Navigating the venture capital landscape in tech can be turbulent for Black women. Female tech founders have to jump through more hoops and climb over a couple more hurdles to secure a fraction of the start-up funds as their male colleagues. For those who are lucky enough to hit the jackpot and get some capital, the amount is sometimes lower than what their other non-Black colleagues in the tech industry receive for many reasons.
Last year, only 27 Black women secured at least $1 million for their companies. In 2020, 93 Black women raised over $1 million in venture capital and, Black women-led startups received less than 0.5% of all venture capital, according to ProjectDiane, a biennial report on the state of Black and Latinx women founders by the organization Digitalundivided.
It’s pretty clear that a Black female tech founder’s skin colour can affect her access to venture capital a.k.a – the Benjamins. So, we put together a couple of tips you can consider before making your next elevator pitch for some capital to grow your business as a Black woman in tech.
Tip #1 – Build Your Tribe
Ever heard the old saying “it’s not what you know, it’s who you know?” Well, today, there’s lots of truth to that saying. According to CNBC, some estimates suggest that up to 70% of all jobs are not published publicly, and up to 80% of jobs are filled through networking. Therefore, Black tech founders should make it a priority to collaborate with other tech founders and be part of a strong network like Obsidi.com that has thousands of Black tech professionals and corporate partners. Tiffany Dufu, the founder of the networking app The Cru, said that every Black female founder needs a support group to help her navigate the venture capital landscape. Tiffany’s company raised $2 million in July 2020, led by Bloomberg Beta and Alpine Meridian.
Tip #2 – Research Venture Capitalists in Your Niche
Do your research. Knowing who to pitch for investment is just as important as building out a rock-solid network. It’s suggested that you look at the investors’ profiles and see the types of businesses they fund. Read the comments and advice of other female Black tech founders. Whomever you decide to take investment from, should be a good partner that you will feel comfortable working with. The truth is, Black women are more likely to find success in certain environments and more likely to fail in others. If you have an idea and or a start-up business but have no clue where to start looking for the big bucks, here’s a list of investors who are friendly towards people of colour. There are also resources you can use to increase your knowledge of the marketplace and get your foot in the door.
Tip #3 – Explore All Financing Options
From racism to funding pipelines to the investment mentors or the lack thereof, pulling yourself up by the proverbial bootstraps to grow your business can get harder every time. The good news is there are myriads of funding options worth considering outside of venture capitalists too. For example, you can consider personal savings, bank loans, community development financial institutions, minority grants or private equity firms as alternate funding sources to scale and support your business. Here’s a guide from Hubspot that compiles the top resources to fund your business, along with loans, grants, and private equity firms known to support Black-owned businesses. Whether you’re looking to scale up or get started, there’s a resource for you.
Tip #4 – Know Your Value & Pitch It
Each time you step into a room to raise capital think of it as your vicarious appearance on the TV show Shark Tank. The teeth come out and you have to be ready.
- Present a problem and your company as the solution
- Know your business and market
- Use a data-driven pitch deck – we’re talking numbers and facts. For example, Rachael Twumasi-Corson, a cofounder of the beauty brand Afrocenchix, stuffed her pitch deck with numbers and closed a $1.2 million seed which included Google as an investor.
- Be comfortable communicating your competitive advantage in a few sentences.
- Know your “why” – Why are you better than your competition? Why will your business succeed? Why should a company invest in your business?
- Differentiate your brand from competitors.
Tip #5 – Set Aside Enough Time
The fundraising cycle can be a tedious and taxing process. Do your research and create a timetable of activities with lots of wiggle room when you venture into sourcing funds. According to Harvard Business Review, “the process can drag on for months as interested investors engage in “due diligence” examinations of the founder and the proposed business. Getting a yes can easily take six months; a no can take up to a year.” Also, set aside time for pushbacks and find a way to maximize each meeting. Plan for any eventuality and don’t expect to get anything done expeditiously. Instead, have some timelines and research how long each leg of the process will take so you don’t get frustrated along the way.
Tip #6 – Be Persistent
You know, starting and running a business is hard work. According to an article by McKinsey & Company, 58 percent of Black-owned businesses were at risk of financial distress before the pandemic, compared to about 27 percent of White-owned businesses. To make matters worse, the ghost of Covid-19 is said to have contributed to 41 percent of Black-owned US businesses closing doors in 2020. For the average Black female tech founder, this just means you’ll have to work twice or thrice as hard now to get investments and reap success in your business. But, there’s hope. You just have to be hungry for success in the words of motivational speaker, Les Brown. Never give up until you hear the “yes”. And remember, every “no” takes you one step closer to the ultimate “yes mam.”
P.S. Be sure to check out our last blog and sign up for the 1k for 1k referral competition going on now on Obsidi.
‘Til next time, peace!