Starting a business wasn’t even on our minds when we first met in the summer of 2003. We had each been selected to participate in Leadership Atlanta, a rigorous development program that brings together 80 civic, business and faith leaders to strengthen community ties and address social and economic issues facing the region. We were two of the youngest participants in this esteemed group, which is selected annually by nomination and represents the sweeping diversity of the metro area.
At the Leadership Atlanta workshop on race relations, the moderator invited Stacey to share a secret dream that most people would never have suspected. Typically reserved and still mulling over when she might launch her political career, Stacey gamely revealed to the crowd that she would like to become president of the United States. Sitting across the room, Lara could hardly contain herself. She felt an immediate kinship. Turns out, she too had aspired to run for the White House and was nearly bursting out of her seat to meet another woman who harbored very same dream—and would say so out loud.
We still laugh over what happened next, because it is the perfect way to illustrate how different we are. As soon as the room broke for lunch, Lara made a beeline for Stacey, and after the briefest introduction, blurted out her life story even though we were basically complete strangers. Stacey was stunned for a moment. But as we sat down at a table and began to talk over lunch, we developed a connection.
For the two of us, the experience was a crash course in what intrigued our heads and our hearts. We got to see each other be vulnerable and uncomfortable. We got to see each other learn. And we got to see each other pursue a passion to reform part of the state’s foster-care system through the community service project our team spearheaded. Our work cemented our mutual respect. We saw how we could leverage our unique perspectives to innovate and help others. We learned that difference was our superpower.
It’s Time to Level Up
To launch a business is to be passionate about fearlessly and independently solving a problem. It’s a uniquely American endeavor that has enabled transformative innovation and prosperity. But the promise of business ownership as a ticket to a better life no longer looks as bright as it once did. Despite a record uptick in new business filings during the recovery from the COVID-19 pandemic, entrepreneurship has been on a troubling downward slide for years. The rate of startup creation across the nation plummeted 44% between 1978 and 2012, prompting small-business advocates to sound alarms. As someone once said to us, the key to entrepreneurship is staying alive long enough to get lucky.
But it shouldn’t come down to luck when we know that the most basic need of a small business is access to capital. Capital is how you make your product, how you get your customers, how you tell your story, how you pay your employees. And yet, especially for minority and female-led enterprises, securing that propellant is exceedingly difficult. Minority-owned firms are more likely to be denied bank loans and to pay higher interest rates for credit, and less likely to apply for loans because they rightfully fear they will be denied. At the same time, women-owned ventures account for just 16% of conventional small-business loans and 17 percent of Small Business Administration loans, even though female-owned firms make up a third of all small companies in the U.S.
Furthermore, disparities between black and white wealth and the nation’s history of redlining means it’s far less likely a Black entrepreneur owns a home to use as collateral for a commercial bank loan. For this reason, many Black business owners cannot access loans from traditional lending institutions and often turn to credit cards, their own savings or nonprofit community lenders.
The COVID-19 pandemic exposed this inequity and misunderstanding by policy makers. Paycheck Protection Program (PPP) loans meant to help small businesses were administered by traditional banks and quickly snapped up by large and established enterprises. The critical fumble by Congress and the SBA put many marginalized companies on the brink of closure and some out of business for good. Only 12% of Black and Latino business owners who said they applied for federal loans in the spring of 2020 received aid. Forty-five percent of Black and Latinx small-business owners who were still in business in May 2020 reported they would have to close by the end of the year, if not sooner.
When it comes to finding investors as a source of capital, it’s no secret that women and other marginalized founders encounter more bias and obstacles than white men—and it’s already exceedingly difficult to secure venture capital. It’s so tough for most entrepreneurs to access capital that 83 percent of entrepreneurs don’t even use bank loans or venture capital when starting a business. They dip into retirement savings, run up credit card debt or ramp up slowly while juggling day jobs.
Small businesses have been fighting an uphill battle for decades just to access commerce. These roadblocks keep small businesses small or struggling to grow. It is time to shift the power dynamic for all small businesses.
It all starts with our story, when the stars aligned to connect two Southern women with very distinct leadership styles and personalities from wholly different upbringings. We improbably joined forces in 2006, and we have founded and grown two multimillion-dollar enterprises. When we stumbled, we conceived of an innovative way to solve the problem that defeated our company. We created a fintech startup called Now which helps small businesses across the U.S. get paid faster. Now has accelerated close to $1 billion in invoice payments to small firms. The idea was born out of the cash-flow challenges we and others experienced and ignited our desire to change the game.
A dizzying array of financial, political, and regulatory systems put small-business owners at the mercy of big banks, corporate America, and Silicon Valley startup worship. Bottom line: It’s not you, it’s them. So we want to help you better understand the often invisible and unexpected forces that hold back many small firms from fulfilling their potential. Through Level Up lessons in each chapter, we want what we’ve learned to be of use to you as your own struggles are reflected in our story. Together, we can expand opportunity in the greatest engine of job creation in this country: America’s 30 million small-business owners.
The truth is, neither one of us aspired to become entrepreneurs. In fact, many of you may not even realize that the Stacey Abrams you see on TV fighting for voting rights quietly co-founded multiple companies when she wasn’t campaigning for office or debating bills in Georgia’s House of Representatives… or dreaming up dramatic new twists in her bestselling novels. And Lara, as a trained rocket scientist—yes, an aerospace engineer—has sold sneakers, built skyscrapers and raised a family. Like many of you, we joined each other on this unlikely path of small-business ownership at a time when each of us was searching for an avenue to earn a living that would provide a new measure of self-determination and freedom.
Unexpected Business Owners
We didn’t even call ourselves entrepreneurs at first. In our minds, that was a title reserved for coders in hoodies in garages out in Menlo Park. We were just two highly ambitious friends who had reached a stage in our lives when working for someone else no longer fit our goals. As we discussed our concerns and potential choices by the nighttime glow of our laptops, we finally decided the only solution would be to go into business together, drawing on our respective expertise, and essentially designing the jobs we wanted for ourselves on our own terms. And so, in the middle of the night at the end of a tumultuous year, Insomnia Consulting, our very first enterprise together, came to be.
The way we started our business is the story of American entrepreneurship. Eighty-one percent of small businesses in the U.S. are owned by sole proprietors. They, like us, are people who took the leap to become their own bosses, to hang out a shingle in hopes of generating a reliable income and having more control over their time. In reality, most entrepreneurs create the job they wish they had before ever thinking about building a whole company.
One thing we know for sure is that when you are doing something you have never done before, having a partner who shares your vision and your values but has a completely different perspective on how to get it done is not only exciting, it is essential. And it all started with insomnia—and the decision to take a risk on each other to see where and how far we could go.
Adapted from LEVEL UP: Rise Above the Hidden Forces Holding Your Business Back by Stacey Abrams and Lara Hodgson with Heather Cabot, published on February 22nd 2022 by Portfolio, an imprint of the Penguin Publishing Group, a division of Penguin Random House, LLC. Copyright © 2022 by Stacey Y. Abrams and Lara Hodgson. Photo by Kevin Lowery.