The Case for Supporting Black-Owned Ventures

My business support services have a broad reach. I have worked with many accelerators and incubators, including Wayra (Telefonica), Virgin Startups, MSDUK and several others who prefer to stay under the radar. Collectively, I have helped startups and scaleups raise over £150m in investing and will continue to do so for the foreseeable future.

But there is something deeply personal to me about investing and supporting Black-owned companies (where 50% or more of the founding/executive team is defined as Black). There is a sense of duty and pride in helping to build collective wealth and economic security for people who very often don’t get to participate in these spaces fully.

And I am all for putting my money where my mouth is. I have made personal investments in a few Black-owned companies (and will continue to do so). As an angel investor, I have helped to crowdsource seed investment for several Black-owned brands. I am the co-founder of The Black Founders Hub, a business growth mastermind for Black-owned service companies.

As well as championing investment initiatives aimed at Black founders, I have pitch-coached and mentored Black business founders to help them access funding, from angel funds to venture capital (VC) to private equity (PE).

The Challenges for Black-owned Ventures

So, let’s get into why more of you should match my energy when it comes to supporting Black-owned ventures. Let us look at some stats.

In Money.co.uk’s report on business diversity in the UK - ‘UK Diversity in Business Statistics 2023’ they found that “Ethnic minority entrepreneurs, particularly Black entrepreneurs, continue to face multiple barriers to achieving their full potential, including discrimination throughout the entrepreneurial journey, restricting their access to external finance, wider markets, business support and other resources needed to succeed.”

What does this look like in numbers?..

39% of Black aspiring entrepreneurs surveyed stopped developing their business idea because of a lack of finance.

20% of closed Black-owned businesses shuttered because of a lack of finance.

Black business owners are four times more likely than white owners to be denied business loans.

In 2021, 53% of those surveyed suffered racial discrimination.

The British Business Bank reported that:

• After starting a business, Black business owners have a median turnover of just £25,000, compared to £35,000 for White business owners. Median productivity is less than two-thirds.

• Only half of Black entrepreneurs meet their non-financial aims, compared to nearly 70% of White entrepreneurs.

• Asian and Other Ethnic Minority entrepreneurs have better outcomes than Black entrepreneurs. However, they have a lower success rate for starting a business and see less success overall than White entrepreneurs.

• Access to finance, deprivation, education, and under-representation in senior workforce positions partially explain these disparities. However, systemic disadvantage plays a role.

Diversity funds and programmes are under attack. Why?

In addition to the above reports, two pieces of news caught my eye last month, which got me thinking about my reasons for supporting Black-owned ventures and the objections people have against specific support for them.

The first piece was ‘Europe’s venture diversity machine is out of control’. The author, Harry McLaverty, posited that diversity funds, fund-of-funds, angel and scout programmes to support a more diverse ecosystem have actually put us even further behind.

I was intrigued by the notion and metrics of what constituted being further behind, especially when knowing what little proportion of funding (especially venture capital) goes to Black founders.

Without a doubt, there are exceptions that many tech publications will fall over themselves to highlight, but the exception is not the rule. This is why many have ventured to plug that gap. From Impact X to Cornerstone VC to Black Seed, a slew of individuals of Black heritage are joining VC funds to challenge some of the pattern matching. Larger organisations, like Google’s multi-million Black Founders Fund, looked into how they could support founders of Black heritage to help them accelerate.

Organisations like Angel Investing School tapped into a space to help educate and bring awareness to angel investors. Although not just targeted at Black Angels, the visibility of a Black founder brought many to that space who thought it was the exclusive domain of high net-worth White people. In turn, this spawned angel investment groups within a number of organisations. As a graduate of the Angel Investment School, I can attest to its value. Even as someone who has worked in the space for years, I learned a lot - the intricacies around deal flow, valuation and traction. I am now able to coach founder teams to be even more investment-ready.

There will undoubtedly be a problem with the notion of funds targeting just Black founders. But the truth is, we were excluded for so long that very few are aware or have the networks to make access to mainstream funds seem possible.

In the UK, there was a time when those from African and Caribbean communities were unable to access home loans and credit facilities. Because racism. So they became self-reliant and leveraged rotating savings and credit associations (ROSCAs) - microfinancing before it became mainstream. Pardna and susu are probably the most common and helped many first-generation Black heritage expats to this country raise money to buy homes. ROSCAs also operated in South Asian communities as chit or committee.

However, these microfinance funds need more funding bandwidth to scale and grow ventures.

What angel funds, venture funds and other forms of private equity afford a lot of Black entrepreneurs is the option to go bigger and faster and hire the staff to scale from a singular entity — moving away from the limitations of friends and family and microfinance schemes.

With that background in mind, I raise an eyebrow when I see articles decrying a targeted effort at levelling the playing field for Black founders. And it makes me wonder if the same kind of energy would be applied to criticism of programmes that support women founders, who only receive about 2% of total funding from venture capital.

Saying that a system needs to change is not enough to change the system. If you’re a successful venture capitalist, the current system works just as it should. Sometimes, it calls for an out-and-out revolution.

One point where the author and I agree is that too many diversity programmes are shaped by those who don’t understand the socio-economic needs of those they serve. But that doesn’t mean they’re not having a positive impact. The only suggestion by McLaverty that these funds and programmes are making things worse amounts to people questioning whether you deserve to be there. When has this never been the case for Black professionals in majority-White spaces? I’ll wait…

The second piece I want to highlight is the Edward Blum legal case on the Fearless Fund in the US. Having just won a case to prevent race-based affirmative action in US college admissions, Blum’s team have set their sights on race-based venture funds and corporate diversity. And it doesn’t take a rocket scientist to know which elements of corporate diversity they are aiming at.

In 2020, many organisations were tripping over themselves to ask me and many of my melanated colleagues to come in and talk about how they could navigate the historical problems around talent attraction, retention and progression for Black professionals. I advised those firms that the issue was bigger than just how they thought about race but their general thinking about how leadership made decisions across the board. This hugely shaped my signature product, The BRAVE Leader, and its emphasis on pillars contributing to inclusive leadership. I also warned Black staffers in those companies and my wider network that despite race action plans or whatever initiatives they developed in-house, it would only be a matter of time before there was pushback and that many of these promises made without thinking would be ignored. I hated being right. Oh how I wanted to be proved wrong.

I have lost count of the number of founders and their organisations in the private and non-profit sectors who held out hope for funding or access to funding on the back of 2020 and are now out here scraping for funds as the equity and grant-making spaces have shrunk.

In the US, the Fearless Fund was one of those funds that looked at the dire situation facing many Black women funders at less than 2% and took matters into their own hands. The fund has invested $26.5 million in more than 40 businesses owned by women of colour, including high-profile success stories like Slutty Vegan and Fresh Bellie. It has also awarded over £3m in grants to other businesses. I am puzzled as to how this version of addressing capital underfunding for Black women is a problem.

Blum’s lawsuit took some by surprise, but not those of us who have been following him and his conservative take on race neutrality. What was perceived by many as his effort to make sure government is accountable to fairness (although he is remarkably quiet on Republican-led legislature that shapes racial gerrymandering) has moved from voting to college admissions and the new territories of funding for Black ventures and now corporate diversity.

Why is this dude so hung up about a group of Black women getting access to funding they couldn’t get elsewhere? How is he defining this as racial discrimination? Is this the only fund available to women founders? Would you take the same energy to other funds that target LatinX, Native American, Pacific Islander, Jewish or Indian founders? Because they all exist even if they are less public than the likes of Fearless Fund.

Why is support for Black founders so provocative? It shouldn’t be. Take a good look at the current state of the tech ecosystem. “Unicorns” that are yet to turn a profit. Egotistical founders fucking up the world by positing office space as a tech company. Low-margin delivery services. Surveillance capitalism. Horrific treatment of staff. Surely, amongst all that chaos, there are more pressing issues to address than Black founders wanting an equal chance at pitching for funding.

Perhaps the issue is that there have been attempts, some in the form of questionable government reports, to suggest diversity gaps are not as big a deal as we know them to be. The sweet talking and ideologies found in publications like the Commission on Race and Ethnic Disparities Report do nothing to address the inequities highlighted at the beginning of my article. So we decided to step up.

Black Founders Hub, the company I co-founded with Denise Nurse and Rashida Abdulai, realised that many Black founders, especially of serviced-based companies, would not thrive on a median turnover of £25k or £33k. We specifically aimed through our mastermind and masterclasses to help our members grow to six figures and beyond. Building revenue, team, and capacity to become VAT registered so that they could be considered for supplier diversity and procurement. Something people like myself had been doing for large blue-chip companies for a while. Now, having helped many of our members achieve well over £500k in revenue, our next aim is to reach seven figures and beyond.

Others like Translate Culture have helped primarily Black Founders to build seven and eight-figure direct-to-consumer brands. The UK Black Business Group partners with individuals and institutional brands to elevate the outcomes for Black-founded businesses. Organisations like the aforementioned Cornerstone VC, Angel Investing School and Lendoe, a funding platform for underestimated entrepreneurs (also not exclusively for Black founders), shine as beacons for Black founders to be part of a wider funding ecosystem. An increase in limited partners (LPs) and general partners (GPs) from the Black community joining VC and private equity firms bodes well for understanding how we navigate these spaces. We are not out here holding our breaths for system change when we can actually be the change ourselves.

We’re playing the long game

We put our money (and energy) where our mouth is. We realise that many diversity initiatives, funds, and support services aimed at reducing the funding and profitability gaps, including ours, may have flaws, but it is a game of inches. We play the long game. Understanding that our efforts to create corporate and, subsequently, generational wealth is a concerted and joined-up work. We respect those in the Black community and those outside of it who see this business case as none of their concern, but for those of us who, in the spirit of pardna and susu, realise that collective wealth is more than just money but trust, collaboration and support, we press on.