In the wake of the killings of George Floyd and Breonna Taylor last year, and after the national uprising calling for racial justice and equality had largely left the streets, companies large and small, including those in the local startup and venture capital ecosystem, said they would do their part to create change moving forward. Promises were made. Some came to fruition. Others made little impact.
“We’re not even near the finish line at all,” said Leah Frazier, president of Dallas-based social media and PR agency Think Three Media.
While Frazier said some companies did what they had to at the moment, others have taken it upon themselves to hire more diverse talent and work on their internal practices to foster more inclusion in the workforce. However, she notes there is still a lack of diversity at the leadership level of many companies and investment firms.
Mandy Price, co-founder and CEO at Kanarys, works with companies to help to create diversity equity and inclusion in their workforce. She said there have been other positive changes taking place. She said many companies approaching the Dallas-based startup are looking for a sustained, measurable approach to the issue rather than looking for a one-off initiative. She also said many of the companies Kanarys works with have recognized that DEI work is not just housed within the H.R. department but needs to be something implemented from the top down.
“What we see now is more of a focus not just on the recruitment and talent acquisition, but companies trying to understand the entire employee lifecycle, trying to ensure that the policies, practices and procedures within their organization are promoting inclusion and equity,” Price said.
However, she too notes there is still work to be done, especially when it comes to helping Black and other diverse founders find funding at the early stages. Despite the numerous pledges from organizations to fund under-represented founders, according to Crunchbase, of the $150 billion in venture capital deals in the U.S. in 2020, only about one percent went to Black founders. Looking at the VC deals that NTX Inno has written about since the start of 2021, out of 15 deals, only two of those went to Black founders. And only one was raised by a female founder.
“It’s great that we’re taking these steps to move forward, but I don’t want people to think that we’ve made it because we haven’t,” Frazier said.
Signs of success
Kanarys was part of that one percent to find funding via a newly aimed initiative for Black founders. Price is one of only about 50 Black women to raise more than $1 million.
“Being able to give the normal, ‘Come prepared and make sure you practice your pitch,’ isn’t good enough. It’s more of how do we overcome the barriers that we know exist,” Price said.
After being accepted into the newly formed Google for Startups Accelerator for Black Founders, the internet giant followed up its support for Kanarys with a $300,000 investment from a $5 million fund dedicated to Black founders. Other local startups Zirtue, ShearShare and CourMed, also went through the accelerator and received funding.
Kanarys and fintech startup Zirtue later went on to land $500,000 at Revolution’s Rise of the Rest Tour, which focuses on underrepresented founders. With that prize came a promise from Revolution co-founder Steve Case that he would commit at least $100,000 to any funding round of $1 million or more for the companies. And when Kanarys raised a $3 million seed round in January of this year, he followed through with that commitment.
Price said the follow-on support the company received from Google and Revolution has been critical to helping Kanarys and other Black-owned companies receive funding through initiatives aimed at diversity. A one-off check doesn’t help founders overcome other structural challenges, inequities and obstacles. Through Google for Startups, Price said there would be regular meetings with other Black founders to talk about challenges they face and how they are overcoming those challenges. In addition, she said Google continues to provide quarterly mentoring and coaching.
“It been a resource of having that support system and being able to talk to other founders because it’s very isolating and lonely to be a founder, there are many, many challenges that exist,” Price said.
While some companies received funding, others didn’t. And while some of the initiatives that were launched provided that needed follow-on support, some seemed more like a one-off check to other founders.
“You’ve got to do the real deep work. For a company, you’ve got to integrate diversity into the ethos of your company. For a fund, if you want to be a more diverse fund and allocate your funds more diversely, you’ve got to integrate that into the main fund. you can’t carve out some small piece and say, ‘Oh, we’ve done our job,’” said Craig Lewis, founder and CEO at Gig Wage. “The problem is systemic, so the solution has to be systemic.”
It helps to come from money
Nearly every founder NTX Inno spoke with in reporting this story said that while some improvements have been made in the overall ecosystem, not much has changed since last year's events.
Lack of access to capital or networks, the traditional Ivy League-mentality in the startup community, and Ronnie Green, founder and CEO at fintech startup AlgoPear, says a lack of belief in founders of color is at times a lack of belief in founders of color still pervasive problems.
“Some (people) still lack the belief that Black founders could create unicorns,” Green said. “Even though some of us are not Ivy League, we can still push the needle, hit certain milestones and grow really fast. I wish the mindset were different, but it’s just not right now.”
Lewis attributes the slow progress to a lack of accountability. He said one time while attending an event, a “trust-fund baby” told him the best way to build a startup in Dallas was to come from money. And that mentality points toward larger, systemic issues in the community that still hold founders of color back.
“Yes, we need access to more capital, but it’s also access to the type of capital that empowers us to take the risk,” Lewis said.
From the start, many schools in underserved communities lack the funds to provide technology resources to students, leaving them at a competitive disadvantage later on. Lewis points out that founders of color often don’t come from generational wealth, making raising friends and family rounds difficult. A lack of generational wealth also makes having the collateral to initially launch a business hard to find. It can also decide to join the sometimes high-risk startup community in the first place if someone is the main earner in the and already has a steady job.
“I think there’s this interesting thing where you’re starting to see the wealth gap impact the ability for entrepreneurs to build scalable, high-growth businesses because you’re talking about a generation of Black people who are the first career professionals oftentimes ... and the whole family depends on them,” Lewis said.
There is also still inherent bias in some within the startup and VC ecosystem, Frazier said, adding that some of her clients at Think Three Media don’t want to advertise they are a Black-owned business because they’re afraid to lose customers.
Even though many Black founders say lack of access to capital is still one of the largest issues, and some larger institutions are making commitments to fund founders of color, Maxie Taylor, founder and CEO at Goodieboxx, said it could at times seem like a charity handout.
“I believe the opportunity and the unfortunate circumstances put a lot of spotlight on under-represented founders and our plight, but I think that conversation shifted to feel more charitable than looking at it through the lens of adding to your pipeline,” Taylor said. “We have some dope companies that are doing some really incredible things, so not only is it an underrepresented link but if you’re in it to make money, there’s money to be made if you wanted to invest.”
Taking destiny ‘into our own hands’
“If you have a $10 billion fund and say, ‘Hey, we’re going to carve out $100 million to invest in a certain group,’ ... fine, great, smart. But what’s wrong with that entire $10 billion fund?” Lewis asked.
Lewis hasn’t taken any money from newly created initiatives. However, he’s one of the few Black founders to have raised more than VC funds, most recently with a nearly $10 million Series A round.
Now, as Gig Wage looks to more than double its workforce, bringing on between 20 and 30 new members this year, Lewis is part of a growing trend he said he sees in the startup community of founders taking it into their own hands to build the ecosystems they want.
“Let’s take our destiny into our own hands. Let’s build the companies we want to work for. Let’s invest in the companies we want to grow, and you’re starting to see more of that,” Lewis said. “The people we don’t expect to change haven’t changed, but the people that want to see the change are getting a little bolder and a little more audacious, and that is a good thing.”
For Gig Wage, that means building that workforce out to be diverse. The company has put in place several measures, including removing biased language from application posts, ensuring the applicant pool is made up of at least 25 percent Black and at least 50 percent are women and hiring remotely to increase geographic diversity. To ensure those goals are met, the company brought on a new director of people and culture, overseeing workforce initiatives are met, as well as appointing its chief strategy officer as a “DEI champion.”
“I think companies that are doing it well, it’s starting from the top-down, and it’s got a seat at the business table. It doesn’t sit at the kiddie table, at the diversity table. It’s a part of the business,” Lewis said. “It’s at the board level, it’s at the CEO level, it’s at the C-suite level, and it's measured, and there’s an accountability there.”
Lewis notes that hiring diverse starts and ends with him as a business leader. He adds that it gives Gig Wage a competitive advantage with diverse thoughts and talent. Other founders also use their status as business leaders to help lift others to create communities and networks. For example, Green said he offers mentorship to other founders at any opportunity. He also said that even if an investor passes on his startup for a deal, he is quick to connect that investor with founders he knows could be a potential fit.
“It’s my duty to make sure that I help out any founder… but when it comes to founders of color, the issues that they bring up, I’m like, ‘Yep, I’ve felt that,’” Green said.
Putting ‘their money where their mouth is’
Benjamin Vann, founder and CEO at Impact Ventures, says the Black founders are the most over-mentored and under-funded founders. And his nonprofit accelerator is behind one of the more ambitious plans to solve that.
“We’re to the point where there are enough mentor programs to go around. Now we need capital,” Vann said. “That capital might not even be in the form of a level of success; sometimes that’s capital that you know is going to fail, but a lot of times entrepreneurs of color don’t even get an opportunity to fail.”
He recently launched the Dallas Inclusive Capital Fund. Already, it’s made an impact with a $25,000 investment in AlgoPear.
“They truly believe in founders … and they’re not just talk. They’re putting their money where their mouth is,” Green said. “They are hitting every cylinder … they are helpful and they’re writing checks.”
Ultimately, the fund is looking to raise $20 million. Impact Ventures is in the middle of a $5 million raise and has about $1 million of the capital already committed. Vann is hoping to start deploying more of the fund in the third quarter.
“The idea is how do we democratize access to capital in terms of who gets to build generational wealth through entrepreneurship, but then also who gets to benefit from those said investments,” Vann said.
The integrated capital fund aims to provide flexible loans and “patient equity” investments to underrepresented entrepreneurs, addressing structural barriers that have long prevented founders of color from accessing capital. The fund has a two-prong strategy. Using Impact Ventures’ accelerator tracks – one focused more on traditional small businesses and CPG brands, the other focused on high-growth tech startups – as a pipeline, the fund provides credit lines, revenue-based financing, and convertible note options to founders. While Vann said the fund would aim to provide 2x to 3x returns, ROI will also be measured in things like enterprise health, economic justice and community impact the companies make.
“The nature of venture itself is fast, high-growth and culturally speaking. That’s not the way that we typically do business,” Vann said. “Culturally, it’s more relationship-based. It’s more serving the needs of the community. The venture model is we don’t care what you do, but we want a return on our investment no matter what it does to the environment, no matter what it does to people.”
For the pilot fund, Vann said it is looking to invest in pre-seed companies with investments of about $100,000 and seed-stage investments between $250,000 to $500,000. It will also make "entrepreneur-friendly" flexible loans between $50,000 and $250,000 It’s looking to make between 12 and 15 investments with the pilot fund.
To help founders of color overcome some of the traditional barriers they face when raising early-stage capital, the Dallas Inclusive Capital Fund’s underwriting process is based on trust. Throughout a startup’s time going through the Impact Ventures accelerator program, Vann says the organization evaluates a founder’s character and ability to follow through, in addition to looking for references from community leaders and stakeholders.
“It’s leveraging the community to be able to speak to someone’s creditworthiness versus an arbitrary number,” Vann said.
In addition to helping other founders, Vann hopes the Dallas Inclusive Capital Fund can play a part in creating wealth for the broader community. Impact Ventures is allowing both accredited and non-accredited individual and institutional investors.
“That’s a very crucial point to the fund because we thought, ‘Hey, we could just get four or five guys, start an investment fund, invest in some startups and pat ourselves on the back,’” Vann said. “But that wouldn’t be transformational. It’s like, how can the vehicle of a fund be transformational for communities that allow people to participate and build wealth, and also allow people to invest their own money that they can benefit from in their own communities?”
Vann hopes to “work himself out of a job” in the next 10 years. He hopes that the number of entrepreneurs they fund can impact will create a self-sustaining ecosystem, where successful founders are created who lift up others through mentoring and capital, along with creating generational wealth.
“That’s what a vibrant entrepreneurial ecosystem looks like,” Vann said.
Hope on the horizon
The work surrounding diversity, equity and inclusion continues, and it’s a long road to undoing centuries of systemic racism. However, founders NTX Inno spoke to remain hopeful.
“I’m seeing a lot of people start funds that look like me,” Lewis said. “I think people are starting to find that path and the more people that do that, the better.”
Their reasons can vary. Some point to other nonprofit work, like The DEC@Redbird’s recent initiatives to provide more programming to founders in southern Dallas and to help provide entrepreneurship training to the formerly incarcerated. Others point to public work, like Mayor Eric Johnson’s startup task force, which is co-chaired by Price and has come up with many proposals to help bring more inclusivity in the ecosystem with things like creating new incubators. A new fund focused on early-stage companies. Some say enterprise support like Capital One’s partnership with Impact Ventures and Paul Quinn College to help bring more diverse representation into the scene.
However, nearly all of the point to the determination and tenacity of Black and other underrepresented founders.
“It’s called startup grind… because it’s a grind,” Price said.
Inevitably, some change will happen with Gen Z comprising the most diverse generation yet. And Dallas ranks among the top five most diverse cities in the U.S., according to WalletHub. Taylor said that creates an opportunity for the region to establish an identity as a startup hub not necessarily based around the types of businesses being launched but on the people behind those companies.
“We want to make Dallas a space for the underrepresented. Dallas has the underdog mentality when it comes to other cities, so that could be its secret sauce, the way that it gains its traction, the way it stands alone as a city by being the beacon of hope for the entrepreneurs of the future – diverse, inclusive and forward-thinking,” Taylor said. “I feel like we have a lot of opportunities here. We have to be intentional on the steps that we take, making sure that the entrepreneurial landscape ecosystem and risk-taking are accessible for everybody.”
A previous version of this article stated the Dallas Inclusive Capital Fund plans to make pre-seed investments of $250,000. It will make investments between $250,000 and $500,000.
