Karen Smith worked for decades as an office administrator and hated it. So she changed her life radically: She launched a business making jewelry five years ago.
At first, she made beaded bracelets. Then she taught herself how to work with metal, mostly by reading books and watching YouTube videos.
"I looooove doing this," said Smith, as she lit a torch in her tiny Oakland studio and soldered a silver ribbon to make a ring. "I have never in my adult life had a job where I felt the freedom and passion that I feel now with my work. This is what I'm meant to do."
But money to run and grow her company, NuSpirit Designs, has been a problem from the get-go. Smith launched it without much in savings, family to borrow from, income from a job, or assets to leverage for a loan.
Smith's experience isn't unique. Little access to capital is an important reason businesses owned by African-Americans tend to not grow as much and as fast as other firms. The problem is more acute for women, said economist Alicia Robb, with the University of Colorado at Boulder.
"Women have far lower levels of income and wealth when compared to men, so this issue around financial capital is going to be worse for women," said Robb, who has studied minority entrepreneurship for more than a decade.
Women-owned businesses earn much less on average than men, and black businesswomen in particular have the lowest average revenues among all groups of entrepreneurs, according to a recent report by the U.S. Small Business Administration Office of Advocacy.
Smith's startup capital came from selling her beloved car, a Corolla with tortoise-shell interiors, for about $7,500. Learning how to succeed in the notoriously cutthroat retail industry has been like trying to climb a mountain while running on a hamster wheel, Smith said.
"It's really a challenge because there's so much that you have to know and learn when you don't have capital to pay people," said Smith. "If I had a production assistant and someone who could do work on my website, things would be moving much faster."
'We Just Don't Have That Access'
Stevonne Ratliff, the owner of a natural hair and skin-care line, believes limited access to cash is one main reason she doesn't know of any other black store owners in San Francisco's Lower Haight, where she recently opened a shop.
The area used to be more diverse, close to a neighborhood famous for its jazz musicians and rich African-American history.
"That's so cool that I'm right by the Fillmore and I have black people who are from here, from the neighborhood, and they stop by and they are like, 'Wow, we are so happy you are here. To see a black-owned business reminds us of old times,' " said Ratliff, 35.
San Francisco has lost more than half of its African-American population in the last five decades: from 96,000 residents in 1970 to about 47,000 in 2015, according to U.S. Census data. Many factors have contributed to the decline, including the high cost of living and doing business in the city.
"As African-Americans and certain people of color, we just don't have that access or that family backing or the influential people that can help you gain cash to start your business," said Ratliff, 35.
Ratliff started Beija Flor Naturals with her unemployment check after losing her job at a tech startup during the Great Recession. But she found ways to keep both her living and business costs down and turn a profit.
Harnessing the Power of the Internet
As a one-woman startup, Ratliff formulated concoctions of mango and cocoa butter creams in her mom's kitchen, and began selling the products completely online through the website Etsy.
"It's hard and lonely but at a certain point you're like, 'OK, I'm in too deep,' " said Ratliff, who lived on a shoestring and couch-surfed with friends to save on rent. "Also, I just wanted to see where this would lead me, how far I could go."
The internet allowed her to invest most of the profits back into buying ingredients to fulfill orders and run the business from her bedroom. E-commerce also gave her access to customer data that she used to test the market and fine-tune her products to find a niche.
With the touch of a button, she could answer all kinds of questions.
"I'm a stats junkie. I could see what's selling best," said Ratliff, who grew up in San Jose. "Like, what do I need to do, what do people want, what are they responding to."
Bloggers and magazines got hold of her products and sales blew up, said Ratliff. That allowed her to jump on a growing wave in online retail: opening brick-and-mortar stores to reach more customers.
Ratliff uses her two stores to showcase handbags, clothes and jewelry she carefully selects from local artists and makers.
"I support black women in my business," said Ratliff, who expects revenues to top $200,000 this year and is hiring staff. "I'm really happy I can do that now."
Finding New Clients With Good Old Networking
Karen Smith, the metal jewelry designer, wanted to move away from selling her products at farmers markets, where sales can depend on the weather, to more steady sources of revenue.
In her quest to find new opportunities for her business, Smith attended a recent mixer of black businesswomen in downtown Oakland.
Like Smith and Ratliff, many of the women who mingled over drinks said they had left unsatisfying jobs or were unemployed when they started their ventures.
Black and Latino entrepreneurs are more likely than their white and Asian counterparts to start businesses while unemployed, joining the ranks of so-called necessity entrepreneurs.
While some of the women at the mixer were just launching startups, others had already blazed successful paths.
Candice Cox, a former corporate sales executive who now owns a profitable jewelry business, was one of the event's organizers. She and six other artists founded Just Be, a local collective of black women entrepreneurs, to share experiences and support each other.
"It feels so good to be able to do things that you love to do as a hobby but as a business and get paid for it," said Cox, who counts as a client the National Museum of African American History and Culture's shop in Washington, D.C. "That’s empowering in itself just giving women the confidence that you can make your own destiny. You can create your own path."
For Smith, the event was "soul shifting," she said.
"When you work for yourself a lot of times you work in solitude, you don’t have co-workers to bounce ideas off and commiserate," said Smith. "So the opportunity to meet other African-American women entrepreneurs is a blessing."
One of the entrepreneurs Smith met there was Kelly Paschal-Hunter, who owns a gallery in the Old Oakland neighborhood. Both women clicked and Paschal-Hunter invited Smith to hold her debut pop-up show at her gallery weeks later.
The jewelry show brought new clients for Smith, and also potential customers for the gallery, said Paschal-Hunter.
"What she does isn't easy. What I do isn't easy. You know, people don’t need artwork or jewelry every day like they need food," said Paschal-Hunter, who left a career as a health care executive to open her gallery last year. "I saw an opportunity where two female-owned businesses could collaborate, support each other."
After the successful pop-up, Paschal-Hunter decided she would continue to sell Smith's jewelry.
"First gallery that has shown interest in my work and I’m super excited," said Smith. "It makes me feel like I’m moving in the direction that I want to be."