How Minority Founders Overcame the Challenge of Finding VC Investors
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Tristan Walker is CEO of personal grooming company Walker and Co. The affable thirtysomething has the shiny resume one expects of a startup founder. College valedictorian, Stanford MBA, Boston Consulting Group and stints at tech titans like Twitter, Foursquare and Andreessen Horowitz.
Baldwin Cunningham, co-founder of Partnered, has a similarly tech world approved CV. He was a college football player who worked at startups before being accepted to the prestigious Silicon Valley finishing school Y-Combinator.
Both men have gone on to raise money for their popular startups from brand name investors, garnered healthy amounts of PR buzz and solid customer traction. Though in the early days of empire building, both seem the epitome of the classic Silicon Valley success story.
The content of their character might match that of other successful founders but the color of their skin, to paraphrase Martin Luther King Jr, makes them outliers of epic proportions. Walker and Cunningham are black.
While 11 percent of Americans are African-American, a scant 1 percent of founders of venture-backed companies identify as such. Women are also massively under represented in VC funding, with rates as low as 8 percent commonly quoted. Other groups, including Hispanic populations, receive so little funding that it is difficult to quantify.
Some of America's most ardent technology users are women, Hispanics and African-Americans but the Silicon Valley elite don’t yet reflect that diversity. Given the homogenous reality of who gets funded, it’s no surprise that Walker’s recent $6.9M round made headlines, as did female founder Kegan Schouwenburg’s recent $6.4M series A for her 3-D printing startup Sols.
To help make this kind of funding more commonplace, we collected tips from Cunningham, fresh off of a $850,000 fundraise of his own, and Ana Diaz-Hernandez, a Latina venture capitalist at Kapor Capital. They shared insights on what it takes to get funded when you’re in an, oftentimes, literal minority.
2. Lead with the numbers. Investors won’t always understand the problem you’re solving. Make the size of the market opportunity obvious so that the traction isn’t a question.
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3. Help them help you. Don't forget what investors do, Cunningham said. Some have a strong mission statement to help certain kinds of entrepreneurs, industries, etc., but their job is to get a return on their investment. They have limited partners to return the funds to and need to make money. Make sure your mindset isn’t about them helping you but how can you help them help you.
4. See what others don’t. How you were born, raised and developed forces you to see the world in a certain way, says Cunningham. That influences the problems you’re solving and the approach you take to get there. If what you are building is something investors haven’t thought of, it can work to your advantage. The challenge is explaining it so they understand. The approach and solution can be out of an investor’s comfort zone. Their lack of knowledge makes investors less interested. Simplify your business message and strategy. Make sure everyone can connect with the mission
5. Find ways around lack of access. This is by far the biggest challenge. There are people spearheading different events to bridge the gap to investors but investors make their bet on the founder. That means having relationships. There are people interested in funding specific underrepresented groups. Take the opportunity to target them. "My network was jumpstarted through my accelerator network, then I really spent time investing in one-on-one relationships,'' said Cunningham.
While knowing how to find and pitch investors is key to making progress in funding, there is more to winning than networking and strategy. “Assuming you've found product/market fit, continue to believe,'' said Walker. "The large majority of founders will hear way more 'no' than 'yes'. I did. You have to continue to believe in what you're doing. Those 'no's' don't always mean your idea is a bad one. It might mean that you're really onto something that others can't see yet. Innovation and opportunity starts with more 'no's' than 'yes's.' Just believe.”
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