Research shows that black founders face disproportionate barriers to funding despite enormous economic potential. But here’s how several are pushing ahead.
As a woman of color, Janine Truitt was intrigued when she met an investor last winter whose “whole schtick” was to help underrepresented minorities raise money for their companies. But she was skeptical.
The owner of Talent Think Innovations, a consulting firm she founded in 2013, Truitt had bootstrapped her business and wasn’t initially convinced that venture capital was the best way to grow it. “I was thinking about my business as a legacy that I would build and pass down,” she tells Fast Company, “and that is not something investors love. They want to know if it’s a solid idea, [that] there’s a need for it in the market, and how quickly you can get out of it and pay [them].”
Many black and Latinx business owners feel more congenial about venture capital than Truitt does, but most have disproportionate trouble accessing it all the same. Those who struggle to get funded typically need to find other ways to innovate and grow. Here’s how.
VAST UNTAPPED POTENTIAL
Women entrepreneurs launched some 3.5 million new businesses over the past decade, according to the most recent “State of Women-Owned Businesses” report, with as many as 78% of them owned by women of color. By 2016, an estimated 1.9 million firms owned by black women employed some 376,500 workers, generating $51.4 billion in revenue.
Yet despite all this combined economic clout, venture capitalists have largely stayed away. A 2014 Babson College study found that most women-led businesses have been funded by the founder herself or by friends and family. Only 4% of women-owned businesses and 13% of minority-owned businesses received VC funding last year. Part of the reason is that less than 3% of VC funds have black and Latinx investment partners, according to analysis by Social + Capital.
Despite these long odds and her own reservations, Truitt knew how helpful investor backing might be for getting the tech solution she was working on off the ground–a multi-sensory platform for jobseekers with disabilities–around the time she met the equity-minded investor. So after a little encouragement, Truitt pitched her product. Impressed, the investor team offered her another meeting, so she spent the month of December hiring and leading a team of developers to build out the product, then sent off schematics for feedback.
Shortly after New Year’s, Truitt says she received an email from one of the partners saying they’d need to see the technology gain at least six months of traction in the market before deciding whether to invest. He also asked if she’d thought more about their earlier suggestion that she turn the business into a nonprofit. That wasn’t a route Truitt was initially planning to pursue, although she was open to it. Nevertheless, she’d wished their interest in investing in nonprofits had come out on the table earlier. “[My product] was always a solid idea,” she maintains, adding, “They may have the money, but it’s a partnership.”
The VC firm granted Truitt another meeting, but she hasn’t heard anything since. “I am just moving forward on my own,” she says.
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