Think at London Business School
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A tiny fraction of investment in new ventures in the US and UK is allocated to Black founders. Here’s what needs to change
“If I’m going to talk about the experience of Black founders, I might as well tell the honest truth. Otherwise a poor young Black founder is going to get the wrong impression of this industry, and they’re going to go into it blindly. They’ll struggle because of that.”
Zipporah Gatiti EMBA2014 is speaking with careful candour. She is the sole founder and CEO of Taste of Kenya, a sustainable supply chain for Kenyan coffee farmers, and after being asked whether her status as a woman of colour in any way impacted her ability to secure funding for her project, she sighs.
Having started her business in 2013, Gatiti is currently attaining her third degree, a Masters in Public Administration from Harvard. In spite of this, she has received the same advice over the course of her career: partner with a Caucasian male founder in order to secure investors.
“It’s not a unique recommendation,” she says. “I’ve received it as recently as a few weeks ago. A classmate told me she struggled to get funding as a single founder and woman of colour. She is extremely successful, very established, very educated – but she also struggled to get funding until she got a white male co-founder. That’s been my reality.”
Ultimately, Gatiti has chosen not to partner with a co-founder, not because she objects to it on principle, but because, “we’re a values-based company. We’re trading, we have nine employees in Kenya: we’re growing. I want to get a co-founder for the right reasons. So it’s been a struggle.”
When it comes to funding, less than 1% of all VC investment in the US is allocated to Black entrepreneurs, while in the UK, Black businesses make up 0.67% of the nation’s overall portfolio. In Europe overall, 0.9% of founders are Black. And it’s no better on the other side of the table. With white venture capitalists and angel investors making up more than 70% of the industry’s community, shortage of funds for Black businesses can often feel like a self-perpetuating cycle.
VC Funds struggle to invest in black founders because there is simply a lack of diversity at the decision making table, says Kwaku Nortey MIFPT2019, cofounder of travel management company Prime Planit and previously a part of the Investment team at EBRD and Luminous Ventures. “It is easier for investors to select founders who are essentially a reflection of themselves.”
Nortey has decided to take matters into his own hands. “I’m building a platform I’m calling BLVCK. It focuses on access to capital for Black founders – different VCs plug into it and subscribe to it. I do the difficult section for the VCs, which is collate talent.
“We partner with universities, incubators, and grant providers to have a bigger pool of Black founders and talent so that investors can no longer say, well, they don’t have a network, we don’t know who these guys are, so we’re not going to fund it. We’re making it easy.
“It would be great if they could have a minimum capital commitment. A number of funds have realised there’s a problem and are actively working hard to address the inequalities in VC. One such is Local Globe, which I am partnering with on a number of initiatives. They have a quarterly call where they update the wider Black ecosystem on progress made (#blackouttuesday) in order to be held accountable.”
Difficulty in accessing knowledge and networks is a constantly recurring theme where funding Black talent is concerned. Latitude Ventures and Local Globe co-founder Saul Klein, an Executive Fellow at LBS, points to deeper structural issues in funding as endemic to where there are systemic failures in matters of education and cohesive data in any given nation overall.
“People who have not had access to top tier school or university education find it difficult to get into the VC ecosystem, either as a founder, investor or talent. Disproportionately this affects black people. We’re trying to make the professional development and learning that is required to get into and be a success in the venture capital industry more accessible to black founders, investors and talent.”
Across the board, Black entrepreneurs agree that access to professional mentoring and resources have been invaluable in getting them through the door. One such founder, Dolapo Adeyemi MBA2019, notes that programmes like the LBS Incubator have provided warm introductions and structure not readily available to green talent.
In addition to Klein’s assessment, there is the psychological component of working as a Black founder. “I thought I needed to prove myself,” Adeyemi reminisces about getting funding for her startup, Sueted. “I went down the path of trying to secure very little money from an angel investor and then trying to make revenue off that before going for a bigger round of investors. But a lot of people cancelled their commitments. I was too reluctant to ask for funding… I didn’t go after it soon enough.”
Gatiti describes a similar experience of investors failing to follow up on initial interest due to her company’s location in Kenya. “That kind of mentality is crippling because we are assuming that education equates to ideas or entrepreneurial spirit. I have Ivy League and LBS experience but I don’t think it equates. A lot of opportunities are being left on the table. Local knowledge and local solutions work. People in their communities know them better than others ever could. They have to be involved in that journey.”
Nortey, who used to work for JP Morgan, agrees. “I felt Black every day at work… venture capital is for the top 1% of the world to play around with. Automatically, the 1% will have a viewpoint that’s completely polarised against yours, because of upbringing, social, ethnic and class background.”
He stresses the importance of original thought and perseverance. “One thing I think investors are missing out on is the sheer tenacity of a Black person. For a Black person to get in front of you, to pitch to you — they have gone through a war!” he laughs.
“That’s exactly the profile of a person you want to have running a startup. It’s a journey that requires grit and patience. If you are Black in any Western environment, you have that as an innate skill. As unfortunate as that is, these VCs are not getting access to that level of hunger, which is an amazing source of alpha.”
The good news is, that slowly but surely, things are changing. Whether through the creation of Black-led firms like Impact X or the growth of Black networks through the willingness of founders to share advice and speak candidly about their experience, progress is being made.
“We need to know that these platforms exist, that these funds exist. Everyone has a part to play in this,” says Nortey.
Gatiti offers similar advice. “Surround yourself with a group of champions, of mentors. That’s what’s going to cushion you. It’s supremely important. If an investor tells you no and you’ve done the work… it’s not the idea that’s wrong. Consider no’s as windows that are closing and look for another one. Keep collecting no’s to help you understand how to change direction and find the right person. ‘No’ is part of the path. Life moves on.”
Think at London Business School
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