Black Founders are telling policymakers what they need to thrive, and policymakers need to listen
By The Engine Team
Black founders are launching and growing innovative startups every day, but they don’t face a level playing field. Black founders need support at every stage and level of innovation, from funding and mentorship opportunities, to access to federal grants, to network building, and more. Engine startup network founders have discussed — with us and with policymakers — why this support is so important for innovation and how policymakers can help.
As Renee told lawmakers in a letter to the Senate Committee on Banking, Housing, and Urban Affairs: “Through our work, we see the inequities in capital access for underrepresented founders as painfully obvious. But the gaps exist not just in venture capital or self-financing, but through our banking system as well. Across the board, Black founders face diminished access to the capital they need and without policy change, founders of color will continue to face barriers throughout our startup ecosystem. The greatest challenge a founder faces is acquiring funding, but the U.S. banking system, simply put, does not provide equitable access for many Black and brown individuals. This became apparent to many amidst the pandemic and the roll out of the Paycheck Protection Program (PPP). Predominantly Black congressional districts received fewer loans, faced delays in approval, and many Black and brown small business owners were shut out of relief due to insufficient banking relationships.”
“But for these founders to succeed, they need equitable access to business funding. If we truly want to foster an environment that produces diverse innovation and embraces a representative startup ecosystem, policymakers must work to address the systemic inequities across all funding streams on which founders rely.”
As Carolyn wrote in a recent op-ed: “A true and impactful path to lasting support for Black women entrepreneurs is for there to be diverse faces that exist among decision-makers at every level of the innovation ecosystem. And presently, we aren’t meaningfully represented at the top where only 1 percent of Black women are venture capital professionals. It means bringing diversity to the investor pool so that Black women founders see their faces and their lived experiences amongst the people who are writing the checks.”
“We need Black and brown women throughout government, reviewing grant applications and providing access to other funding opportunities. Even programs erected to directly challenge financial discrimination for underrepresented founders can be inaccessible when the people in charge don’t reflect our communities. When banks prioritize business loans for those with existing lines of credit it limits access. When first-time entrepreneurs navigate lengthy grant applications but lack a robust mentorship community or paid assistance it limits access.”
“It became very hard for me to continue advocating for folks to enter the cybersecurity field because they would likely be underrepresented at their job, and that didn’t sit right with me. There’s a level of support that our community is not able to obtain because there just aren’t that many of us. Black members of the LGBTQ+ community, and visibility matters, so it becomes somewhat of a conundrum. The industry needs diversity, but struggles to achieve that goal because of the long-standing repetitive nature of hiring practices that result in a homogeneous candidate pool of applicants. I decided that I needed to do something about this.”
“When thinking through the consequences of policy decisions, we need to make sure we have some of the brightest, diverse minds in the room, who can think about the impact on entire communities that policies would have. And then once we have all of the data from relevant parties who can speak to that, we can develop better policies because they’re not part of the homogeneous mindset traditionally in the room.”
As Tani told lawmakers in a statement to the Subcommittee on Capital Markets: “The capital formation space is rife with the need for reform to embrace and grow a diverse startup ecosystem. From the inaccessibility of venture capital for many underrepresented founders to barriers diverse founders face in accessing federal funding including loans and grants, it is clear a lot of work is needed to uplift founders of color. Modernizing and democratizing the accredited investor definition would represent a significant step to bringing equity to our startup ecosystem. The ability to invest in promising startups is central to the ability to build wealth, but high income thresholds restrict many Americans, especially people of color, from participating. In fact, as of 2020, just over 10 percent of American households were estimated to be able to qualify as accredited investors. But the arbitrary income requirements do not speak to the financial acumen of would-be investors, nor do they speak to the financial reality of many people of color. Instead, it perpetuates income inequality and shuts out countless women and people of color, including many of the women my startup works with, who want to take charge of their finances and have an equitable opportunity to build wealth.”
“As an Afro-Latino I wear multiple hats, and I’m someone who represents what the U.S. will look like in twenty or thirty years when the country is majority Black and Brown. I think it’s important to give typically underestimated founders the benefit of the doubt now when it comes to accessing capital for their startups. So my top priority is making sure that people give underestimated and underrepresented entrepreneurs the benefit of the doubt.”
“When a white friend of mine wants to create a business, they may be able to go to their families and borrow $5000. When a Black friend of mine wants to create a business, they may not be able to do that if his/her family’s accumulated wealth on average is around $15,000. We can talk all day long about creating businesses and offering loans and technical assistance — and we’ll continue to do that — but you can’t effectively accomplish that when the system isn’t set up to address basic issues.”
“Well the part that’s not a secret is that I’m a Black founder. There aren’t that many Black founders in the tech space. And, because of who I am, the resources and funding opportunities available to me are much more limited. When investors look at me I can see the “Can you really do this?”-type doubts and questions forming. On the other hand, I have a friend who is also a founder — he has a much less developed idea and it’s not anything unique, he’s working on a video game. But I have witnessed him go out and raise $4 million in capital in large part because he didn’t face the same barriers that I do.”
“I have two accountability groups I meet with regularly. One group is mostly white founders, and funding hardly ever comes up. But the other group is six Black founders, and everytime we meet we are talking about how we need money. And we’re not looking for millions of dollars. Nombolo is so small and underfunded, even when we bring in a few thousand dollars, that makes a difference for our team.”
If you’re an underrepresented founder interested in making your voice heard to policymakers, take our survey and learn more about Engine’s mission to foster diversity in the broader innovation ecosystem with our Innovation For All project.
Engine is a non-profit technology policy, research, and advocacy organization that bridges the gap between policymakers and startups. Engine works with government and a community of thousands of high-technology, growth-oriented startups across the nation to support the development of technology entrepreneurship through economic research, policy analysis, and advocacy on local and national issues.
