Only around 1% of venture-capital funding went to Black-founded companies each year from 2016 through 2020. That figure has ticked up as investors recognize the importance of backing diverse entrepreneurs.
He’d quit his job in venture capital in 2019 to try to launch his own fund giving early-stage money to tech startups founded by entrepreneurs of color, but investor interest was slim. Last June, he and his co-founder figured that before throwing in the towel, they’d write one final mass email to anyone they’d ever pitched or spoken to about their fund—a group of around 300 people—asking for support.
Mr. Clements’s Los Angeles-based firm, Slauson & Co., now boasts investors ranging from actor Ashton Kutcher toThough Slauson—named after a prominent thoroughfare in historically Black South L.A.—originally hoped to raise $15 million, they’ve now surpassed $50 million in commitments. Other sizable new Black-led funds include a $134 million fund recently closed by venture-capital firm Harlem Capital, which invests in companies with founders who are female or ethnic minorities.
That lack of diversity trickles down, says Mercedes Bent, a partner at Lightspeed Venture Partners, adding that investors tend to feel more comfortable investing in founders who share their backgrounds. A 2014 Babson College study found, for example, that venture-capital firms with female partners are three times as likely to invest in companies with female CEOs than firms without female partners. “It’s all about network and what you’re exposed to,” says Ms. Bent, who is Black.
“Covid has shown the investing world that great founders can be anywhere,” Mr. Seibel, who is Black. That’s especially important, he notes, given Silicon Valley’s lack of diversity. The area’s population is just 2% Black, according to U.S. Census data. “It’s going to expand the landscape in a way that was never possible before,” says James Norman, a longtime tech entrepreneur who has been tracking the number of Black-founded companies that receive venture funding.
In many ways, when it comes to the push to open up venture capital, one of the most powerful forces might not be the desire to diversify, but the fact that there are more investors out there looking for deals, says Matt Joseph, the Black founder of the professional networking app Superconnector. Yelitsa Jean-Charles, founder of Healthy Roots Dolls, pictured with the toy she designed to help young girls learn about natural hair care.“This is not an altruistic business,” he said in an interview, adding that investors who overlook founders from nontraditional backgrounds risk missing out. Mr.
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