Editor’s note: Veteran entrepreneur and investor Donald Thompson writes a weekly column about management and leadership as well as diversity and other important issues for WRAL TechWire. His columns are published on Wednesdays.
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RESEARCH TRIANGLE PARK – C-suite leaders and entrepreneurs at startups need funding to build and grow their organizations into tomorrow’s next big thing. They dream of creating the kind of game-changing companies that have an outsized impact on society and change people’s lives for the better. This is the stuff of dreams.
Yet, we also know that diverse founders have extra hurdles to overcome when it comes to getting venture capital money and backing. The disparity creates a sizable disadvantage for underrepresented leaders in relation to their peers. The VC industry has made some attempts at creating opportunities for diverse founders, but the reality is that securing funding is an oversized challenge.
At The Diversity Movement, we have gained a great deal of insight from our experiences with VCs over the last couple of years. While getting money is certainly difficult, it is not insurmountable. Here are some strategies and thoughts on overcoming barriers to success that other leaders may be able to implement on their journey.
VENTURE CAPITAL AND DIVERSITY
Penn State University and nonprofit Diversity VC released the results of an investigation into venture funding for startups with diverse leaders. The report revealed that a meager 1.87% of the $31 billion held by 200 venture capital funds they studied had been allocated to diverse founders and executives, particularly underrepresented minorities and women.
The Penn State/Diversity VC study backs other surveys that show similar results. For example, according to the 2018 Small Business Credit Survey, large banks approved just 29% of loans sought by Black business owners, compared to 60% of White entrepreneurs and 50% of Latine or Hispanic small business owners. In 2020, venture capital firms funneled roughly $150 billion to startups, according to Accenture, but only 1% of those funds were invested in Black-owned businesses.
The funding disparity is quite a challenge for startup leaders as they simultaneously build their organizations and navigate the tough economy. The notion of balancing empathy with economics might seem a bit too aspirational for startup founders and executives who can’t find the investment sources to keep the operation growing. The simple fact of the matter is that when it comes to underrepresented founders, their opportunities are just not equal – far from it.
ADVICE FROM THE FRONTLINES
I can tell you this, the success we have had in securing funding at The Diversity Movement has been through sweat equity and taking advantage of specific opportunities for networking with organizations, individuals and VCs who specialize in funding underrepresented companies.
We saw this earlier this year when Durham-based Resilient Ventures (led by Dr. Keith Daniel and Thomas Droege) invested in us. Resilient is leading the local effort in the VC community to disrupt systemic economic injustice by investing in Black startup founders, particularly those who are operating high-growth businesses, and by serving as a catalyst for Black-led startups.
And, today, we announced an investment from TiE Atlanta via its ACCESS Program, an initiative that creates inroads for underrepresented founders throughout the Southeast. Launched in 2020, TiE Atlanta’s ACCESS program aids leaders and emerging businesses who have been historically kept from investment and venture capital avenues, as well provide the mentorship opportunities essential for long-term success.
Our work with TiE Atlanta has been led by Kurt Merriweather, our vice president of innovation at The Diversity Movement. Kurt’s experience is one that other leaders can replicate – search out opportunities that go beyond funding or writing a check and include mentorship and networking. Kurt learned that TiE members are entrepreneurs and leaders, as well as aspiring professionals. That networking has opened doors and created ties with other leaders who are facing similar challenges with traditional VC funding.
The coaching and mentoring has also given The Diversity Movement entry to TiE Global, the largest entrepreneurial organization in the world. There are currently 15,000 members, including more than 2,500 charter members in 58 chapters across 12 countries. Rather than feeling like he’s shouting into a windstorm, Kurt has access to entrepreneurs and educational programming based on TiE Global’s expansive reach.
The ACCESS program was set up as a tiered model to guide leaders through the entire funding process. We were one of six companies selected from a pool of 43. As a result, Kurt and I received access to weekly mentoring sessions on pitch, product-market-fit and finances; access to the TiE Atlanta and TiE Global networks; and introductions to potential customers and partners for long-term growth. We benefited from real-time engagement with coaches who helped us redefine our story for the investor community.
The Diversity Movement’s success at the ACCESS Investor Showcase made it eligible for investment from TiE Atlanta Angels, which leads the mini-fund for ACCESS. The company was noted for the strength of its platform, vision, traction and the quality of its management team. The combination of networking, mentoring and educational programming made the difference.
Paul Lopez, ACCESS co-chair, explained: “With the right access to mentors, corporate partners, and all-around network, startups can really thrive. Kurt and Donald really dedicated themselves to take advantage of the resources ACCESS had to offer, and that’s the ultimate result in their success in the program. We are excited to invest in The Diversity Movement and look forward to their growth and continued participation with TiE Atlanta.”
As a leader, I know that creating workplace excellence is fundamental to my organization’s future success. In the startup ecosystem, securing funding not only enables me to speed growth, but also do the world-changing work that is our primary goal at The Diversity Movement. We want to build culture-centric leaders and organizations at scale.
What we have learned in our journey with Resilient and TiE Atlanta is that trailblazers benefit from access, whether it’s capital, mentoring, coaching or a network of like-minded entrepreneurs who want to create new opportunities for everyone. As underrepresented founders, we are building ventures that deliver immeasurable positive changes in the world and addressing some of society’s most pressing needs.
To achieve these dreams, underrepresented founders must forge new paths with partners who see the immense value our work promises without the baggage of a less diverse and equitable past. Until the landscape changes, we have to help one another to achieve our aspirations.
About the Author
Donald Thompson is CEO and co-founder of The Diversity Movement and the author of Underestimated: A CEO’s Unlikely Path to Success. For a limited time during the holiday season, both The Inclusive Language Handbook: A Guide to Better Communication & Transformation Leadership by Jackie Ferguson and Roxanne Bellamy and Underestimated are offered with a 25% discount.