Sesie Bonsi is the founder and CEO of Bleu, a financial technology platform focused on delivering a touchless payment experience.
Financing of black entrepreneurs in the United States reached nearly $ 1.8 billion in the first half of 2021, quadrupling the previous year. However, according to a study conducted by RateMyInvestor and Diversity VC, most venture-backed startups are still overwhelmingly white, male, Ivy League-educated, and based in Silicon Valley.
In addition to increasing availability of government-sponsored proposals, such as New Jersey allocating $ 10 million to seed funds for Black and Latin startups, venture investors are funding the founders of Black and minorities. Since we promise to provide, can we expect to see a fundamental change? Or do we need to repeat the same conversation about the failure of a representative within a VC fund?
Crunchbase investigated access to capital in the venture-backed startup ecosystem and proved that many industry leaders are still worried that nothing will change dramatically. As the founder of Black FinTech, I believe venture investors are making safe bets and investing in late-stage founders rather than early or pre-seeded stages.
But what about the family, friends, and unconnected minority founders you can count on for the first $ 250,000? Venture funding remains elusive, but there are some tricks for startup founders to hack the system.
Notice that you are facing an old system
Stepping into the door with a new venture capitalist partner can be difficult, and minority founders are often naive at first. By reading TechCrunch and analyzing other VC deals you’ve seen in the news, you can get multiple answers and speak the words of people who have won millions of dollars for startups. I thought I could do it. But I didn’t get a single response while the other founders were receiving VC investments for the basic idea.
This is something I had a hard time learning. Listening in the media or reading in company blog posts often simplifies the process and may not cover the trajectory that a few founders must follow to secure funding.
I experienced hundreds of denials before raising $ 2 million to launch Bleu, a mobile payment platform that uses beacon technology to drive simple and secure payments. Climbing is a huge mountain, a full-time job to continuously market your vision and yourself to reach your first meeting with a VC fund. Still, it’s a few miles away from the funding debate.
These arguments bring additional bias to the surface. If you sit in a conference room or on a Zoom phone and listen to the types of transactions offered to the founders of minorities, you’ll see how uncomfortable they are. Often, these founders will be offered all the money they request, but don’t be fooled. It is usually not given at once because I think it is a lack of trust. Basically, interval funding is the same as being a baby sat.
Therefore, as the founder of a minority, you must be aware that it will be a long vehicle, and you reject because you are at a disadvantage before opening your mouth to market your idea. Will face. It’s all possible, but patience is key.
Consider the worst scenario
After understanding how complex the funding process is, my coping mechanism is to understand how to leverage the business ideas that I have already implemented in case I have never been funded by a VC. was.
Think about it: how can you make money without institutional investors, friends, family, or an internal network? When you experience 100 rejections, you will be amazed at your entrepreneur’s thirst for success. That’s why the minority companies involved in these test situations can quickly gain an edge through ancillary and secondary businesses, or through crowdfunding against GoFundMe and Kickstarter.
Although generally considered non-essential, ancillary companies provide regular income and service streams to support your core business ideas. Most importantly, it shows investors that a continuous source of revenue other than their core business can create valuable products and attract loyal customers.
Find niche markets and conduct surveys with potential clients to find out the specific needs they have. Then build the product with feedback in mind and release it to beta clients. When you release your product to the public, find a reseller that keeps your internal workforce low and generates recurring revenue.
However, do not take the accessories lightly. They are not just a side job. Payment issues can occur when you’re crazy about revenue, distractions from clients and partners who need custom requests, and supply chain issues.
In my case, I built a POS (point-of-sale) software platform for selling to sellers. This provided another source of revenue that could be integrated with Bleus payment technology. These ancillary businesses help fund your core business until you plan a full start-up or raise more money.
In 2019, The New York Times published an article entitled “More Start-Ups Have a Unfamiliant Message for Venture Capitalists: Get Lost.” It highlights how entrepreneurs, who are shunned by VC funding channels, are looking at alternatives and forming opposition movements. There are always alternatives to see if the funding process has proven to be very difficult.
Move forward seriously with the accelerator
Accelerators allow ventures to define their products and services, build networks quickly, and most importantly, sit at tables that aren’t possible on their own. Applying for an accelerator as the founder of a minority was a real turning point for me. Because we have met key investors who can build trust and open the door to new networks, investors and clients.
We recommend that you use a platform such as F6S to find an accelerator that explicitly searches for the founders of minorities. These are in line with accelerators and early growth programs working on innovation in various global industries such as financial technology. That’s how I found the VCF inTech Accelerator in 2016, and one-third of the founders came from a minority.
Since then, Blue has won the spotlight in the 2020 class of IBM Hyper Protect Accelerator, which is dedicated to supporting innovative startups in the fintech and health tech industries. These types of accelerators provide access to startup workshops, technology and business mentorship, and networks of partners, customers, and stakeholders.
You can impress your accelerator by creating a pitch deck to showcase the founders and products and a video of the company in less than two minutes, and working with the fintech community to disseminate the news.
Another alternative to accelerators is government funding, but for a myriad of reasons, investing in startups has been largely unsuccessful. Government funding tends to be a more pragmatic approach as it is not under great pressure from a limited number of partners (LP, institutional or individual investors).
Investors, who are active partners, are needed as the founders of minorities, but the government-backed funding reduces the demand for capital returns. To help the government get enough profits, we need to ask ourselves if we are really looking for the best startups owned by minorities.
Utilize overseas markets
There are many unconscious social stigmas, stereotypes, and invisible prejudices in the United States. These cultural dynamics are fundamentally different in other countries that do not have the same history of discrimination, especially when looking at teams and assessing their founders.
Not only will the bias be reduced, but investors in Southeast Asia, Scandinavia and Australia will be much more likely to risk new contactless payment technologies as they use less cash across the region. I also noticed that it seems to be. Take Klarna and Afterpay as examples of FinTech success stories.
First, I engaged in market research and scrutinized my annual report to determine if I should look for funding abroad rather than applying for funding close to home. I looked at Nielsen’s reports, payment publications, PaymentSource, and numerous government documents or white papers to understand cash usage around the world.
According to my research, FinTech in Australia is far more timeless and four-fifths of the population uses contactless payments. The financial services sector is also the largest contributor to the national economy, contributing approximately $ 140 billion annually to GDP. Therefore, I spoke to the Australian Ministry of Foreign Affairs and Trade in the United States and they recommended several regulatory payment groups.
I immediately flew to Australia to meet with the banking industry. We were able to find an Australian investor by word of mouth surrounded by the demand for mobile payment solutions.
In contrast, US investors who are still using cash and cards weren’t interested in what I had to say. This highlights the importance of market research and looking for investors rather than waiting for them to come to you. There is no science in it. You can also take advantage of the network to reach people via LinkedIn.
Need to diversify the venture capital industry internally
By addressing pipeline issues and addressing the level of diversity within VC funds, VC funding needs to be more comprehensive for women and minority groups. All networks that VCs first reach tend to come from Stanford, MIT, and Harvard university programs. These more privileged and wealthy students can easily take advantage of the traditional and outdated networks built to benefit them.
The number of venture dollars flowing to the founders of Black and Latinx is terribly small, partly because of this knowledge gap. Many women and the founders of minorities don’t even know that VC funding is their option. Therefore, if you receive seed funding, spread the news about it within the network to help others.
Inclusion starts at the educational level, but if the percentage of black and minority students in these elite colleges is still low, you can see why you need a minority representative in VC rank. Even if the expression rises by a percentage, it’s a big change.
As the number of VC funds announcing their commitment and interest in investing in minority businesses is increasing, it is advisable to take a closer look at these. But what about the demographics of VC companies? How many ethnic groups are there in the executive rank?
To change the venture-backed startup ecosystem, you need to start from the top and diversify the people who sign your checks. Looking to the future, black-led funds like Sequoia, or varieties like women’s venture funds, backstage capital, and elevate capital inclusive funds, are illuminating the path to solutions that reflect US diversity. Other funds focused on sex.
It is the responsibility of the entire investor community to build relationships with more women and minority-led start-ups, and ultimately to deliberately fund them.
Despite the barriers and hurdles that minority founders face when looking for VC funding, there are more and more ways to raise money as they get the attention of the media.
As outdated systems are tuned, it’s important to keep preparing for denials and looking for suitable accelerators to build critical networks. Then, if you’re unlucky, consider what you can do with your business ideas without using VC funding, or look to foreign markets where you may have different settings and different opportunities.
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