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In the US, only 1% of venture capital funded startup founders are Black. But 2021 is showing a slightly different story. Black startup entrepreneurs are smashing venture funding records this year. In the first half of 2021, Black founders raised nearly $1.8 billion. That is more than four-fold increase over capital raised in the same time period last year.
That's according to a report by San Francisco-based Crunchbase News released July 13. According to Crunchbase's calculations, Black founders raised $400 million in the first six months of 2020. This year, Black founders are already outpacing full-year funding totals for both 2020 and 2019. In the previous two years they raised $1 billion and $1.4 billion, respectively. Startups raising Series A and B rounds drove much of the funding growth this year.
Mac Conwell, founder and managing partner at Baltimore-based RareBreed Ventures, wasn't surprised by the results. “After George Floyd was killed, we had all these people come out and make pledges to invest in Black founders.” Conwell says he is passionate about supporting diverse founders through venture capital. With the tragic murder of George Floyd opening the eyes of many in America to the inequity occurring here, many organizations are fighting back with their dollars.
The unprecedented interest and momentum in the investor community helped him find the capital to launch his own fund. Conwell launched RareBreed in September of 2020. While the progress made for founders and RareBreed is encouraging, he says, “it's disheartening, because this is what it took for this to happen.”
Conwell's fund was one of many that launched in the wake of the tragic event and resulting calls for racial justice. SoftBank Group launched a $100 million fund focused on diverse founders in June 2020. Corporations like PayPal and eBay also committed money to promote Black entrepreneurship.
However, there are investors like Mitch Brooks and Tristan Wilkerson, who have invested in Black businesses for over a decade. The long-time friends are widening their impact and doubling down on their expertise to help close the multiple gaps in the venture capital world. Everything about the men and their mission is filled with purpose. The creation of High Street Equity Partners is a dream realized for Brooks and Wilkerson. The name bears meaning from Wilkerson’s Southern roots.
“The name, High Street, is a historic street name in Little Rock, Arkansas. It was the center of business and innovation and where a lot of Black and minority businesses were concentrated. The name is a homage to the vision and goal of the firm.” – Tristan Wilkerson
Now renamed to Martin Luther King Jr. Avenue, this street is where his family is from. Wilkerson’s late grandfather and grandmother, his uncles, and brother all lived at one point in time. In many ways, no matter the city or state, MLK Boulevard or Street represents Black lives and culture. The name High Street, Wilkerson adds, is a daily reminder for them to “stay close to the ground and knowing where we come from and who came before us to get us to this point.”
The Crunchbase report cited other reasons for the increase in funding. More Black investors were promoted or started their own firms. The April 2021 initial public offering of real estate company Compass, led by CEO and founder Robert Reffkin, helped break some ground. And an increasingly competitive market for founder talent meant investors looked outside their regular circles for companies. TechCrunch described Compass as the equivalent of the launch of the first iPhone to the various other smartphones that preceded it.
There have been several already large and established companies pledging to Black businesses as well. Google has pledged millions to Black founders to help grow their businesses. Goldman Sachs has begun their One Million Black Women initiative and has already announced the first round of recipients. Even Black owned companies like Uncle Nearest are pledging to help fund other Black owned spirits brands.
Despite 2021 gains, venture capital going to Black founders remains proportionally tiny. In the first half of 2021, startups overall raised a record-breaking $147 billion. Only 1.2 percent of it went to Black founders. In 2020, Black founders received 0.6 percent of all venture capital deployed.
But the real question is, can the momentum continue? Between the pandemic, the social unrest of 2020 and the push towards racial equity, Brooks shared, “I just felt really moved to do something in the formal investment vehicle and I spoke to Tristan about that and we started to do our due diligence and here we are today.” While many may be looking at all the businesses that have failed, Brooks and Wilkerson are focused on the opportunity. Brooks theorized, “If you had a solid business model and if you were a good business operator, then the pandemic accelerated things for you and moved your revenue model up five to 10 years.”
The two businessmen are solely interested in investing in what they consider to be underrepresented founders from underrepresented geographies with businesses that accrue $100,000 in annual revenue. A 2018 investment report from PwC and CB Insights shares that four states (California, Massachusetts, New York, and Texas) control over 80% of venture capital dollars. High Street Equity Partners is focused on closing this gap.
And now you can be part of the change and closing the gap regarding venture capital. If you are a family office, a high net worth individual, or leading an institutional fund, High Street Equity Partners is currently engaging in conversations to help manage your money with purposeful investments. If you are a BIPOC founder and you are looking for resources, this just might be your chance. Apply here to pitch.
In addition, Inc.com has a great resource for entrepreneurs of color who are looking for funding.
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