Believe it or not. Black founders get ~1% of venture capital funding, according to Crunchbase. It’s an uphill battle when you’re ambitious while Black. Giving up on your dreams becomes easy when you don’t have access to capital to bring them to life.
It’s not like Black tech entrepreneurs don’t have great ideas, though. They fall short of the necessary backing to fund their ideas. An Ewing Marion Kauffman Foundation study found Black founders start with...three times less capital than white founders.
Trust me. Black innovation is here to stay. Black tech entrepreneurs, more than ever today, continue to build businesses despite the challenges.
What barriers exist for Black people in the tech space?
The tech industry is notorious for under-representing people of color and women. Most of the big tech companies like Google and Facebook have only ~5% of Black folks on their teams.
The amount of Black people in leadership roles is even lower. My point is this. Throughout history, the white male majority of Silicon Valley…hasn’t welcomed Black people or other diverse communities. That said, Black folks started with a disadvantage from the beginning, and the inequities continue today.
Elements of the disparities many Black people in tech face include:
- Dealing with unconscious biases
- A lack of a strong network
- Little to no venture capitalist (VC) funding and more
Big tech’s attempt to remedy these problems over the years left no lasting effect. Many hired people to lead new Diversity and Inclusion (D&I) departments and made unconscious bias training mandatory.
Unconscious bias training doesn’t bring about lasting change. People might view it as something to check off a to-do list. Instead of a means to undo the biases, people accumulate with time.
“[Unconscious bias training] does not make statistically significant differences, either in reducing bias or unfairness or increasing retention,” Kapor Klein founder of the venture capital firm Kapor Capital told Megan Dickey of TechCrunch.
The endless disparities within the tech space can’t hold us back. Black founders continue to carve out their space in the tech industry. Their biggest challenge is convincing investors their ideas are worth funding.
Why should Black tech entrepreneurs educate investors?
Conversations about the role of race have sparked in the tech space recently. Soon after, VCs developed an eagerness to fund Black tech entrepreneurs. Some key issues preventing investors from funding Black entrepreneurs remain.
Here are some examples of how to educate investors or other key decision-makers on the experiences of Black tech entrepreneurs in America. Black-owned companies’ trajectory often looks different from their white counterparts.
We aren’t all the same, but there’s some overlap in our shared experiences.
James Norman, a Black serial entrepreneur, helps us draw meaningful conclusions about the core challenges Black tech founders face in his recent op-ed in Harvard Business Review.
One of them includes a misunderstanding of the problems some Black people want to solve. The majority of investors don’t share the same worldview as Black people.
If investors don’t understand the unique market opportunity involved with a product or service, they won’t invest. Some Black entrepreneurs will create out-of-the-box solutions for more common problems.
The problems Black people explore, make little sense to a lot of investors’ limited framework. Investors prefer to fund ideas they’re familiar with over something innovative. So, investors often pass on funding unconventional ideas. Then, the little-to-no funding cycle begins.
What’s more, there’s a “friends and family” round of fundraising in the startup space. White people often receive support from wealthy family members. And many Black people lack financial support in this phase because of financial disadvantages.
So they rely on loans, credit cards, and their full-time jobs to fund their projects themselves. Let the truth be told. Investors, many of them white, can’t relate to a Black founder’s journey at all.
Black folks in America often feel the need to code-switch in professional settings. It’s not a surprise that communication gaps exist between Black tech entrepreneurs and investors.
Most Black people are direct communicators. We don’t mince words. In a pitch setting, Black founders will give declarative answers about their product, market, and strategy.
Investors see this as arrogance. The fact is. Black entrepreneurs only want to show that they belong at the table. What are some solutions?
Investors need to fund skilled Black founders. According to a WIRED article, “…diversity and pipeline issues are more social than technical in nature.” So we need to do the work of elevating Black entrepreneurs’ positions and encouraging them in their pursuits.
Harold Hughes, a Black founder of Bandwagon, said, “I found myself grasping for icons and role models that weren’t athletes, musicians, and entertainers. This led to fatigue, at best, and a limited scope on what I could become, at worst.”
Black people aren’t encouraged to take huge risks. We’re encouraged to play it safe with maybe a well-paid career in tech, instead of branching out on our own. This calls for even more support of the brave entrepreneurs willing to take on risks. What else do we need?
Black investors make up less than 1% of VCs. More Black VCs in the room can increase the chances of Black tech founders getting funded.
Brentt Baltimore, a senior associate at the venture fund Greycroft told L.A. Times,”He’s glad more people are talking about the problem but what’s really needed is ‘boots on the ground’: consistent money, time, and leadership dedicated to… bringing more Black tech professionals and investors into the industry.
Will tech build a more equitable culture in the future?
Here are a few predictions to consider. No doubt about it, we’re getting browner by the day. Come 2044, America will become a majority-minority nation… white folks will make up less than 50 percent of our population, according to the U.S. Census.
Is the future female? It sure seems like it. A report by American Express found Black women entrepreneurs are starting businesses the fastest in the U.S.
For what it’s worth. According to Inc, “Black people will be the employers of the future.” To remain relevant, VC firms will need to adapt to a more diverse and equitable society.
Funding Black tech founders will stir up unparalleled economic prosperity in America.
With more access to products created by Black entrepreneurs, will keep the dollar circulating in our communities. In this way, we’ll create more generational wealth.
Also, it will be a norm for new tech startups to pave the way for diversity and inclusion from the start. This will help create a culture of inclusiveness and camaraderie that will drive innovation.
The Bottom Line
Black tech entrepreneurs need more support from investors to achieve their goals. Black entrepreneurs are full of ideas but need funding…today. Investors who fund Black founders will invest in a more prosperous and just future for everyone.