Editor's Note: This article is a guest post from Mandy Price, co-founder and CEO of Kanarys, a Dallas based diversity, equity and inclusion platform.
There is an underlying current that runs through the lives of Black people, one that business leaders of other races may never know about, no matter how well-meaning they are.
The everyday lives of Black Americans have long been affected by institutional and systemic racism. The latest examples are the horrific deaths of George Floyd, Breonna Taylor and Ahmaud Arbery. Unfortunately, their deaths reflect a systemic issue affecting the African American community at large.
As the co-founder and CEO of a two-year-old technology company that has raised $1.5 million in funding, I also know firsthand how these issues and biases affect access to capital for Black founders and Black-owned companies. I will never forget the day a prominent investor turned me down because he was “concerned about an African American woman leading the company.”
My story is just one of so many that lead to the troubling data that only 1 percent of VC-backed entrepreneurs are Black, and only 3 percent of venture capital investors are Black. When Black founders do receive funding, it’s oftentimes a smaller amount with a higher interest rate. Even more alarming is that less than 50 Black women have raised more than $1 million in VC funding, ever. This is especially startling, given the high rate of entrepreneurship of Black women.
Many investors are now asking themselves how they can meaningfully address the national crisis and also put their money where their heart is. Here are my top recommendations for authentically addressing racism in VC:
● Focus less on mentoring and more on funding. “Black founders are often over-mentored and under-invested,” says Monique Woodard, co-founder of Black Founders. Offering mentorship and no funding to Black founders does nothing but make you feel good. There is no data that suggests Black founders require more mentorship than white founders.
● Diversify your decision-making team. “More than 80 percent of venture firms don’t have a single Black investor,” according to BLCK VC. In 2020, representation matters 100 percent of the time. Without diversity in leadership, VC firms will not be able to fully understand the experiences of founders of color, leading to less investment in these communities.
● Make a conscious effort to expand your portfolio to include Black-founded companies. Two major investors took steps this week toward providing better support for founders from diverse backgrounds. SoftBank unveiled a $100 million vehicle that will only back companies led by people of color, and Andreessen Horowitz launched a fund to focus on underserved communities, beginning with $2.2 million of the firm's own capital.
SoftBank COO Marcelo Claure had this to say to CNBC: "I see a lot of people have good intentions, but I think each one of us needs to contribute to make change in America."
● Expand your networks. Nine out of 10 VCs will take warm introductions over cold calls any day. And we know that most people of color, particularly women, do not currently run in the same circles as VCs today. Look around your inner circle. Look at your kids’ soccer field, your couples game night, and ask yourself, “who can I invite to the table?”
● Acknowledge your own implicit biases. 2020 has been a year of awakening for many Americans, bringing to light disparities and inequities that have long existed in the U.S. Much of it focused on systemic racism and implicit biases with the tragic deaths at the hands of police and also with COVID-19’s disproportionate impact on minorities. We can’t begin to put the above actions into place until we acknowledge today’s system simply wasn’t built for people of color and that everyone, even well-meaning people, have built-in biases. Whether it’s seeing Black-owned companies as a “risky” investment or or assuming a Black woman like myself couldn’t get into Harvard “legitimately” (yes, I was asked this once,) we all have to begin where we are and do the work to end racism across the board.
Most importantly, acknowledge the humanity of Black founders, fully and completely. See us, don’t turn away from us, and fund us.
