Black Founders Looking for Venture Dollars? — ‘Fuhgettaboutit’ Crowdfunding is the Better Option

“Startup funding is growing past it’s reliance on Venture Capital”-Dawn Dickson

Photo Credit Christina Morillo from Pexels

In the last few weeks, several sources have cited the increase in funding for Black founders H12021. According to Crunchbase, funding for Black founders hit $1.8 billion dollars in the first half of 2021, almost quadruple more than in 2020. This increase, not surprisingly, coincided with the racial justice movements of 2020, which spurred of momentum of white guilt in the form of apologetic #guiltdollars. In the wake of George Floyd, we saw corporations and venture capitalists racing to give funds to black entrepreneurs. White guilt ran rampant as companies rushed to zero out their “petty cash budgets” and use these funds to position themselves as allies of the Black community. Black founders rushed to get whatever they could get their hands on before the well ran dry.

Let’s keep it real tho. The funds were a mere pittance compared to the amount of money that is flushed through #venturecapital and therefore come off more as charity than investments with expectations of growth.

Truth be told, we no longer need to appeal to #venturecapital for funding when we have our peers.

1. JOBS Act- Since Obama enacted the JOBS Act, micro/non-accredited investors have gained access to investments they normally would not have had access to. In the early days of investing, only accredited investors had access to the private markets. The only way to invest in companies was to do so when they went public. However, the largest returns are made in the early part of a company before it goes public. The greater society did not have access prior to 2012, but the JOBS ACT as changed the game. Crowdfunding, especially equity crowdfunding (one of the provisions in the JOBS ACT) has essentially democratized private investing making it more accessible to the public. One notable founder who has successfully tapped into equity crowdfunding is Dawn Dickson. To date, her company POPCOM has run three successful crowdfunding campaigns on platforms such as Start Engine — raising well over $3.5 million dollars. In fact, in 2020 POPCOM acquired WYZERR (a company also founded by a Black woman). By investing in Popcom, you essentially get to invest in more than one company and the value of your investment grows. This is a very simplified explanation, but suffice it to say that these types of investments or access to capital were not available to your mother or grandmother. So in the words of Smokey from Friday “Take advantage man…take advantage”.
2. Easier to leverage networks and peers than to meet a venture capitalist — Want to know about the culture of warm introductions in #venturecapital? Just ask Del Johnson, author, and proliferator of the “Ban Warm Introductions” movement. Yeah, it's a thing. Having to get a warm introduction before even getting an email exchange with a VC is work, Hunty! Who wants to go through all of that? Running a business is hard enough without the worry of getting a meeting. In the age of social media, where one can build up a following as well as credibility with human beings who have jobs and money, why not appeal to them for investment dollars? By creating a campaign and promoting it, one can leverage the power of their peers. This strategy helps you maintain your pride and sense of dignity because you’re not having to overcome the lack of access to networks and the biases that venture capitalists have. A few years ago, we were not able to leverage our networks for access to capital. Now we can. That’s our 40 acres and a mule — the JOBS ACT.
3. Venture capitalists haven’t quite realized that the lived experiences of black founders make them excellent entrepreneurs— What’s unusual about black founders is that, unlike immigrant founders, they are not looked at within the context of their experiences and how their experiences have shaped and molded them. Immigrant entrepreneurs and founders are often revered for their work ethic, resourcefulness, and grit. I often see in various media outlets, both the founders and those that invest in them speak to the fact that their being an immigrant makes them a great founder. Well like them, the black experience in and of itself is a story of resilience, grit, hard work, and never giving up. No one has worked harder than the black American who has seen nothing but obstacles, even while living in America. There is no question this resilience does cross over into how they run their businesses. A #venturecapitalist may not understand this, but your peers do. We get it. We want to share in your success. Give us the opportunity to invest in your company. Put it out there like Dawn Dickson. You never know.