The harsh reality for black entrepreneurs in the web/tech space. Your chances of raising startup capital are slim to none. Someone prove me wrong please!

Posted on September 8, 2011 - by Wayne Sutton

The harsh reality for black entrepreneurs in the web/tech space. Your chances of raising startup capital are slim to none. Someone prove me wrong please!

Flickr photo by By rickz

Let’s start with some facts:
African Americans make up 1% of Internet company founders nationally. (source)
Whites make up 87% startup founders, with Asians make up 12% (source)
Minority angel investors account for 2% of the angel population. (source)
Minority-owned firms represented 6% of the entrepreneurs that presented their business concept to angel investors. (source)
92% of venture backed startups are male (source)
California ranks as the highest state in terms of number of VC deals with 48%, with New York at 14% and Boston at 8% (source)
Half of the startup founders who Raise Money ages range from 35-44 (source)
Black unemployment: Highest in 27 years (source)

Hot Topic for 2011: Black Startup Founders/ Entrepreneurs
This year like never before have conversations, meetups and programs been launched and talked about why are there so few blacks in tech, or why black startup founder are not getting the same opportunities or access or why such programs as the NewMe Accelerator and organizations such as Black Founders are needed. It’s about time is how I feel about since I’ve been in the web/tech space since before the first dot com bubble and even though the internet is suppose to make things a level playing field, sadly when it comes to launching a web tech startup and getting funding it’s not. Some people act like racism doesn’t exits and want to say if you have a great idea or product, you have the same chances as everyone else. I tell you that is just not true in most cases.

True Stories from Silicon Valley:
This summer while we were in Silicon Valley for the NewMe Accelerator we learned a lot and kept hearing a few repetitive stories. One was about a young teenage Indian programmer who worked for another startup, left and pitched an idea, no app, no MVP, nothing but an idea and walked away with over $700,000 in funding. Another was from leading Venture Capitalist and investors such as Jay Jamison, Mitch Kapor, Michael Arrington, and Ron Conway that there are not enough Black startup founders and/or they don’t see enough Black Startup founders walk through their doors and/or there are not enough successful Black startup founders who have raised funds as examples for others. So if you don’t see the need for such programs such as the NewMe Accelerator or Black Founders or groups such as Blacks in Tech. Don’t argue with me… I dare you to argue with them.

flickr photo by Juan Haro Rodríguez

Black Founders/ Entrepreneurs Are you ready?
Since the launch of the NewMe Accelerator we have received tones of request from Black Entrepreneurs with startup ideas looking for help in terms of mentorships, funding, partners, investments, design help, programming help, you name it. But most of the time the request is looking for small seed investments to get an an app or product launched. When the phone rings I can almost predict the conversation, it goes a little something like this: Hello, I have an idea or startup that’s going to be big. Can you help with funding or mentoring or introduce me to someone with money. Every now and then someone will say, I’m building a new social network that’s going to be bigger than Facebook and I my response is usually, Ok, can you send me a deck and after that I hear nothing.

Regardless of the phone calls or who has an idea or not, one thing I learned being in the Valley during the summer is there’s a system, a format a bar set by other startup founders to raising capital and that bar is high. It doesn’t matter what color you are, if you don’t follow the protocol or format or standard unless you have a NBA friend, or rich uncle or have the right people in your network with capital and trying to raise money for your startup in this economy…good luck!

Getting in and making a difference:
With everyone launching a startups these days or have an idea to launch one, this is why the business / community accelerators are on the rise and startup accelerator/incubator such as Y combinator, Founders Lab, Tech Stars, and 500 Startups are like the NBA and NFL draft for entrepreneurs.

The numbers for how many black startup founders who have participated in such programer have yet to be made public and while a few incubators are well diverse such as 500 Startups in terms of race and gender none have had a large or a significant amount of Black founders participate over the years. If I’m wrong, show me the data and explain the 1%. This is why we launched the NewME Accelerator, it’s why I’m happy to see the growth and future of the Black Founders group in Silicon Valley and why programs such as the DreamIt and Comcast Ventures for minority-led startups are being created.

If you’re a founder that makes it into one of these programmers, consider yourself lucky and take advantage of the opportunity because you may not get another chance and there are thousands of entrepreneurs who would love to be in your shoes.

Your startup chances by idea and team to raise money:
I don’t have any hard data yet but this is my observation for Black Startup Founders/ Entrepreneurs:

Idea + Team = Chances to raise money

Start a new social network
Single founder with no startup and no coding experience = .5%
Team (developer, CTO, designer) with little experience = 2%
Single founder with experience from a huge successful social network = 4%

Launch a hip hop or Urban platform or urban blog/website or urban video site
Single founder with no startup and no coding experience = 1%
Team (developer, CTO, designer) with little experience = 3%
Single founder with experience = 5%

Launch a mobile (iPad, iPhone or Android) app
Single founder with no startup and no coding experience = 5%
Team (developer, CTO, designer) with little experience = 10%
Single founder with experience = 20%
Team (developer, CTO, designer) with little experience = 30%

*If you’re a black woman and single founder = -1%

The harsh reality for black entrepreneurs in the web/tech space. Your chances of raising startup capital are slim to none. If you’re an entrepreneur, good luck and prove me wrong. If you’re an accelerator or incubator, open your doors and prove me wrong. If you’re a venture capitalist please prove me wrong!

PS:
There’s nothing wrong with launching a startup, not raising or taking any money and being successful by making money form your customers. Good luck!

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Tags: black founder black founders Entrepreneurs silicon valley Startups
This entry was posted on Thursday, September 8th, 2011 at 11:12 pm and is filed under Diversity, Entrepreneurship, Featured, Startups. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

http://lagtime.com/blog .LAG

How is this different than black opportunities in many fields of commerce and employment? our battle is always uphill.
Royce Haynes

Black founders are a small minority and I think, instead of reiterating the sad facts, we should arm potential black founders who have ideas that solve a *problem* with pratical advice. Your example of the Indian cat who had nothing but an idea and raised money doesn’t display the right message. Instead, a practical example and advice would be to validate your idea with customers and find product/market fit before attempting to raise money. If a black founder comes to a VC proving a product/market fit, t would be difficult for a VC to turn the investment opportunity down, ESP. If the team is on point.

Aside from my rant, do black founders not get funded because there is very few of them or because they dont have a problem which is being solved by their idea?
Anonymous

Wayne unfortunately I disagree with you. The best entrepreneurs succeed against whatever odds exist. Most founders hear no hundreds of times before they get funded.

Focus on the goal not the obstacle.
http://www.frankdenbow.com Frank Denbow

Interesting read, but I don’t think this is hitting on the actual problem that needs to be solved: getting more black founders into the funnel. If Ron Conway and Arrington agree that there are few black founders that come through their doors, what is the root cause and subsequently what can be done to remedy that?Funding is hard for *everyone*. Ask some highly coveted startup founders how it was like raising funds/getting into incubators not too long ago. Investors pass on good ideas/teams all the time, so extrapolating from a small data set of black founders applying to programs is a mistake.From what I have seen, VCs are all driven by the desire (and fiduciary responsibility) to make returns. I’m sure there are some racist VCs around, but this hasn’t been a personal experience of mine so far, so I couldn’t support that notion. The article has a soft reference to racism that isn’t truly backed up by anything (an indian programmer getting money is irrelevant). How does racism come into play? If thats the problem holding back black founders (I dont think it is) then what are the ways of dealing with it? I guess this article just feels incomplete to me and making claims of racism will always put black founders in an “us vs them” paradigm which is not helpful, as you alienate people who are on your side.You hint to the fact that some of the applicants even for the NewMe aren’t ready to get funded since they don’t understand the landscape and aren’t privy to the system of VC, which I think is a great point. If programs like NewMe can be the system that remedies this problem, it would be a boon for black founders.My main thesis is that if you want more black founders getting funded, you need to expose more black high school students the opportunities of the technology industry. Yes its a slow way to do things, but the reality is there aren’t too many blacks in technology on the collegiate level, so your pool of potential startup founders in technology is small to begin with.The area where you say “this is the harsh reality for black founders” is conflating experiences of all entrepreneurs.
http://www.frankdenbow.com Frank Denbow

Interesting read, but I don’t think this is hitting on the actual problem that needs to be solved: getting more black founders into the funnel. If Ron Conway and Arrington agree that there are few black founders that come through their doors, what is the root cause and subsequently what can be done to remedy that?Funding is hard for *everyone*. Ask some highly coveted startup founders how it was like raising funds/getting into incubators not too long ago. Investors pass on good ideas/teams all the time, so extrapolating from a small data set of black founders applying to programs is a mistake.From what I have seen, VCs are all driven by the desire (and fiduciary responsibility) to make returns. I’m sure there are some racist VCs around, but this hasn’t been a personal experience of mine so far, so I couldn’t support that notion. The article has a soft reference to racism that isn’t truly backed up by anything (an indian programmer getting money is irrelevant). How does racism come into play? If thats the problem holding back black founders (I dont think it is) then what are the ways of dealing with it? I guess this article just feels incomplete to me and making claims of racism will always put black founders in an “us vs them” paradigm which is not helpful, as you alienate people who are on your side.You hint to the fact that some of the applicants even for the NewMe aren’t ready to get funded since they don’t understand the landscape and aren’t privy to the system of VC, which I think is a great point. If programs like NewMe can be the system that remedies this problem, it would be a boon for black founders.My main thesis is that if you want more black founders getting funded, you need to expose more black high school students the opportunities of the technology industry. Yes its a slow way to do things, but the reality is there aren’t too many blacks in technology on the collegiate level, so your pool of potential startup founders in technology is small to begin with.The area where you say “this is the harsh reality for black founders” is conflating experiences of all entrepreneurs.
http://twitter.com/iam_kj Kristen Jones

Getting funding is tough for everyone. I think it’s tougher for us because our network is, in comparison to our white counterparts, severely limited. Very few of us have relatives and friends who have thrived in this space and can make the key introductions that propel businesses/founders forward. That said, this article would be far more useful if you went into detail about what the protocol you mentioned is, and how we can get that info to more black startups.
http://twitter.com/jasoncblee Jason Lee

One of the things you have to be willing to do is hustle and take every single opportunity to meet the right people who can serve as a reference. Tech industry is like the Mafia. You are only as good as the person who vouches for you. With that said, anyone trying to come up on the East Coast should attend this event. Bringing together a great group of people to focus 100% on this issue. A rare and unprecedented opportunity.

***************************
Greetings,

The Congressional Black Caucus Foundation (CBCF) and Representative Sheila Jackson-Lee would like to invite the members of your community to an issue forum, entitled “African Americans: Joining the Leading Edge of the High Tech Boom,” during the 41st Annual Legislative Conference (ALC) in Washington D.C. to discuss tangible efforts to increase African-American participation in the high growth technology sector.

This panel will bring together several of the nation’s leading technology entrepreneurs and venture capitalists, along with members of the African-American technology community including:

Scott Case, chief executive officer of Startup America Partnership (http://www.startupamericapartnership.org/) and co-founder of Priceline.com; Ben Horowitz, co-founder and general partner of Andreessen Horowitz VC (investor in Facebook, Skype, Twitter, and Groupon); Rep. Jared Polis of Colorado, co-founder of ProFlowers.com and Techstars Incubator; Charles Hudson, partner at SoftTech VC; Tristan Walker, business development at Foursquare; Pauline Malcolm-John, executive vice president at WeeWorld Inc.; Regina Wallace-Jones, senior director at Yahoo Inc.; and Amos Winbush III, chief executive officer of CyberSynchs Inc.

As described in this op-ed written by panelist Ben Horowitz’s business partner Marc Andreessen (http://on.wsj.com/pC7IrX), “…we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy. More and more major businesses and industries are being run on software and delivered as online services—from movies to agriculture to national defense..”

In this economic climate, Rep. Jackson-Lee believes it is imperative for talented individuals like yourselves to attend this important event to learn how you too can create jobs and wealth in various facets of the new technology economy. We hope to see you there.

WHAT: 41st Annual Legislative Conference –Session: African Americans: Joining the Leading Edge of the High Tech Boom!

WHEN: September 23, 2011, 10:00 a.m. – 12:00 p.m

WHERE: Washington D.C., Walter E. Washington Convention Center, Room 144A

The forum is open to the public and registration to ALC is not required, but space is limited so please make plans to arrive on time. Time will be allotted for attendees to ask questions and interact with the panelists.

The four-day ALC is from September 21-24 and provides an outlet to highlight the mission of CBCF – developing leaders, informing policy and educating the public by providing more than 80-high level, thought-provoking forums to address the critical challenges facing the African-American Diaspora.
Congressional Black Caucus Foundation Inc. | 1720 Massachusetts Ave. NW, Washington DC 20036 | (202) 263-2800 | http://www.cbcfinc.org
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Pauletteroca

This is so sad I have fifty thousand to invest. But after hearing these tears of woes, forget it. I will go out on my own.
http://www.gebedo.com Arvell Craig

Hey Wayne,

I have a random thought – I’m sure it’s nothing special… But I’d be interested in funding start-ups with services (seo/marketing/design) as compared to capital. – You know of any site that orchestrates such?
http://profiles.google.com/herb.gilliland Herbert Gilliland

http://www.nopersoncommittee.org
Sharon

Wayne, I’m an usual case. I didnt get funding by an angel investor but i was able to raise under 10,000.00 in 30days to build my first app from friends that believed in my app. Creative funding i guess..I’m Black and Female..
http://itunes.apple.com/us/app/igotem/id465185965?mt=8

Sharon
twitter@igotem:twitter
Taking_care_o_biz

Hi! Why did you “tuck in” at the end Black women= -1? No offense but sometimes I think Black men enjoy imagining themselves having better chances than Black women.

Btw, have you ever wondered where the White women were in the midst of all these start-ups? I Googled about 30 dot coms out of curiosity (Yahoo, Amazon, Tumblr, Ebay,Facebook, Myspace, Delicious,Classmates.com, WordPress, Formspring, Chatango, IMVU, Blogger, Flickr, Netflix, and on and on). Women outnumber men. What the hell are they doing? Not starting dot coms, that’s for sure, and that’s where the money is.

Needless to say, I was disappointed. I saw Black Planet as having been founded by a Biracial man from Europe I believe. I don’t know what women are doing but they are not taking care of business in this tech age. Men get to have all the fun!
http://www.facebook.com/profile.php?id=1812298687 Asif Ifteakhar Ridoy

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Wayne Sutton helps individuals, startups and businesses succeed in understanding how to communicate on the social web via web development, user experience, brand strategy and marketing (Mobile and Social).

Wayne Sutton is an Entrepreneur, Advisor and Partner of NewMe Accelerator.