Last week I attended the Introduction to Backstage London breakfast held at the Silicon Valley Bank to hear about the fund’s new UK-based accelerator. Backstage Capital, a fund set up by Arlan Hamilton to invest in underrepresented founders, announced last year that they would be launching accelerators in 4 cities (London, LA, Detroit & Philadelphia). On Thursday the London team issued a clear statement of intent for their accelerator:
The primary focus of the company is to find, equip and amplify the entrepreneurial talent usually overlooked by investors, and so naturally the discussion tended towards why the need existed in the first place. Having organised a stellar panel of investors & founders, the insights ranged from the obvious to the interesting – and below I’ve outlined some of the more overlooked factors tripping up black founders looking for investment.
The internet has brought us much closer to each other and makes outsourcing tasks across the globe infinitely easier – but when building a technical business, it’s crucial that you understand what your coders are doing.
If tech isn’t your expertise, take an internship, work with coders, enrol in a free online course to learn the basics. Without the ability to assess the quality of their work or even comprehend the language of the code, your knowledge of your own business is limited.
It’s not a level playing field, we know this – but that’s a fact, not an excuse. Similar to the above point, if you’re entering a world you’re not familiar with, research, research, research. Read, listen to podcasts, meet people – stalk the industry & it’s main players like a lion stalks its prey (or in Sharmadean Reid’s words, like a woman stalks a spice on Instagram!) Even if it means you’re the only fashionable black woman in a room full of converses & hoodies.
Studiously learn the rules of the game you’re playing and then once you’re in, change them for those who come after you. Lower the barriers to entry and pave the way for those who come after you.
Andy Davis, Backstage Capital’s Director
If people don’t like or get what you’re doing, that’s their problem not yours. This is particularly salient when building businesses for underrepresented businesses: don’t apologise for deciding to focus on a particular market segment or demographic and don’t concern yourself with dissident voices. If the need is there, serve it.
Some of the world’s best-known investors passed up the opportunity to invest in some of the world’s best-known businesses. There will be people who don’t share your vision or understand what you’re trying to do, but don’t change yourself or your vision to fit in with their mould. If they don’t realise the potential of your business, then more fool them – you don’t want their money and you definitely don’t want their advice. Find people who do understand and surround yourself with them instead.
Part of the difficulty in raising investment for businesses run by founders of colour or serving underrepresented communities is the lack of case studies that highlight their value. When success is reported, the stories told usually centre around the themes of ‘luck’ – rarely are questions asked about the individuals behind the scenes and how diversity contributed towards their achievements.
The blueprint for success currently looks like white founders selling to white customers with shedloads of good fortune. Investors need to start digging deeper, but as an entrepreneur it means that keeping an eye out for these counter-examples – and using them where relevant – could have an impact on the response you get.
A comment that came up repeatedly during the breakfast was that often founders shoot off their pitch decks before exercising any kind of due diligence on the investors. Funds managing £1bn+ aren’t going to be interested in giving you £500k; investors who operate in the tech industry are likely unbothered by your food brand. Investment can be tricky to understand, but you’re wasting everyone’s time if you don’t at least put some time in beforehand to gauge who might want to hear from you.
There are significant external factors for why black founders struggle to raise funding, but taking into account these pitfalls will help you to capitalise on your business’ potential.