Funding Resources for Underrepresented Founders

tl;dr As awareness of the VC funding gap has grown, initiatives designed specifically to invest in companies led by folks from underrepresented backgrounds (e.g., Black, Latinx) have emerged. Underrepresented founders seeking capital for their ventures can tap into these growing opportunities to make it to their next growth milestone.

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While you may have already read this post describing how to raise capital without taking VC funding. This post specifically addresses some specific fundraising options if you are an #UnderrepresentedFounderRaisingCapital.

Funding is critical for high growth startup success. Since startups need years of runway before they become profitable, access to capital is essential. No one knows this better than underrepresented founders (UFs).  UFs report that profitability is disproportionately impacted by a lack of access to capital, with new Black-owned businesses starting with almost three times less in terms of overall capital compared to white-owned businesses.

Fortunately, new solutions to bridge this gap are emerging. VC funds with mandates to invest specifically in companies led by UFs are becoming more common. Grants established by legacy corporations and community groups and designed for companies led by UFs are popping up. Taking advantage of these kinds of opportunities could provide the bridge UFs need to reach their next growth milestone.

Here is a non-exhaustive list of funding options for UFs:

University Affiliated Opportunities: Many educational institutions are developing offerings such as programs, fellowships, competitions, incubators, and accelerators geared towards investing in UFs coming from that university. If in need of funding, UFs should investigate whether their college, university, or alma mater has one of these programs available. Here are some examples:

• Summer Lab Fund. HBCUVC, PledgeLA, and Crosscut Ventures announced the 2020 #PledgeLA Summer Lab Fund, which will allocate $5,000 grants (equity-free) to startups founded by HBCU students and alumni. 
• Duke & NC Central Pitch Competition. Duke University and North Carolina Central University launched a pitch competition for current students and alumni of Duke and NC Central. At the competition, founders will showcase their companies to investors who are committed to investing in Black-founded and Black-led businesses and will compete for up to $25,000.

Grants: Grants are especially ideal if UFs are looking for non-dilutive funding. Several legacy companies and foundations have established grant programs to provide capital to companies led by UFs. Be careful of qualification criteria though, some of these opportunities may be geographically limited. Here are some examples:

• DivInc.  I am entirely biased here as I have been a mentor and supporter of DivInc for years, but Preston and his team do amazing work supporting UFs and building community.  Their accelerator program offers startups non-dilutive seed funding upon successful completion of the program.
• Visa/iFundWomen: Visa and iFundWomen have awarded over a quarter million dollars in grants to women-owned businesses in 2020. Visit here for updates on how Visa, in partnership with iFundWomen, will continue taking action in 2021.
• Oakland Black Business Fund (OBBF): Black-led investment platform, providing capital (some via grants), technical assistance, and growth strategy to Black-owned businesses. Funds currently available are for black owned businesses in Oakland needing repairs.
• SheaMoisture: SheaMoisture announced, under its long-established Community Commerce business model, a $1Million Fund to support entrepreneurs of color and small businesses.
• AEO Innovation Meets MainStreet. The Association for Enterprise Opportunity is offering their Innovation Meets MainStreet grant to black-owned women businesses impacted by COVID-19 and civil unrest. The grant can be used to help black-owned women businesses with layoff aversion, covering operational costs, paying rent, and connecting with customers. 
• Rebuild the Block Grants. Rebuild the Block’s mission is to rebuild the block through the organic growth of resources by redistributing wealth and knowledge to the black community. In connection with this mission, Rebuild the Block offers grants to black-owned small businesses. 

Pitch Competitions: For pre-seed founders, pitch competitions can be a good source of non-dilutive capital. The caveat here is that I would not spend a ton of time pitching at competitions as you should focus on building a business and your time is valuable.  However, here are some examples that may work for you:

• Startup302. Delaware’s revamped Startup302 pitch competition focuses on UFs, a group that has historically struggled with funding inequities. Startup302’s definition of UF includes women, as well as people of color, including African Americans, Latin Americans and those of Native American descent. Prizes for the winners include more than $150K in prize money and access to mentors and valuable connections within the startup ecosystem, including introductions to potential investors. The application window for this year’s cycle has closed, but UFs should keep an eye out for next year’s application cycle.
• Black Girl Ventures Pitch Competition. Black Girl Ventures (BGV) funds and scales tech-enabled, revenue-generating businesses (under $1M) founded by people who identify as Black/Brown and woman. BGV’s pitch competition gives each founder three minutes to pitch and 3 minutes for Q&A with the audience. The audience votes with their dollars using the SheRaise platform. 
• Scale-Up Pitch Competition. National Black MBA Association® (NBMBAA) launched the Scale-Up Pitch Challenge in 2017. This year’s pitch competition is designed to “Make Big Ideas Bigger” by encouraging NBMBAA members to create startups that are scalable. The winning team will be awarded a $50,000 Grand Prize, with additional to prizes for 2^nd place and 3^rd place as well as a People’s Choice Award. 
• Flash Pitch Latinx. Flash Pitch Latinx was launched in partnership with Verizon, to empower Latinx entrepreneurs and their game changing ideas. Participants of this year’s Flash Pitch Event will get the opportunity to pitch for up to $20,000 in pre-seed funding as well as the opportunity to build strategic relations with other Latinx technologists, tech companies, and other founders.

Angel and VC Funding: Angel and VC funding are still king for startup capital raising.  For UFs looking to secure funding from either source it is a good idea to find groups looking to invest in UFs. Here are some examples:

• Beam Angel Network.  Again 100% biased here as I sit on the advisory council and serve as General Counsel for Beam, but Jessica and team are doing tremendous work supporting women entrepreneurs.  Last year, Beam launched its Beam Angel Network which invests in high potential startups run by women.  
• POCIT Black Founder List. PeopleOfColorInTech, an organization dedicated to highlighting the achievements of people of color within in the tech and startup space compiled a list of VC firms who have actually “sent the wire” and backed Black founders. The Black Founder List can be found here: https://medium.com/@pocintech/the-vc-firms-backing-black-founders-list-f4bf8ec35358.
• Black Angel Tech Fund. The Black Angel Tech Fund was founded by a group of Black entrepreneurs and angel investors. They focus on investing in Black tech entrepreneurs at the early stages. 
• The Fearless Fund. The Fearless Fund invests in women of color led businesses seeking pre-seed, seed level or Series A financing. Their mission is to bridge the gap in venture capital funding for women of color founders building scalable, growth aggressive companies. The Fearless Fund was built by women of color for women of color. Notable portfolio companies include Hairbrella. 
• Backstage Capital. A newer friend yours truly, Backstage Capital invests in companies led by UFs, including women, people of color, and LGBTQ+ founders. So far Backstage Capital has invested in 150+ companies. Backstage is sector agnostic and invests in companies at any stage. Check sizes range from $25k-$100K. In addition to financial support they provide access to experts for their portfolio companies.

Here is a more general list of VCs who claim to want to invest in companies run by UFs. 

And here is my plug – before you enter into any sort of transaction, especially one where you issue securities (e.g., convertible notes or equity), be sure to consult with legal counsel to determine its impact on your company and cap table.

Happy hunting everyone!