Only about 200 Black female entrepreneurs have ever gotten $1 million in venture capital investment.
Tanya van Court recognized right away that her firm was not being supported by white male investors.
Van Court, a Black woman, created the Goalsetter app in 2016 to teach kids about investing and saving money. She found about 90% of her investors were from underrepresented groups after obtaining her first $1 million in venture financing in 2018. Goalsetter, which utilizes gamification to teach youngsters smart financial habits, now has 367,000 users and was recently funded by Nike for $1 million.
Goalsetter was "uninvestable" and kids' fintech "wasn't a thing," she remembers white investors telling her.
Then, she added, she'd see the same financiers back a comparable firm led by a white entrepreneur.
This pattern lasted until George Floyd was assassinated. Then, she said, people began to pay attention to Black-owned businesses. Her firm earned $3.9 million in a seed round in January, with NBA players Chris Paul and Kevin Durant as investors, and it has garnered $6 million in venture funding to far.
According to the demographic research ProjectDiane, the number of Black women raising $1 million or more in venture capital is rising but remains tiny – 93 as of December, up from 34 in 2018. According to 2019 statistics from Richard Kerby, a cofounder of the venture fund Equal Ventures, just 2% of venture capitalists identified as Black males in 2018 and 1% as Black women, while 70 percent of venture capitalists are white.
Consider who qualifies to be an entrepreneur in the first place. It's those born into riches, according to research.
Being a Black female founder in a largely homogeneous sector means being doubly marginalized. To succeed and attract investment, these Black women must manage structural impediments, restricted networks of contacts, code-switching, racist expectations, and majority group norms, just as they do in corporate America.
Insider talked with van Court and six other Black female entrepreneurs who have secured over $1 million in venture financing to learn how they did it. Their advice on finding the proper investors, pitching potential funders, and cultivating favorable connections with other entrepreneurs is included in the booklet.
Because the burden of change does not fall only on the shoulders of the excluded, the ladies also discussed what venture capital businesses should do to increase equality in the venture capital field.
According to them, the following are the best practices.
Bring a list of numbers with you.
According to ProjectDiane statistics from 2020, the typical seed round for Black female entrepreneurs was $125,000, compared to $2.5 million for the national median. ProjectDiane discovered that Latina female founders earned just 0.43 percent — or $715 million — of the $166 billion in venture capital investment raised in 2020.
This not only means that Black female entrepreneurs have less money to expand their enterprises, but it also means that they have to raise smaller sums at shorter intervals. Being in a continual state of fundraising is stressful and takes time away from other important tasks, such as product development, according to van Court.
When it comes to pitching your company, whether for a pre-seed or Series D financing, having a presentation full of figures that highlight things like revenue growth and total market potential is critical, according to van Court.
Britney Winters, the owner of Upgrade Boutique, a bespoke wig boutique, said one of her early blunders was not spending enough time teaching white investors about the Black beauty sector, which was worth more than $2.5 billion in 2018, according to Mintel data.
As her journey progressed, she said, adding additional data to her presentation deck helped indicate where Upgrade Boutique might belong inside the multibillion-dollar sector, which helped convince more investors. In May, her firm raised $1.7 million in a seed round headed by Mercury Fund and the Artemis Fund, bringing the total amount raised to $2 million since its inception in 2019.
The cofounders of the hair-care business Afrocenchix, Rachael Twumasi-Corson and Joycelyn Mate, similarly utilized figures to educate their white investors. They used statistics when investors questioned the accuracy of their growth, as well as highlighting critical elements like excellent customer retention rates. However, they said that this did not protect them from racist inquiries.
"Someone said, 'Why are you talking about Africa?' and made comments about Africans being poor," Twumasi-Corson recalled. Twumasi-Corson funded $1.2 million in a round led by Google in June. "When it comes to white investors, they might not be interested in Black stories, therefore you have to provide them this information."
Make contact with other entrepreneurs.
Tiffany Dufu, the founder of the networking app The Cru, believes that every Black female startup needs a support group to assist her negotiate the venture capital world.
Bloomberg Beta and Alpine Meridian sponsored a $2 million seed round for the startup in July 2020.
"Collaboration, communication, asking for support, and being vulnerable with a group of women who are going through the same thing is one of the most crucial things you can do," Dufu added. She said that these ladies "can help hold you accountable while also reminding you that you're not going insane."
Dufu's remark was reiterated by Joanna Smith, the creator of the educational startup AllHere. She joined Visible Figures, a support group for Black women in computing, to talk about issues including recruiting and fundraising.
"Never go it alone," Smith, who has secured $12 million in venture funding since launching AllHere in 2017, advises. "There is a community of women who have raised children and are anxious to discuss what has worked and what has not."
Early on, conduct research and establish contact with potential investors.
When looking for investors, Smith recommends doing research on the venture capital firm, its founder, and the company's culture. This guarantees that the connection is about more than simply money.
"Capital is only a small portion of what you gain from a solid engagement with a VC or institutional investor," she explained. "They'll be the folks you go to when everything is going well and when things aren't."
Edna Martinson has a philosophy that is comparable to hers. Before pitching a company, she looks at its portfolio, the sectors it invests in, and how it generally interacts with entrepreneurs. Boddle, her learning platform, has so far raised $2.07 million.
Meanwhile, Yelitsa Jean-Charles, who has collected a total of $1.5 million in funding, only works with investors who understand and accept her position as an entrepreneur. She established Healthy Root Dolls in 2015 with the goal of teaching natural hair care to young children of color through dolls.
"Be careful of how much time you have and the most valuable way to utilize it," she said.
Funding may be available through incubator and accelerator programs, but act with care.
Tiffany Kelly, the creator of Curastory, a video-creation platform, said that programs like the 2021 Techstars Sports Accelerator helped her learn about funding and grow her network. It also aided her in raising a $2.1 million pre-seed round in September.
However, several of the accelerators she visited were managed by white males who taught her fundraising strategies that she had already attempted and failed to use as a Black female entrepreneur.
While pitch contests and accelerator programs helped Martinson get traction, she found it discouraging that women had to rely on these means to prove themselves all the time.
"It's almost as if you need that to legitimize yourself before venture capitalists start looking at you," she explained, "whereas some of your other counterparts are able to go in with an idea and get venture capital dollars on the spot."
But keep in mind that the burden of accountability isn't just yours.
While these women offered tips for navigating the venture capital landscape, they also emphasized that for any meaningful progress to be accomplished, fundamental barriers and institutional structures in Silicon Valley needed to alter.
"A lot of prejudice would have to be undone," Jean-Charles stated. "It's not going to happen unless those folks are prepared to put themselves in various locations and explore beyond what they know."
Smith believes that mentoring and investing in historically minority entrepreneurs is critical for funds to remain competitive. Twumasi-Corson, the cofounder of Afrocenchix, wants to see more openness among backers within that framework.
"Investors could make this more equitable and boost their profits if they established clear, transparent success indicators and followed them," she added, "even if the founder doesn't look like Mark Zuckerberg."
Meanwhile, Van Court stated that if venture capital firms want to receive public and corporate pension money, they must fulfill particular diversity rules. Government grants, as well as private institutions such as university endowments and pension funds, are used to support some venture capital businesses.
Van Court would also want to see businesses adopt a policy akin to the NFL's Rooney Rule, which mandates that teams with head-coaching vacancies interview persons of color for the role. But, she added, even after Floyd's death, she and many of her colleagues were still encountering the same hurdles that many in the industry pledged to remove.
"It'll take more than six months or a year to see the proof in the pudding," she remarked. "What occurs in the next five years will determine what happens in the following ten."
By Flexi Team
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