DURHAM – When the black founders of Durham-based social media startup SpokeHub went looking for seed funds this past year, they cast a wide net.

But in the end, most of the $2 million raised came from one demographic group: African-Americans.

“We are honored to disclose that a majority of our investment dollars have come from African-American investors,” Robert Hartsfield, one of SpokeHub’s five founders and Chief Executive Officer, told WRAL TechWire this week.

However, what happened here in Durham could be seen as part of a larger national trend.

It’s no secret that companies with black founders often face a harder time securing cash to get their company off the ground. In a 2015 study, venture capital research firm CB Insights reported that black startup founders received a mere 1 percent of VC dollars even though blacks make up 12 percent of the US population.

But in recent years, a growing group of black angel investors and black-led early-stage Venture Capital (VC) funds have been working to address the funding gap by stumping for cash and seeking out minority-led companies to support.

Among the most visible firms are New York-based Harlem Capital Partners, California-based Backstage and Black Angel Tech Fund.

And earlier this week, big news emerged in Silicon Valley:  Andreessen Horowitz, a top-drawer VC firm, is reportely raising a new $15 million fund that will fund more black entrepreneurs. 

“I do see that increasing and certainly over the last 18-24 months, the rate and pace of black-led companies that have been funded over $1 million for seed and Series A rounds has really increased,” said American Underground’s (AU) Executive Director Doug Speight.

“There’s growing interest on behalf of accredited black investors to invest in the tech ecosystem and in startups with a really unique market opportunity.”

“SpokeHub is one that we love to highlight because they are Google Exchange alumni,” he added. “SpokeHub’s capital raise is truly historic. Not only because they’ve raised $2 million, but because they’ve raised it from black investors.”

Hosted by AU, Google for Entrepreneurs Exchange: Black Founders is a week-long immersion program that focuses on addressing the funding gap through mentorship, training and access to capital.

“Admittedly, there are very few African-American led companies that have passed the $1 million mark locally,” he said. “Nationally, I’ve seen more and more companies raise capital.”

Funding bias forfeits the chance at billions

There are few reports that actually break down the ethnic, racial, gender and educational backgrounds of founders of Venture Capital-backed (VC) companies. Perhaps the most seminal is the oft-cited study by CB Insights.

Ultimately, it’s costing America big bucks.

Due to discriminatory financing practices and a bias towards companies primarily operated by white males, America is losing out on over 1.1 million minority-owned businesses, according to a 2016 Center for Global Policy Solutions report.

The result: the forfeit of an estimated 9 million potential jobs and $300 billion in collective national income.

Those figures are frustrating to SpokeHub’s Richard Berryman III, another founder and head of business development.

“When you break it down, I get somewhat sad knowing the headlines,” he said. “It’s discouraging to see that black entrepreneurs have a difficult time raising money. How many ideas have been shunted?

“That’s why it’s important that we share our story. This can be done, and we’ve done it.”

It’s about the financial returns

Arlan Hamilton

To Arlan Hamilton, founder of Backstage Capital based out of West Hollywood, California, those lost opportunities also means big business for her.

Since 2015, her company has invested more than $4 million in 100 companies nationwide led by underrepresented founders – including women, people of color and the LGBTQ community.

She’s also cottoned onto what’s happening right here in Durham.

Since AU launched Google for Entrepreneurs Exchange: Black Founders more than two years ago, her company has turned up to check out the talent, investing in a total of ten companies that have gone through the program. None of those companies, however, happened to be local.

Bottom line: it’s about financial returns, she said.

“It’s not about ‘helping’ founders, it’s about fueling an untapped ecosystem so that you may be lucky enough to reap the rewards in years to come,” she wrote in a first-person piece on the online publishing platform, Medium.

“Because of the blind spot investors have for this group of people right now, there’s an enormous opportunity to invest at undervalued prices.”

Bring it on

Speight welcomes this emerging trend and believes there are “some diamonds in the rough out there.”

Through AU, he’s hoping to “create density” and subsequently, more opportunities for black founders locally through programs like the new monthly social, I’mBlackInTech, and Google Exchange, which is slated for next month.

SpokeHub’s Berryman III, agrees this is the way forward. “You have some interesting and innovative African-American led companies, not just in tech but period, that aren’t getting the eyes from every community.

“Our mission is to inspire the next generation of entrepreneurs. We have an opportunity to be a catalyst to change the dynamics of the conversation.”