VWV Volumes #18: Analyst Renee Andam '24 on the Startup Economy of the African Diaspora
For generations, strength and resilience has been a hallmark of how Black people interact with the world. For any persecuted people throughout history, this need to survive often creates an environment where innovation is born out of necessity. For the Black American community, this innovation has been through music, comedy, art, and entrepreneurship. Black entrepreneurship goes back several generations, but more recently, a shift in venture funding has enabled these innovations to become more of a reality. After the murder of George Floyd in summer 2020, many investors committed to continually funding Black-owned startups amidst what many felt to be America’s racial reckoning. In the beginning of 2021, VCs had invested over $1.8 billion to Black founders, and that number has been increasing steadily. Investing in the Black community is so important because racial inequality in the US has significantly impacted the quality of life of Black families for generations. Black Americans are estimated to hold just about 4% of the nation’s wealth, despite being 13% of the population. Additionally, investors are missing out on a lot of opportunities if they don’t commit to fund companies that they may not otherwise get exposure to. Still, despite recent advancements, only 1% of venture-backed founders are Black. In this article, I want to celebrate startups and companies that I believe are making great progress in their respective industries, as well as talk more about trends that will drive the future of the Black innovation economy.
Disparities and Successes
The main disparity for startups founded by Black founders has been lack of access to venture capital funding. Reducing this disparity begins with having more Black investors. Harlem Capital is a group that is bridging this disparity and investing in the Black community. Of course, one of the main reasons for the lack of Black venture capitalists is that there are not a lot of pipeline programs to introduce students to the world of VC. This is where BVCC, the Black Venture Capital Consortium, excels. The consortium has an HBCU curriculum program to expose students to the world of venture and entrepreneurship. One of my favorite sources of news information about Black-owned businesses has been The Plug founded by Sherrell Dorsey. Monica Melton is the managing editor of The Plug, which delivers news and insights on the Black innovation economy. I love reading about Black owned startups as someone in VC, because it expands my worldview and makes me more knowledgeable overall. This is something that I encourage other VCs to do also, regardless of background.
A Few Notable Companies
Flutterwave is an African fintech startup with over $1 billion in valuation. It will soon become the leading software company for business payments from abroad.
Jumia, another startup created in Nigeria, has also experienced success abroad. It is often nicknamed the “Amazon of Africa”, and operates in 11 countries as of 2020.
Concluding Thoughts
The world of venture is oftentimes uncertain, and being a founder is often difficult even for those that are well-connected. This makes it all the more worthwhile to continue to bridge the gap in venture funding for Black founders. In a rapidly evolving world, venture capitalists also need to stay up to date on trends that affect communities they are not a part of. This systematic shift in access to capital can continue to show great effects on the economic mobility of Black people in America and across the world.
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