As a startup founder, I frequently receive questions from friends, family, acquaintances, about how this mysterious fundraising process works. In short, raising venture capital funds is a business deal in which you exchange equity, or a percentage of company ownership, for the capital your business needs to grow, in the form of investment funds.
Rapidly just raised our Seed round in February and now I am currently in the process of raising our Series A in the midst of COVID-19 and a faltering economy. As a Black founder, I am using my diverse perspectives and nontraditional career background as a strength in my venture capital fundraising process.
My Experience in the Startup World
In my experience as an African American founder, we don’t get a lot of venture capital funding for companies we own and run. When speaking to venture capital firms, I try to have a strong story of growth first and foremost, rather than coming in and saying “Hey I’m an African American founder, invest in my company.”
My advantage is in knowing these venture capital firms need diverse founders in their portfolios. How many of their portfolio companies have a minority founder? How many have 50-60% of their company has women in leadership roles?
Diversity & Inclusion in Venture Capital
In both startup hiring and venture capital, if you’re a person of color or you don’t come from a certain pedigree, yes, you have the odds stacked up against you.
If you’re a white male Stanford alum founder, it’s not that you have things easier, but you have a certain pattern recognition and you have an implicit bias going for you if you’re pitching to white male Stanford alum VC’s who see white male Stanford alum founders as the head of top VC-backed companies.
With this form of implicit bias, you look like these people, you’re part of their group, and it’s going to be a different experience. If you don’t fit into this linear, clearcut, comfortable background, consciously or unconsciously, there might be additional questions revolving around the founder’s competence, or more hoops and requirements they need to meet in order to even get into the same level of consideration as someone who holds the same background as the rest of the group. This is how you stack the deck against someone and set someone up to fail.
VC firms can overcome their own implicit bias by actively giving more founders chances who don’t fit into their group or look a certain way or have a certain linear background. As seen in Tiffani Ashley Bell’s viral tweet there will be an impact when companies decide to “make the hire, send the wire” rather than just pander with hosting office hours or a networking event.
Investors need to know that as much as we’re pitching them, they are pitching us and whether people of color would want to enter into a business relationship with them. It’s quite simple: write the checks for the founders who aren’t in the traditional pattern recognition realm, and give them an opportunity.
Hire and Promote Diverse Talent
I naturally hire more people of color and more women into my company than you would see in an average company. Why? Because that comes naturally to me as a Black founder, and it sets the tone of Rapidly as we continue to grow and hire in the future. It’s really important to build diversity and inclusion into the DNA of your business from the start, not just into your marketing campaigns to look good externally.
With all of the current events from just 2020, if things progress as they are, These things will become more important with growing your business. You might not attract new investors going forward if you don’t have equal representation across your organization or people of color on your board and in leadership.
The advantages of having a diverse team on the day-to-day are that we are building a product for a diverse set of users within the tax and accounting industries. The customers we already have who work in the tax and accounting industry are diverse, and they represent the American population. We’re not building a service or tool for just a certain type of person so it’s advantageous for us to have a team that is going to bring different perspectives and different backgrounds to the company as we make product and marketing decisions.
Let’s Pay It Forward
Firms need diverse founders in their portfolio, and once I’ve got my foot in the door in discussions with VC firms, I want to put emphasis on how they’re going to create more opportunities and access to other founders who look like me. My foremost goal is to open the door wider for diverse founders and make sure they’re not locked out of these opportunities and conversations.
I have two close connections in the industry that I want to shout out and spread the word about their work.
Lyle Adams, ex-Uber employee, is currently building up his company Spry. He’s building a business around Name, Image, and Likeness for college athletes to monetize their brand.