Investing in Black Entrepreneurship
February 29, 2024
Phil G. Joseph
Founder
Rep Matters
Garrick Ng
Senior Advisor
New Power Labs
Phil G. Joseph from Rep Matters and Real Ventures joined Garrick Ng from New Power Labs in a New Power Talk to explore the experience of Black entrepreneurs and leaders in Canadian tech and ways to increase representation and participation in this important economic sector.
In the US, venture capital to Black founders has dropped significantly from 2021. Black leaders and communities continue to face barriers in getting funding across the capital spectrum.
In 2021, venture capital funding to Black founders peaked. Yet, three years later, we have lost momentum. What barriers do Black founders face, and how do investors and funders overcome these? Phil G. Joseph shared insights from his work, highlighting three big ideas.
1. Funders invest in people we feel safe around — those who look, think, and talk like us.
When there are not enough Black funders and investors, this unconscious bias is a barrier for Black leaders and communities to access funding. Phil added that perceived safety does not only stem from visible racial and cultural cues, it also comes from socio-demographic class. People from the same background, who went to similar schools and have similar networks are more likely to feel more comfortable around one another. Black entrepreneurs from diverse backgrounds often feel the need to code-switch to build relationships with funders and investors from different backgrounds.
One of the solutions is to increase Black representation among investors and funders. Another angle is for investors to better recognize and act on unconscious biases that may be impacting decision-making. Filling data gaps also plays a role in sharpening our understanding of where we need to turn our attention.
2. Bridging the race-based data gap can help funders and investors overcome unconscious bias.
In North America, venture capital that goes to Black communities has been below 2%. In Canada, we lack up-to-date, race-based data when it comes to investments and funding to specific communities — not just for venture capital but across the capital spectrum.
This data gap is a problem – without data, it is harder to assess the investment landscape, track progress, and ultimately increase funding for Black entrepreneurship.
Through our discussion, we learned how Real Ventures internally collects socio-demographic data to understand the diversity of their portfolio companies. Phil noted that with an organizational culture that is open to learning and iterating, this kind of data helps the investment team reflect on their practices and look for ways to improve access to capital for Black entrepreneurs.
New Power Labs is also leading the People and Capital Data Partnership to help funders and investors collect self-reported, disaggregated, socio-demographic data on their leadership team and their portfolio organizations. Learn more here.
3. There is a funding and resource gap for early, pre-seed startups.
Black entrepreneurs need the same things as every entrepreneur does: education, network, and capital. Yet, the venture capital system specifically – and the financial system broadly, was not created with Black entrepreneurs in mind.
Phil noted that early-stage pre-seed startups face more challenges raising capital due to perceived higher risk. For Black-led pre-seed startups, the perceived risk is even higher, and Black founders historically need to meet higher expectations in order to get funding. This highlights the need for various funders and investors to support Black-led startups across their life cycle – whether through grants, loans, direct investment or blended capital.
To learn from and find support from within a community of black founders, Phil encourages Black entrepreneurs to engage with Rep Matters. Watch this episode for Phil’s conversation with the founders of the AfroTech Conference where he digs deeper into the different experiences of black tech founders in the US and Canada.
Relevant resources
How is capital flowing toward Black leaders and communities?
Rep Matters’ Changing the Narrative - Black in Tech at Afrotech
Inclusive Entrepreneurship: Exploring the Barriers Facing Black Entrepreneurs in Canada
Optimism and Adversity in Entrepreneurship
The State of Entrepreneurship by Black Women in Canada
Black Communities are Missed and Underfunded by Canadian Philanthropy
