Bridging the Divide Between Black Tech Founders and Venture Capital

For the last day of Black History Month 2021, I wanted to summarize my opinion on the challenges of raising venture capital (VC) as a Black tech founder; and offer suggestions on ways to help.

To date, around 1% of VC dollars go to Black founders — an estimated $3B out of $300B in 2020. Anyone that has ever tried to build a startup will tell you next to having a clear product vision, the two most important things are: people and money. Sometimes the best ideas and products fall short because of a lack of these two critical pieces. However, one could argue that at a certain period in a company’s journey, that money is the most important thing because even with the best ideas and vision, people will only work so long for peanuts. So it is no wonder that successful Black founders are nearly non-existent in the tech world, if they are not even given an opportunity when raising funds. And it is not for a lack of good ideas or skills that Black founders are unable to raise funds. In my opinion, the lack of investing in Black founders is largely tied to 3 causes that may or may not seem obvious to any consciously “woke” person:

1. Unconscious bias of VCs: Decades of research has concluded that people tend to mostly help those who look like themselves. This too is evident throughout the VC community, especially when you consider nearly half of all VCs come from two schools (Harvard and Stanford). Investors have a flawed view of who success looks like and thereby overlook great opportunities and solutions by Black founders.
2. People are different: As much as we are all alike, we are also different in our own unique ways; and this is true for the Black community. There are problems unique to our community, as well as our approach to problem solving is different. Many VCs often miss out on great opportunities from Black founders because they can’t relate to the problem and/or their approach to solving a problem and building a product is different. While there is a right or wrong way to answer equations, such as 2+2; there can be more than one solution for solving real world problems, especially, if those problems are unprecedented.
3. Socioeconomic backgrounds of Black founders: In the US, Blacks rank just about last in every major socioeconomic dimension/stat. These unsettling factors impact many Blacks’ ability to fully commit to early sacrifices needed to establish a company which many VCs judge as cost of entry, such as: early fundraising through family and friends, quitting their jobs and solely working on the product/idea, etc. If Blacks typically come from impoverished backgrounds and lack generational wealth, it is almost impossible to expect them to meet the table stakes many VCs initially judge a founder on.

To suggest there is a silver bullet to solve for these challenges, is absurd. The root cause for these challenges are rooted in systematic oppression and global societal issues. And for the most part, you can’t fix a problem, if you don’t acknowledge there is a problem — which is where we currently are.

So until we get past the first phase of the problem “acknowledgment,” here are some ways we all can actively contribute to a solution:

Ways To Help:

1. Highlight Black founders and startups on your platforms
2. Create introductions for Black founders to your VC peers and leaders in tech
3. Use Black startups products you align with (which contributes to their metrics)
4. Amplify the uniqueness in Black founders’ startups and ideas
5. Mentor and/or sponsor Black founders
6. Connect Black founders with early funding opportunities you are aware of (eg. grants, angel investors, etc.)

Interested in supporting Black founders, see this amazing list here compiled by Yonas Beshawred, Sefanit Tades, and James Norman, in association with the Transparent Collective of Black startups and founders, US based.

These challenges and ways to help are not entirely specific to Blacks in Tech, they are also applicable to women and other underrepresented groups (e.g. Latinx, Native Americans, the disabled, etc.)

Source: Crunchbase; Harvard Business Review; Techcrunch