experience efforts to start a new business comparing to 10 of every 100 white men.
• Blacks in urban areas show a greater tendency to start businesses.
• Black women in the middle age groups, 25-54, have a much higher rate of entrepreneurship than other groups.
• Black men and women with higher income levels are more likely to start a business. They had the highest nascent entrepreneurship rates than all groups in the income range $76 K and up.
• Blacks working in full time jobs had the highest nascent entrepreneurship rates than blacks working part time or not working.

3. According to recent studies by Small Business Administration, Office of Advocacy, during the period 1997-2001:

• The number of Black owned firms increased from 308,260 in 1982 to 780,770 in 1997.
• Total receipts of Black owned firms in 1997 was $71 billion dollars
• Black share of business ownership increased from 2.56 percent in 1982 to 4.2% in 1997. Black-owned firms made up 15 % of minority employer firms.
• Black-owned business survival rate increased with the size of the business, reaching 75 % with receipts between $500,000 and 999,999. Survival rates were the lowest in the $10-25,000 range for receipts.
• Black-owned business expansion rates were the highest in the less than $5000 range for receipts.
• The contraction rates were the lowest in the firms with low receipts.
• The receipt range of $10,000 to $50,000 appears to be a critical stage for the survival and expansion of Black-owned businesses.
• The sectors with the highest survival rates for Black-owned businesses were Finance, Insurance and Real Estate, Agriculture, Forestry and Fishing, Services, Wholesale and Manufacturing.
• Top sectors for Black owned firms were Services (53%), Retail (10 %), Transportation (8%) and Construction (7%).
• During the period 1990-2000 Blacks received 4.15 % of SBA 7 (a) loans and 1.59 % of the 504 loans.
• During the period 1997-2001, in Minnesota Black-owned businesses were the only minority group showing net gain in jobs created.
• During the period 1997-2001, in Minnesota Black-owned businesses had a survival rate of 71 % compared to the state average of 74 %.
• During the period 1997-2001, in Minnesota Black-owned businesses had an expansion rate of 33 % equal to the state average.
• During the period 1997-2001, in Minnesota Black-owned businesses had a contraction rate of 14 % lower than the state average of 23 %.
• States with the highest survival rates for Black-owned businesses were Wyoming (93.5%), Utah, D.C., North Dakota and Rhode Island (72 %).

4. According to the 2002 Economic Census:

• Blacks firms make up 1.6 % of all employer firms in the country
• 31 % of Black employer business owners have some college education
• 25 % of Black employer business owners had a post-graduate degree, the second largest group in the country after Asians.

5. A survey of clients of top non profits in Minnesota revealed that Blacks make up the largest percentage of their clients: MEDA (46 %), NDC (40 %), WomenVenture (21%). For the clients using the state’s Urban Initiative Funds, 46 % were Black.

Bruce P. Corrie, PhD Emerging Markets Series

651 641 8226 corrie@csp.edu

The Color of Entrepreneurs Quiz

Which population groups have a higher percentage of employer business owners relative to their share of the population?

Answer: White, Asian

Which population groups have the highest percentage of employer business owners with a post graduate degree?

Answer: Asian, Black or African American

Which population group has the highest percentage of employer business owners with an educational background of high school or less?

Answer: Hispanic

Which population group has the highest percentage of employer business owners with some college education?

Answer: American Indian and Native Alaskan

Which population group has the highest percentage of employer business owners spending more than 60 hours a week on their business?

Answer: Black or African American

Which population group has the highest percentage of employer business owners who state that their business is the primary source of their income?

Answer: Hispanic

Which population group has the highest percentage of employer business owners who state that their business is not the primary source of their income?

Answer: Black or African American

Source: Survey of Business Owners, 2002

Bruce P. Corrie, PhD

Minnesota Needs to Leverage its Dollars Spent on Construction, Professional and Other Services to Grow Small and Minority Businesses

Minnesota has an important but underutilized tool in its economic development toolkit: Statute 16c.16, states, “The commissioner shall for each fiscal year ensure that small businesses receive at least 25 percent of the value of anticipated total state procurement of goods and services, including printing and construction.”

However, in all the billions that are currently being debated in the Minnesota House and Senate, such as the recently approved construction bonding bill valued at almost a billion dollars, there is hardly a whisper how such massive state spending can help build our economic base in Minnesota by implementing state statute 16c.16.

There is tremendous potential to grow our own small businesses in Minnesota. This is particularly true for minority and new immigrant businesses. Minority businesses are one of the fastest growing segments of the local and national economies. For example, according to the Economic Census 1997 data, Hispanic firms grew 350 percent during the time period 1987-97.

If you were a venture capital investor – would you invest in minority and immigrant businesses ? Ask the nationally know Kaufman foundation: In a recent report, MINORITIES AND VENTURE CAPITAL: A New Wave in American Business, “Taken together, 117 investments tracked by Bates and Bradford from the 24 MBE-targeted venture capital funds surpassed a 20 percent rate of return. During that same time period, according to industry analysts, the S&P 500 Index had a 17 percent return. Furthermore, Venture Economics (VE) and the National Venture Capital Association derive a Private Equity Performance index. VE tracks the performance of over 1,400 US venture capital and buyout funds on a quarterly basis. As of early 2001, the ten-year trailing average annual return for the Private Equity Performance Index was 20.2 percent.”

If private capital can do it why cannot public funded projects take the cue?

Some of the major benefits that come with the growth of minority businesses enterprises are revitalization of both the low income neighborhoods as well as the high tech corridors. There is documented evidence to show that minority firms hire minority and other local people, buy supplies from local businesses, pay rent and local taxes, invest in their communities and serve as positive role models. In many instances, owning a business is an effective way for new immigrants to achieve the American dream.

The minority economic base is an estimated 11 billion dollars in consumer power according to the Selig Center. Census estimates minority paying 85 million dollars in real estate taxes and 57 million dollars in rent. Minority communities pay an estimated billion dollars in state and local taxes. Minorities and immigrants make up both a critical proportion of essential workers (roofers, food processing and hospitality industry, agricultural workers) as well as a critical proportion of high tech workers (physical scientists, nuclear engineers, physicians, computer professionals and economists). Minorities with their global links can help Minnesota tap into global markets. Some of Minnesota’s fastest growing markets in Venezuela, Mexico, Argentina, Korea, Japan, Indonesia, Colombia and South Africa can and have benefited from these local connections.

If our policy leaders rise up to the challenge we will have a strong and diverse economy in Minnesota.

Bruce P. Corrie, PhD

How Immigrants Transformed University Avenue, 1981-2005

The Transformation of University Avenue by Immigrant Entrepreneurs from 1981-2005: A Report*

Bruce P. Corrie, PhD, Grant Meyer, Jenna Fields, Sherri Volkert, Xieng Thor, Amber Suttle, Watchee Zogaa, Chee Lor, Xue Vue, James Holmes, Shayne McMahon, Damien Dukek, Derek Coleman, Dylan McAlpine, Cesar Perez, Frank Hanzlik, Bryan Bach, Dave Furlong and Eric Utoft.

University Avenue in Saint Paul from Lexington Parkway to Rice Street illustrates the vibrant energy that immigrants bring to Minnesota. Asian American entrepreneurs from Vietnam, Laos, Cambodia, Korea, and the Philippines have taken over dilapidated buildings and transformed them into profitable enterprises. Today the avenue is poised to be transformed into a thriving commercial corridor.

In 1997, David Kaplan documented the growth in the avenue in an article published in the journal Economic Geography. Integrating data from various sources he documented the growth and development of Asian owned businesses in a 6 block stretch from Dale to Farrington from 1981 to 1991. The growth in the avenue paralleled the arrival of Southeast Asian refugees to Minnesota and Saint Paul. In 1999, Saint Paul Pioneer Press reporter Brian Bonner did an extensive and detailed map of businesses on 17 blocks on University Avenue.

Undergraduate students at the Department of Business at Concordia University under the direction of Dr. Bruce Corrie decided to update the above reports of the avenue and provide a contemporary perspective on the 6 block stretch from Dale to Farrington. The advantage of focusing on just the 6 block stretch on the avenue was the presence of comparable data going back to 1981 that could illustrate the dynamic energy on the avenue.

Students visited every store on the 6 block stretch of the avenue to verify if the business was Asian owned and whether the building was also owned by an Asian. The experience of Bonner in 1999 still holds true – business owners on the avenue are still wary about talking to strangers, but when a bond of trust is established they have been very open in providing information.

In 1981, the Kaplan study stated, that there was only one Asian owned business on the 6 block stretch on the Avenue. In 1991, Kaplan estimated the number to be 22. In 10 years the avenue was beginning to diversify and various kinds of Asian owned businesses emerged from restaurants and grocery stores to companies providing financial services.

In 1999, the Pioneer Press report documented 59 Asian owned businesses in the 6 block stretch of the avenue. The diversification noted in the Kaplan study had deepened, with a variety of stores from music to video stores to the Asian American Press and Hmong Times. Asian owned businesses were now spread all across the 6 block stretch from the 2 block core from Western to Macubin in the 1991 Kaplan study.

The Concordia University study of 2005 estimates the number of Asian owned businesses on the 6 block stretch to be around 61.

The following are some trends observed in the survey that is also illustrated in the accompanying illustration of business on the avenue.

• Since 1981 the overall number of businesses has grown on the avenue from 46 in 1981 to 91 in 2005 – around 100 percent.
• The number of Asian owned businesses increased from 1 in 1981 to 61 in 2005- a 6000 percent increase.
• Asian businesses grew from 2 percent of all businesses on the six block stretch of the avenue in 1981 to 39 percent in 1991 to 67 percent in 2005.
• From one Asian business on one block of the avenue in 1981 to complete blocks of the avenue filled with Asian businesses.
• There appears to be a lot of churning of businesses in the very small category for various reasons and as entrepreneurs focus on emerging business opportunities such as the housing market boom or the need for home health for Asian elders. A recent report in the Hmong Times referred to the impact of the nearby flea market as a cause of the decline of some Hmong businesses on the avenue. Businesses with lower overhead costs located at the flea market gained a competitive edge over businesses on the avenue. It also presents two models at work in the ethnic economy: the stand alone store versus various forms of mini-malls/flea markets that can be found not only in the Asian community but also among other immigrant groups such as the Somali and Latino communities.
• A number of core strong businesses have expanded, through renovation or building of new structures. Take the popular Mai Village restaurant for example – they built a beautiful multimillion dollar restaurant with an authentic Vietnamese tradition by the side of their old rental property. Asian American Press is another example – the owner expanded across the avenue to the present location and made significant improvement on the building. In many parts of the avenue we can find new additions on top of the old structures being rented out to start-up businesses.
• The owner of Mai Village provides an example of another dimension of the many contributions immigrants make to Minnesota. He plans to establish on the floor above the restaurant a museum of traditional Vietnamese culture. Through this museum he hopes to share with Minnesotans the rich cultural heritage of Vietnam going back thousands of years.
• Another trend is for entrepreneurs to buy up other properties and expand outside the avenue. One business owner reported owning 5 new businesses, two on the site, and two on other parts of the avenue and one in a nearby suburb. Each of these businesses had a different focus: A restaurant, jewelry shop, pharmacy and a hotel.
• What also is happening over the years has been the expansion of Asian owned businesses from the Western-Macubin blocks to a wide stretch of University Avenue from Dunlap to Rice Street. The 1999 Pioneer Press study listed over 100 Asian owned businesses on a 17 block stretch of the avenue.
• Most of the businesses still focus on the ethnic market with a few businesses aiming for a blend between the ethnic and mainstream markets. Some restaurants had an ethnic flavor but catered mainly to a mainstream clientele.
• Among the 61 Asian businesses identified in the avenue, there was considerable diversity: 3 jewelry shops; 11 food establishments; 5 grocery/supermarkets; 7 financial services companies; one liquor store; 12 retail/clothing stores; 1 automobile repair shop; 6 video stores; 3 health care establishments. Many of the buildings were Asian owned. Some buildings and businesses were also owned by Asians outside Minnesota.
• Most of the business owners interviewed reported receiving no start-up capital from the government. They put in a lot of sweat labor and their family resources to start and run their businesses. However the successful businesses also reported accessing outside resources such as SBA loans. As one business owner reported, she started out with her husband as workers in a restaurant and slowly built up their businesses.
• It appears that security is a big concern of businesses on the avenue.

It appears from our preliminary survey that University Avenue sheds much light into the dynamic energy of Minnesota’s new immigrants. With practically no government resources they have revitalized the avenue through their entrepreneurial activity. Many of these entrepreneurs have built and expanded their businesses on the avenue and in the process achieved the American dream. One business owner proudly boasts of one of his children attending Notre Dame. From University Avenue to Notre Dame – that truly is an immigrant’s dream and achievement.

FOR A MAP OF THE AVENUE SHOWING THE GROWTH IN IMMIGRANT BUSINESSES PLEASE CONTACT corrie@csp.edu.

* This report was produced by a team of undergraduate Concordia University students in the Department of Business led by Dr. Bruce Corrie. Students walked down the avenue many times in April 2005 to document the number of businesses.

State of Immigrant Entrepreneurs, 2005

The State of Immigrant Entrepreneurs, 2005: A Report of the Policy Roundtable Bruce P. Corrie, PhD A distinguished panel of experts from leading nonprofits and ethnic chambers of commerce presented the panorama of immigrant entrepreneurship in Minnesota at The Policy Roundtable at the Vietnam Center in Saint Paul on April 6, 2005. Readus Fletcher, Director, Equal Opportunity of the City of St. Paul moderated the forum with Dr. Bruce Corrie, Chair of The Policy Roundtable. The Policy Roundtable produced this forum in partnership with the Department of Business at Concordia University, The Vietnam Center, the Asian Pacific Fund of the Saint Paul Foundation, and the Saint Paul Neighborhood Network. Some of the panelists provided data on the entrepreneurial activity of immigrants. Judy Romlin, Vice President, Milestone Growth Fund, the only Minnesota-based venture capital fund focusing on minority entrepreneurs stated that the Fund invested over $23 million in 69 minorities owned companies since 1990. Of these firms 42 percent are immigrants. Milestone investments over the last 10 years have generated a 9.4 percent return on investment. For the past decade, Milestone’s portfolio companies have provided employment to 800 full time employees of which 200 were new jobs. These companies paid $41 million in total taxes. Tene Wells, President of WomenVenture, stated that 19 percent of their clients were immigrants. The mission of WomenVenture is to assist women secure economic success and prosperity. Female entrepreneurs assisted by WomenVenture owned a diverse range of businesses. Teshite Wako, of Neighborhood Development Center, a neighborhood based organization providing technical assistance, loans and other services to small and minority businesses. According to Teshite, in 2003, 30 percent of the people who took NDC’s entrepreneurial training classes were new immigrants: Latino, Hmong, Somali or Oromo. As of 2003, 138 immigrant owned businesses served by NDC had created 386 new jobs and paid out $5.6 million in payroll, rent, supplies and other expenses. Other panelists presented a perspective on the geographic location of immigrant businesses. Monica Romero of the Latino Economic Development Center, Lu Hang, Chair of the Hmong Chamber of Commerce, A J Siddiqui of the Asian Chamber of Commerce and Tyler Le of the Vietnamese Chamber of Commerce presented a geographical perspective on immigrant entrepreneurship. There are a number of commercial corridors that have strong immigrant entrepreneurial presence such as University Avenue, District Del Sol, Payne Avenue, Arcade Avenue, and Rice Street in Saint Paul and Central Avenue, Lake Street, and Nicollet Avenue. The suburbs around the Twin Cities are another ring of entrepreneurship. Monica Romero talked about Latino entrepreneur growing in areas like Richfield, Chaska, Shakopee, and Hopkins. Romero also pointed to the growth of Latino entrepreneurs in rural Minnesota such as Northfield, Willmar and Worthington. Asian entrepreneurs have a strong presence in the Twin Cities and in suburbs like Eagan and Burnsville and Bloomington. African immigrant entrepreneurs are found in areas around the Twin Cities and in Brooklyn Park and Brooklyn Center. The 1997 Economic Census reported rapid rate of growth in immigrant entrepreneurship. For example in 1992 there were just 3 Minnesota cities with over 100 Asian owned businesses. In 1997 there were 11 cities with 100 or more businesses. The 1997 Economic Census also documented an increase in rural areas. The panelists were of the opinion that the rate of growth continues and will be reflected in the new data coming out shortly at the national level. The panelists also stated that many immigrant entrepreneurs built equity in their inner city businesses or real estate assets and then used this equity to start mainstream and other businesses in the suburbs. For example, Lu Hang stated that one can see this trend in the gas stations and liquor stores owned by Hmong entrepreneurs in the suburbs. Lu Hang also talked about Hmong businesses moving in waves from one sector to another from the Mom and Pop stores, to the financial services sector, to real estate and now home health care. There is a vibrant spirit of entrepreneurship in the African immigrant communities. In areas around Lake Street in Minneapolis, for example, we find the vibrant Somali minimalls and the newly formed African Development Center. According to Teshite Wako, most common types of African immigrant businesses were convenience stores, clothing stores, tax return services, restaurants, phone cards, auto services, money wiring services, coffee businesses and financial, legal, health care and real estate services. The Neighborhood Development Center, for example, also runs a pioneering loan program focusing on immigrant entrepreneurs needing financing based on Islamic principles. Some of these trends were also reflected in a survey of Asian owned businesses on University Avenue by students at Concordia University. Xue Vue an undergraduate at the Department of Business, Concordia University, presented a preliminary report updating earlier research on the avenue in 1981, 1991, 1999 and 2005. From 1 business on a 6 block stretch on University Avenue in 1981, there were over 56 businesses in 2005. Many of the businesses had expanded in terms of renovations or new constructions. Other business owners started new businesses both on the avenue as well as in other parts of the state. A full report of the survey will be released shortly. Tyler Le, talked about immigrant entrepreneurs also getting involved in international trade. A case in point was a recent trade delegation that visited Vietnam. One can also see a trend in immigrant entrepreneurs establishing businesses in the high tech areas. Teshite Wako summed up the major challenges facing immigrant entrepreneurs in Minnesota: language barriers; lack of capital; lack of understanding of the US business environment; institutional issues such as regulations; predatory lending practices; over saturation of the ethnic market. Maliha Hussain, of WomenVenture, added to Wako’s list the importance of business networks and access to information about business resources. Norman Harrington of the Minnesota Minority Supplier Diversity Council talked about strategies to build networks with larger corporations. Hector Martinez of MEDA, an organization focusing exclusively on minority entrepreneurs, offered strategies in which his organization helped meet the challenges faced by immigrant entrepreneurs. The program will be aired on Ch 19 in Saint Paul and on Metro Channel 6 in the next few weeks. For more information please contact Dr. Bruce Corrie, Concordia University, 651 641 8226 or corrie@csp.edu.