February 5, 2024
Tech Accelerator Gains $1M Grant, Plans To Boost Investment In Black Startups
The funding will be used to support diverse business owners in South Los Angeles and surrounding cities and neighborhoods.
Plug In Ventures, a Black-owned tech accelerator, has secured a new $1 million grant from the California Office of Small Business Advocate (CalOSBA). Plug In Ventures will receive $250,000 annually over four years. The funding aims to empower Black and brown early-stage startups in Southern California, fostering a more inclusive entrepreneurial ecosystem through access to capital, mentorship, resources, and educational programs.
CEO and Founder Derek Smith says the funding will be dedicated to supporting diverse business owners in South Los Angeles and surrounding cities and neighborhoods. The grant will be used to enhance his firm’s accelerator program and support new founders outside the program. That will include tailoring services to prepare Black entrepreneurs for VC opportunities and connecting them to potential capital investors.
“Our focus will be on equipping them with the skills and resources needed to develop venture-backable business models and ideas, particularly in the realm of software technology,” he tells BLACK ENTERPRISE.
In general, tech startup accelerators are run by seasoned entrepreneurs who help early-stage tech firms connect with investors, advance their products, and sharpen their business plans. Capital infusion is crucial. Funding to Black founders has steadily declined for three years after the murder of George Floyd in 2020. That was a banner funding year with promised pledges from tech firms. However, last year, just 0.48% of all VC dollars were raised by Black founders, based on tech research firm Crunchbase. That means roughly only $661 million out of $136 billion went to Black firms.
Smith started his South Los Angeles-based firm in 2014, focusing mainly on supporting Black startups. Since 2019, companies in his firm’s ecosystem have raised over $22 million in VC dollars, coming from areas such as climate/sustainability, the creator economy, and athletic apparel.
But now, Smith wants to see the number of companies his firm helps secure investment grow conservatively by 10% to 20% by 2025 and expand into new sectors like automation, healthcare, and digital technology. Plug In Ventures now works with over 30 companies, including about 20 owned by Black entrepreneurs.
Smith explains that his firm has provided all labor at no cost to help its founders thrive until now. But this spring, it is shifting to an equity-based model targeting 5% to 7% ownership, allowing founders to participate in its accelerator.
“We intend to also facilitate follow-on investment directly and through our community of investors,” he says.
Smith expects his firm’s revenue to grow conservatively by 30% to 40% this year, although he did not provide exact amounts. He expects the uptick to come from increasing the firm’s program base and new funding sources and expanding into new markets such as Atlanta and New York this year.
“With the scale back in venture capital flowing into Black and brown entrepreneurs, the work that we’re doing to support these enterprises is more important now than ever,” he explains.