Scaling up Black entrepreneurship
Softbank’s Shu Nyatta on three steps to address the giant funding gap in tech. Here’s what we’re digging into at Opportunity Miami.
This is the Jan. 4, 2022 edition of the Opportunity Miami newsletter, which we send every Tuesday. Click here to subscribe to get our weekly updates in your inbox.
As a new year begins — and Opportunity Miami enters its first full year — it’s worth a reminder about what we aim to do: help shape Miami-Dade’s long-term economic future by elevating good ideas on pivotal issues, and sharing clear, actionable solutions to help our community make better decisions, faster.
With that in mind, this week’s newsletter focuses on ideas shared by Softbank’s Shu Nyatta in a recent Opportunity Miami podcast on ways to address the giant funding gap for Black tech entrepreneurs.
The challenge is severe: in the first half of 2021, Black founders received just 1.2 percent of overall venture capital funding in North America, according to Crunchbase. Remarkably, that was an increase from the year prior, when the percentage was 0.6 percent. And there’s little indication Miami is any better. A recent survey by aīre ventures assessing equity and inclusion in Miami’s tech scene found funding to be the number one priority cited by Black entrepreneurs.
Nyatta, who recently moved to Miami, oversees the $5 billion Softbank Latin American Fund and the SB Opportunity Fund, a $100 million fund focused on investing in Black, Latin and Native American entrepreneurs.
You can watch or listen to the full podcast here, but we’re going to drill down on three recommendations Nyatta made to upend the status quo.
First, focus on the top of the funnel: the beginning of the company formation process is where most help is needed.
The way we build companies is riddled with bias from the outset, Nyatta says. This includes practices like “friends and family” investment rounds, where budding tech entrepreneurs seek seed funding from family members and close friends.
“If you go talk to 10 Black founders and 10 Latino founders and ask them how much capital they could raise from ‘friends and family,’ it is starkly different from upper-middle class Mark Zuckerberg raising from his friends and family,” Nyatta said.
To address this, Nyatta proposes bringing in a well-known accelerator that helps many aspiring Black entrepreneurs take the leap and launch. SB Opportunity Fund invests in companies after this initial launch phase; but it’s at the company formation phase where most help is needed, he said. It’s important, Nyatta says, to not only do this at scale, but to do so with a branded, prestigious operator.
“If I were Miami, I would partner with a very credible [accelerator], I’d convince Mike Seibel at Y Combinator to launch Miami Y Combinator,” Nyatta said, referring to the globally acclaimed accelerator that’s propelled countless tech startups including Airbnb, Door Dash and Coinbase.
Black Tech Week co-founders Derick Pearson and Felecia Hatcher brought Seibel to Miami in 2017 to speak at the conference, as efforts were ramping up to build Miami’s tech community. But Y Combinator has steadfastly followed a model of having entrepreneurs go to its Bay Area location.
Acknowledging this, Nyatta added, “He’s unlikely to do it because there’s no reason to be located in a particular place. But that would be the holy grail.”
Second, it’s important for major financial and technology brands to invest in Black founders. But the investments bring more than money — they bring much-needed validation.
“It’s very powerful to say I have an investment from Softbank or I have an investment from Apple, or I have an investment from J.P. Morgan,” said Nyatta. The name value such organizations bring, on top of capital, “is something that cannot be replicated.”
In addition to the capital gap for Black founders, Nyatta says there’s a permission gap. Many founders from underrepresented groups, he said, don’t feel they have the right to start a company. “When you create examples of other founders who look like them, that sense of permission increases,” he said.
And, Nyatta says, we can help bridge the permission gap through validation.
“So the challenge I would give,” Nyatta continued, “is this is about large, powerful corporate brands — especially financial services brands — lending that brand with some capital to validate an entire community of founders and doing it patiently over time.”
Which brings us to the third point: it’s an urgent but long-term endeavor.
“It’s not a one-year affair, maybe it’s not even a ten-year affair,” said Nyatta. “The most important thing is consistent effort over time, because what you want to create is this self-reinforcing flywheel of founders who do not any longer feel underrepresented.”
There are a range of efforts underway that are doing versions of this in Miami-Dade County. But by any measure, there is dramatically more to be done. For a community that aims to build a truly diverse startup ecosystem, this is a formula to think about as the New Year begins. We would love to hear your thoughts.
You can always find us on our website, check out our podcast on YouTube andSpotify, and follow on our social channels at @opportunitymia. And we can always be reached at next@opportunity.miami.
Here’s to a great and impactful 2022,
Matt Haggman
Opportunity Miami
@matthaggman
Photo (top) by Surface on Unsplash. Opportunity Miami is powered by the Miami-Dade Beacon Council.
