venture capital, venture capital

5 Ways To Help Black Founders Gain More Venture Capital Dollars Amid Funding Decline

Black founders continue to not get much love from the industry pertaning to obtaining venture capital funding.

New data shows venture capital funding remains skimpy for Black founders, an ongoing snag for them.

Those founders gathered $39.7 million of all capital dispersed from $29.9 billion to U.S. startups in the third quarter of 2023, amounting to a measly 0.13%, based on research firm TechCrunch.

The number is a huge drop from last year’s last quarter when Black founders harvested $1 billion from roughly $81.7 billion in VC money, or about 1.2%. In the second quarter of 2023, the founders gained $212 million out of $29 billion. In the first quarter of this year, they got $352 million out of $45 billion.

The latest figure is a big deal as the outlet reports funding to Black founders has been regularly falling since 2020.

The shortfall comes as observers are questioning what happened to tens of billions of dollars the nation’s largest corporations – including tech giants – pledged three years ago to support economic growth for Black businesses and individuals. The vows came after the murder of George Floyd and national protests tied to systemic racism.

The tech industry is reportedly growing ten times faster, with wages two times greater than the remaining economy. Yet, its workforce mainly consists of white male professionals, managers, and executives.

Bryan DiGiorgio, founder and CEO of 1840 & Company, a global business process outsourcing provider that helps startups scale, shared the report, via email, with BLACK ENTERPRISE, highlighting the decrease in VC funding for African American founders. While it is concerning, it also presents an opportunity for those firms to strategize and adapt.

He offered five ways Black founders can boost their access to venture capital funding:

1) “Strengthen Network and Community Engagement: Building: A robust network is crucial. African- American founders should actively engage with their local and broader entrepreneurial communities. This includes attending industry events, joining relevant online forums, and participating in startup incubators or accelerators. Networking isn’t just about meeting investors; it’s about building relationships with other founders, mentors, and industry experts who can provide valuable insights, introductions, and support.”

2) “Leverage Non-Traditional Funding Sources and Platforms: Exploring alternative funding sources can be beneficial. This includes crowdfunding platforms, angel investors focusing on minority-led startups, and venture funds specifically dedicated to supporting underrepresented entrepreneurs. Additionally, government grants and programs aimed at supporting minority-owned businesses can provide both funding and valuable resources.”

3)”Showcase a Strong Value Proposition and Scalability: African American founders should focus on clearly articulating how their business solves a significant problem, its market potential, and a roadmap for growth. This involves having a well-prepared business plan, understanding your market thoroughly, and being able to demonstrate traction or potential for significant traction.”

4) “Focus on Building a Diverse and Strong Team: A diverse team brings varied perspectives, skills, and experiences, which is incredibly appealing to investors. It’s important to build a team that not only reflects diversity but also possesses the expertise and drive to propel the business forward. One effective strategy to build a diverse and skilled team is through outsourcing or staff augmentation.”

5) “Center on Building Relationships with Investors: African American founders should prioritize cultivating long-term relationships with potential investors, understanding that initial meetings with investors might not immediately lead to funding. Instead, these interactions are foundational for future financial support.”

“By leveraging these strategies, African American founders can better position their startups to attract investors and enhance their prospects of securing funding in the venture capital arena.”

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