The Lead š
Is the Southeastās venture scene friendlier to diverse-led startups?
āHow a New Generation of Black Entrepreneurs Built Atlanta's Hot Startup Sceneā [Inc]
āSoutheastern states have a higher concentration of black businesses,ā [HuffPost]
āAtlantaās black tech founders are changing entrepreneurship in America.ā [Fast Company]
The Southeast has recently garnered a slate of aspirational, optimistic media hits that paint the region as a mecca of diverse entrepreneurship.Ā
But does the flood of headlines tell the full story, specifically when it comes to the dollars flowing to Black entrepreneurs? Readers of a few of these stories canāt help but notice that, though they appear in different publications, just a few interviewees seem to represent the entirety of the Southeastās Black entrepreneur population.
We decided to dig in on whether the numbers match up to the headlines, specifically when it comes to venture-backed, diverse-led startups.Ā
Hereās the less-clickbaity, but likely more accurate headline: the region with the largest concentration of Black-owned businesses does not appear to show a demonstrable increase in venture capital dollars flowing into those businesses.Ā
The venture firms donāt stack up.
We took a hard look at the portfolios of the most active institutional investment firms in each state across the ācoreā of the Southeast (Florida, Georgia, North and South Carolina, Alabama and Tennessee). The firms were selected based on last yearās CB Insights rankings.
We then divided the number of Black founders in each firmās portfolios (including non-CEO founders such as COOs or CTOs) by the total number of active startups the firm backs, to obtain a rough percentage.Ā
While some firmās portfolios were more diverse than others ā Jumpstart Foundry, based in Tennessee, backed the highest percentage of Black founders of the firms we looked at ā none came even close to matching the actual demographics of their respective home states.Ā
In fact, several firms in particularly diverse states (where one-quarter or more of the state population is Black) commonly had one or even zero Black founders in their portfolio.Ā
[*Note: we recognize this research is approximate, imprecise, and informal. This exercise was intended to get a rough idea of what diversity looks like across the Southeastās VC landscape. We also did not delve into the dollar amounts of invested capital, which can be split unequally between a firmās portfolio investments.]
The startups that arenāt getting funded.
So if we accept the premise that funding is still not playing out on an equal level, the question becomes: why? Could the explanation be that these founders are not building startups that fit the investment criteria of the most active firms?
The Southeast is largely a B2B hub, with big regional successes in B2B software, fintech, cybersecurity, logistics, and marketing technologies. Local investors tend to bring that focus and bias to the table, and B2C startups therefore may have less investment potential here.
We conducted another informal survey, this time categorizing Southeast-based, Black founder-led startups. These companies were sourced from several places, including the Black Founders Exchange at Durhamās American Underground; the It Takes A Village Pre-Accelerator at Atlanta Tech Village; the Intentionally Good program in Atlanta; Ascend2020 in Atlanta; and individual VC and accelerator portfolios.
This led to a list of 60 companies which fall along the spectrum of stage, funding, and size, categorized as B2B, B2C, or both/either. You can see the full list here.Ā
The results came out to an almost equal split between B2B and B2C startups. The B2B companies seemingly cater toward a wide swath of industries and technologies: marketing technology, AI, big data, education/govtech, health IT and more.Ā
In other words, the list of Black founder-led startups looks similar to a list ofā¦ any startups. And thus the lack of venture funding cannot be explained by the companies or products themselves.Ā
An unsatisfying conclusionā¦for now.
Similarly to investors and analysts across the rest of the country, we did not find a demonstrable reason as to why venture funding for Black founders is so significantly lower than counterparts. It seems safe to say that, given the diversity of the Southeast, it is not a pipeline problem. It is reasonable to also propose that it isnāt a product-investor fit problem.Ā
In a future issue, weāll turn to the next set of questions: what are the attempts or ideas for solutions that are actually working?
What Weāre Reading š
How Coronavirus is creating a watershed moment for remote work
āAs the number of people infected with the virus approaches a hundred thousand and the death toll rises, companies that have been reluctant to allow their workforce to skip the office are now having to weigh the risks in a way they never imagined; productivity would take a huge dip if just one infected employee came to work. Already, some companies are getting out in front of the impending pandemic by promoting remote work. The Washington Post reports that āIBM, which nearly three years agoĀ ended remote work for some U.S. employees,Ā said it had asked workers in coronavirus-affected areas to work from home āwherever possible.ā
Which candidate is Silicon Valley supporting in the California Democratic primary?
āAt the same time, the donations of rank-and-file employees in tech donāt always square with the industryās interests, at least not on the face of it. This primary cycle, the most successful fundraiser among Big Tech workers is one of its loudest critics: Sen. Bernie Sanders.ā
āIn recent weeks, Iguodala has taken on new roles in both the basketball and startup worlds. He recently joined the Miami Heat with an impressive debut. And on Feb. 5, he was tapped as a venture partner for Catalyst Fund, the venture capital arm of Comcast Corpā¦For Comcast Venturesā Head of Funds and Managing Director Amy Banse, Iguodalaās investment experience and network, combined with his āhis passion for supporting entrepreneurs from diverse backgrounds,ā is a perfect fit for the firmās Catalyst Fund.ā
Startup/VC Twitter š¦
You made it all the way down here? Thanks for reading! If you think youāll like Ventured South, please share with your family, friends, and colleagues!