The Big Story: Despite progress, barriers still stand in the way of Black founders. Although the U.S. startup ecosystem is increasingly vast and diverse, Black entrepreneurs across the country still face barriers to entry—such as a lack of equitable access—that make it more difficult for them to compete with their peers. And the pandemic has only exacerbated some of these disparities, with a report from the Center for Responsible Lending finding that approximately 95 percent of Black-owned firms stood almost no chance of receiving a first round Paycheck Protection Program loan from a traditional bank or credit union.
Javier Evelyn—the Founder and CEO of Alerje—started a company to help people, like himself, who live with food allergies. Evelyn told us that investors and leaders need to be more welcoming and accepting of the ideas of Black founders and be willing to give “typically underestimated founders the benefit of the doubt now when it comes to accessing capital for their startups.” Of the almost $150 billion in venture capital investments in companies last year, only $1 billion went to Black founders.
Other Black founders have also noted the difficulties of obtaining funding from venture capital firms and investors. Black entrepreneurs receive less than one percent of VC funding, and investors should do a better job of expanding out their existing networks. Netta Jenkins, the Co-Founder of Dipper—a startup that lets professionals of color share and review their company experiences in order to help other professionals of color make informed career choices—told us that “a lot of Black and Brown entrepreneurs cater their services towards Black or Brown people, and investors can’t see the vision or the mission of their companies.” In order to expand their startup networks—and engage with more diverse entrepreneurs—VC firms and others need to be more willing to consider products and services offered by Black entrepreneurs that are geared towards people who don’t necessarily look like the investors themselves.
Another Black founder, Carolyn Pitt, the CEO and Founder of Productions.com—an Atlanta-based startup working to promote diversity and simplify the hiring process within the production industry—told us that accessing capital is even more difficult for Black founders because they often lack access to funding sources outside of venture capital. “Black and Brown founders often don’t have a friends and family round—or they have one that’s substantially smaller than their counterparts—due to the lack of generational wealth,” Pitt said. Pitt believes that policymakers can better support Black founders by ensuring that they have equitable access to capital and credit, increasing access to federal grants, and providing greater access to emergency pandemic relief.
Policymakers and the broader startup ecosystem must continue to tear down the barriers to access that all too often hold back Black founders. In addition to the solutions outlined above, the government can work to raise up the next generation of Black founders by making education opportunities more equitable and inclusive, creating new funding channels for Black innovators, and incentivizing private investors to fund more diverse startups.
Policy Roundup:
Engine, startups push policymakers to advance diversity in innovation sectors. A letter this week signed by 113 startups, entrepreneurs, innovation support organizations, investors, and others from 28 states and D.C. offered suggestions for how the government can work to advance diversity in innovation. In addition, Engine—in collaboration with students at Stanford’s Juelsgaard IP and Innovation Clinic—submitted comments that highlighted barriers underrepresented entrepreneurs face and called on policymakers to mobilize toward increasing diversity and inclusion in innovation. Both the letter and comments came in response to the U.S. Patent and Trademark Office’s (USPTO) request for comment regarding the creation of a national strategy for building more diverse and inclusive innovation ecosystems across the country.
Court ruling sets stage for California to enforce net neutrality law. A California judge this week declined to grant a motion from a group of Internet service providers seeking to delay implementation of the state’s net neutrality rules, effectively allowing the Golden State to begin enforcing its law. The ruling comes on the heels of the Department of Justice’s decision early this month to drop its challenge to the state’s 2018 net neutrality law. Then-Governor Jerry Brown signed the law into effect after the Federal Communications Commission in 2017 repealed the federal net neutrality rules, which helped keep the Internet a level playing field for startups.
Lawmakers introduce bill to support underserved entrepreneurs. This week, Sens. Chris Coons (D-Del.) and Tim Scott (R-S.C.) and Reps. Jason Crow (D-Colo.) and Troy Balderson (R-Ohio) introduced the Next Generation Entrepreneurship Corps Act, which would invest $330 million over a six-year period in a fellowship program for entrepreneurs designed to encourage new startup formation in underserved communities. The bill would provide selected fellows with mentoring and networking opportunities, including matching them with a local business mentor and giving them access to support from an advisory board of venture capitalists and company executives. Underrepresented entrepreneurs often lack access to networking opportunities, which are especially crucial for startup growth and success.
Biden lifts previous administration’s visa ban. President Joe Biden revoked a proclamation from the Trump administration that suspended the entry of immigrants without approved visas and alleged that they presented a “risk to the U.S. labor market” amid the coronavirus pandemic. Biden’s proclamation said that the rule “harms industries in the United States that utilize talent from around the world” and “does not advance the interests of the United States.” Many technology companies rely on immigrants to fill gaps in the country’s STEM talent pool, and these workers are needed to help the U.S. economy recover from the pandemic.
Startup Roundup:
#StartupsEverywhere: Detroit, Michigan. Based in the Motor City, Alerje is a health management startup focused on improving the lives of people living with food allergies. We spoke with Javier Evelyn, the Founder and CEO of Alerje, to learn more about his startup’s efforts to help people coping with food allergies, his experiences as a Black founder, and his thoughts on what makes Detroit such a unique city in which to launch a startup.
