Learn how savvy minority tech entrepreneurs accelerate past early funding constraints; sourcing cash from customers, lenders, and investors
Minority business ownership in tech growth industries hovers around 4% nationwide. It’s a stat indicating a growing “innovation gapâ€–compounded by insufficient liquidity and limited debt or equity funding. These and other persistent factors inhibit tech entrepreneurship from spreading widely throughout communities of color.
Growth Accelerators such as Minority Venture Partners Inc. (MVP) were launched to address this innovation lag, providing advanced entrepreneurial training and comprehensive startup support to minority and women-led firms. MVP is, however, a departure from traditional accelerators in that the program doesn’t make direct investments into its participants. Instead, the accelerator treats limited capital as a “given,â€ encouraging each team to ideate around their respective funding shortfall. This includes doubling down on “biz-devâ€ fundamentals, such as selling to big business or marketing to a niche. TheseÂ efforts ultimately strengthenÂ Â each participant’s ability to secure OPM (“Other People’s Moneyâ€) from non-institutional sources.
If you’re an aspiring minority tech entrepreneur looking to similarly innovate past early funding constraints, consider MVP’s top three (3) strategies for sourcing requisite cash from customers, lenders, and investors:
Fish in a bigger pond.
MVP’s participants developÂ mobile, social, and digital tech innovations, but are oftenÂ too young to attract institutional funding. These teamsÂ revisit their essential business model, which includes shifting from B2C to B2B customers. The strategic assumption is that the central technology they’ve created offers significant and equal value to corporate clientele. The result isÂ larger receipts, higher margins, andÂ reducedÂ capitalÂ requirements for entering the market.
Time your ask.
Research suggests minority and women tech founders share common startup experiences. This includes, but is not limited to: bootstrapping, heavy use of credit, and frequent borrowing rounds from friends and family. Also,Â 80% of new businesses don’t qualify for bankÂ loan products. Timing the ask means painting the right portrait, at the right time, and for the right audience–the lending institution. Before giving the bank your best pitch, build an asset portfolio that includes elements banks like to see: cash, receivables, and inventory (where applicable). You’ll ultimately improve your business profile as a good lending risk and gain leverage with competing micro-lenders offering friendlier borrowing terms.
Sell the future.
Angel investors and VC’s are always on the hunt for startups that project as home runs. Selling the future entails communicating the best financial picture of your business along with a reasonable timeline for investor ROI. TAM, or total addressable market, is also a big selling point appealing to investors. Many seek first-mover opportunities in industries having the size, outlook, and potential for lucrative upside.
As funding prospects go, customers, lenders, and investors possess unique drivers for parting with their hard-earned cash. Your job as an emerging minority tech founder is to find out what their “getâ€ is and sell it effectively. Doing so can improve your ability to attract other people’s money (institutional or otherwise) and extend your startup’s lifespan.