Incubators, accelerators and new VC funding options are helping to make the Chicago tech startup scene more diverse, business leaders say.
One example: Spool founder and CEO Catherine Merritt was part of 1871’s inaugural cohort, which was focused on providing resources for female tech entrepreneurs.
“There weren’t a whole lot of female founders at that time, and what I’ve seen is that there has been a real growth and surge of making sure that there is a better presence of under-represented founders and making sure they have access and resources,” Merritt said.
Spool has grown 684% in the last three years and was named No. 42 by Inc. 5000 fastest growing companies. That success led Merritt to launch a venture funding arm for the company.
“The lack of investment that goes to female BIPOC- and LGBTQ-founded companies, it's really not a surprise because when you look at the lack of representation from an investor and a VC standpoint. It's almost parallel,” Merritt said. “My hope and intention is to have a seat and to have a megaphone at the table and to be able to help to shift the dynamic. I really believe that if there can be more access for women and under-represented folks to sit at the table as an investor, then that's where real change can happen because that really impacts where and how the investment is deployed.”
Spool is the third company Merritt has launched after starting a crowdfunding site for moms in 2013. She was later co-founder of a direct-to-consumer baby product and brand before founding Spool in 2018.
“Through that experience I realized how hard it is for women to raise investments,” she told Chicago Inno.
Kristen Sonday, founder and CEO of Paladin, is one of three Chicago Latina founders to have raised at least $1 million in fundraising, raising the most of any with $12 million.
She also runs VC firm LongJump and thinks that with the advent of such organizations such as LongJump, Fifth Star, and P33’s TechRise, there’s been a more concentrated effort to bring diverse founders and investors to the table.
“We’re certainly making progress, but it’s been a slow grind,” she added. “The way that folks can support Black and brown founders the most is through capital and connection. That’s what I think catalyzed LongJump and started the TechRise and Fifth Star initiatives to put some real action behind what’s traditionally been words.”
In Sonday’s view, there are a few reasons why less money goes to startups led by women and some racial minorities.
“The first is that investors tend to invest in people and ideas that are familiar to them, and when you have a pretty homogenous group of investors, that will traditionally correlate with the founders who are getting funding,” she said. “The second is that they're not necessarily connected with the problems that these founders are trying to solve.”
That was the case for Eventnoire, which provides software solutions for event planners that "embrace Black culture."
“Just as important that we share our talents with the world is that we have some equity in the solutions that we’re helping to build,” Eventnoire founder and CEO Jeffrey Osuji told Chicago Inno.
Sonday said that one way under-represented groups have been getting access to resources and connections that they never had in the past is through accelerators.
“I think programs like 1871 can literally be the difference between surviving or not because of the skills that they teach, the networks that they build and the capital they can provide,” she said.
Eventnoire was selected to the Google for Startups Black Founders Fund, which provides $100,000 in capital to Black-led startups along with Google Cloud credits and hands-on support to help their startup grow.
Chicago-based Mozaic was similarly named as one of 12 startups selected for the “Google for Startups Accelerator: Black Founders” class of 2022, a program that will guide Mozaic and other growth-stage startups founded by Black entrepreneurs through Google's tools and services, offering support and advice along the way.
Chicago startup Centinel has been named to Northwestern Mutual’s Black Founder Accelerator, one of five tech startups to join the program, as several companies have started accelerator and incubator programs aimed at women and some racial minorities.
"When James Webb's telescope was launching, NASA did something different," Mozaic founder Marcus Cobb told Chicago Inno. "[When] they were receiving research papers they removed all the metadata about names, gender, just the paper and research involved. And astonishingly, they found out that most of the papers they accepted were from female scientists.
"And I think that that's what's happening here," he said. "I think these programs are helping these companies remove their biases."
