Black Founders Making Strides, but More Checks Need to Be Cut

On Juneteenth, I’m reflecting on the power and resilience of the Black community. The fact that we’re still standing after all the atrocities, inhumane and vicious crimes committed upon us, is a miraculous feat that can never be downplayed. Despite everything that’s been thrown our way to stifle our growth, hinder our joy, and ultimately destroy us, we’ve still managed to rise above it all. As former First Lady Michelle Obama once said, “When they go low, we go high.” That sentiment rings true on so many levels.  

Growing up in a family and community of entrepreneurs, I watch them pour their blood, sweat and tears into their businesses even when the odds are stacked against them. Unfortunately, Black founders still face unwarranted setbacks and obstacles. While we’ve made tremendous progress, more work needs to be done.  

Accenture research launched today shows that while Black founders are receiving 1.7 times the number of deals as compared to their counterparts, they also receive 42% less funding on average per deal. Good news at first glance, but the ugly truth is that Black founders just aren’t getting the funds they need to flourish.  

And when Black founders lose, we all lose.  This data follows up on Accenture’s research from last year that found that the lack of equitable funding to Black founders between 2016 and 2020 resulted in an estimated loss of "$67 billion in business opportunities. However, since the VC ecosystem provides innovation, economic growth and employment, some spillover benefits — including the possibility of improving Black generational wealth — are also lost. 

After speaking to a few of them, Accenture identified how these disparities play out for Black founders in the trenches who are trying to navigate this imbalanced — and oftentimes treacherous — terrain.  

As Rodney Williams, cofounder and CEO SoLoFunds and LISNR puts it, “Even when Black founders are funded, they're not funded correctly. They're not given the correct valuations, and ultimately it decreases their opportunity of success. It makes it harder to reach the heights that you would need to.” 

While Black founders struggle to get comparable financial backing from venture capitalists (VCs) as their counterparts, many are figuring out how to successfully navigate the journey of entrepreneurship despite the VC gap and inadequate funding.  

How are they doing it? By digging into their own pockets, being resourceful and deciphering what they and VCs can do to foster more lucrative and thriving business relationships.  

Financial Sacrifices 

Most successful founders, regardless of their backgrounds or businesses, must make sacrifices at some point along the way. (Find one who hasn’t, and I’ll show you a real unicorn.) But Black entrepreneurs are particularly vulnerable to it.  

“There are trade-offs,” Williams said. “You're going to pay yourself less. You're not going to be able to hire the team that's as qualified as you need. You're not going to be able to invest in the future of the company as much as you would like to. Some corners are going to have to be cut to ultimately deliver. One plus one does not equal four. And usually what they're [investors] asking you to do is to make one plus 0.5 equal six.”  

Garry Cooper, CEO and cofounder of Rheaply, a Chicago-based tech company, had a similar experience. “I moved every drop of money I earned, from either in cash or in assets, into the company. So did my founders. And it’s just tough. You just have to believe, because there’s no one else.”  

Fewer Accelerators, More Action  

There’s no question that incubators and accelerators can reap major benefits for Black founders. However, there’s a limit and a strategy that need to be considered. Williams, who’s participated in various accelerator programs, can attest.  

“Accelerators are great,” he said. “However, I will tell you that the reason why there aren't more Black founders getting capital isn't because of accelerators. There are enough. The curriculum is great. What accelerators need to do is put money in these businesses.”  

This is a shared sentiment among the other Black founders Accenture recently spoke with to discuss their business journeys.  

For Ade Adesanya, cofounder and CEO of Movn Health, a telehealth company, participating in incubators and accelerators was a bit of a catch-22.  

“For us, with VC, our first exposure was to the incubators and accelerators,” he said. “And I think as a Black founder, one of the things that I feel, at least in my generation of founders, is that we give up a lot of equity through these different programs. We did, I think, four accelerators that took their own 6% or something close to that.”  

Although there are some downsides to incubators and accelerators, they aren’t all bad. For Adesanya, they were a route to get seed money and springboard a robust network.  

Build Strong Networks  

As a Black woman working in corporate America for more than 20 years, I know the importance of cultivating meaningful relationships. A strong network can’t be overstated. It’s crucial. Knowing what we know, it’s not always about the greatest or most innovative idea, it’s about the people who believe in you! Not your product or whatever you’re selling — it boils down to your personal relationship with that potential funder.  

For instance, Williams is part of three network groups, including YPO, Aspen Institute and Henry Crown Fellows. He told Accenture that they’ve allowed for VCs to get to know him. He said, “Getting an introduction from a safe friend is the best way for a VC to take a real look at you, not a look that is misconstrued based on the bias of how I may appear.”  

Cooper is also keenly aware of the power of the right introductions and relationship building. “I've been intentional about networking,” he said. “In fact, I spend time each month on building, talking to, getting feedback from, getting advice from, my network.”   

As the old saying goes, it’s not always about what you know, but whom you know.  

Time Is of the Essence 

While Black founders can do things like be authentic and cultivate relationships to better their chances of securing VC funding, ultimately, it’s out of their control. However, what they can control is their time. That’s why it’s important for VCs and other people in powerful positions to respect it.  

Cooper put it bluntly: “Don’t waste Black founders’ time. If you're going to invite me on your stage or invite me to a conversation, let's talk about something that has to do with my business and not necessarily has to do with my likeness.” 

But there’s hope. The enterprise and VC ecosystem can take three major actions to bridge the funding gap: Support Black founders in early funding stages, support and help Black founders advance from Series A to late-stage rounds, and figure out a way to diversify venture capital decision-makers who can create more opportunities. 

But we must act fast. To close the deal size gap, it would take the lifetime of the median aged American today, 39, to see progress, and this just isn't good enough. How can this be rectified? By increasing the number of Black founders in the pipeline and the size of the check — expeditiously and exponentially.   

The time is now.  

#Juneteenth #BlackFounders #Entreprneurship #Equity #Innovation #BlackTech