Report: Houston saw a spike in Black entrepreneur-founded companies amid pandemic
It might seem that the formation of startups would have stagnated amid the COVID-19 pandemic. Yet that was anything but the case for Houston startups founded by Black entrepreneurs.
A recent study by economists at Rice University, Boston University, Columbia University, and the Massachusetts Institute of Technology (MIT) found that from 2019 to 2020, the startup rate rose 32 percent in four largely Black areas of Houston: Kashmere Gardens, Missouri City, South Acres, and Sunnyside. By comparison, the statewide startup rate during that period was only 10 percent.
There's no denying that Black-owned businesses already have a significant impact on the economy of the Houston metro area.
A report released in 2019 by the Greater Houston Black Chamber estimated the group's more than 1,500 members collectively generate anywhere from $1 billion to $2 billion in annual revenue. A little over one-fifth of the population in the Houston area is Black. That population is projected to grow 34 percent between 2010 and 2030.
In 2015, personal finance website NerdWallet ranked Houston the 15th best metro in the country and the best metro in Texas for Black-owned businesses.
The Rice economist who contributed to the study is Yupeng Liu, a doctoral student at the university's Jones Graduate School of Business. While he and his fellow researchers note that their study doesn't confirm a cause-and-effect relationship, "it is useful to note that the federal relief payments, and their uniform distribution (independent of eligibility criteria), may have played a role in enabling new firm formation in Black neighborhoods which might otherwise have been constrained by discrimination."
Furthermore, some experts speculate that last year's rise of the racial justice movement may have helped lift up Black entrepreneurs, and that many Black Americans set up new businesses out of necessity in 2020 after being laid off or seeing their work income or hours reduced.
The study, published by the National Bureau of Economic Research, compared startup data for 2020 in Texas and seven other states — Florida, Georgia, Kentucky, New York, Tennessee, Vermont, and Washington — with startup data for 2019. In all, the number of business formations spiked by 21 percent, with the growth of Black-owned startups being especially pronounced. However, an estimated 40 percent of Black-owned businesses closed during the pandemic, compared with 20 percent across all racial and ethnic groups.
The findings of the research bureau's study mirror a subsequent report from the Ewing Kauffman Foundation, a nonprofit that promotes entrepreneurship. The report found more Black-owned businesses were launched last year compared with the total population than at any time in the past 25 years, according to the Los Angeles Times. On average, 380 out of every 100,000 Black adults became new entrepreneurs during the 2020 pandemic, up from 240 in each of the previous two years, the report shows.
In reporting on the National Bureau of Economic Research study, CBS News and The New York Times spotlighted two new Black-owned startups in Houston.
Last July, Destiny McCoy and Oyinda Adebo of Houston launched a mental health company called Wellness for Culture. The company already has been so successful that McCoy says it now supports her financially, according to CBS News.
"All I knew is that I wanted to help Black women," McCoy told CBS News, "and all I knew was I didn't want to do therapy in the typical way."
Another Black entrepreneur from Houston, Pilar Donnelly, enjoyed similar success in 2020. Last summer, Donnelly began making playhouses for her two 6-year-old boys, the Times reported.
"She had been laid off from her job in sports marketing and wanted to give them something for their birthday. With no background in woodworking, she started off with a design she liked online and watched YouTube to learn woodworking techniques," according to the Times. "After making a number of playhouses for her friends and family, she realized it could be a business. That business, which she registered in June, is called Wish You Wood Custom Creations."
Woodworking is now Donnelly's full-time job.
"Everyone I encountered either had a really good year or a really bad year — and for me I had a good year," she told the Times. "Now I'm working outside in the grass and the dirt. I have a workshop in the garage; I have scrap wood everywhere. My life is really different."