By Ola Oyetayo
Editor’s note: This contributor piece is part of Something Ventured, an ongoing series by Crunchbase News examining diversity and access to capital in the venture-backed startup ecosystem. Access the full project here.
Headlines of funding announcements nowadays make it seem as if there’s no better time for entrepreneurs to raise venture capital, but the statistics for venture capital funding to Black founders are still quite dire.
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In the U.K., where I reside, between 2009 and 2019 just 0.24 percent of venture capital went to a team of Black entrepreneurs–a grand total of 38 businesses, according to Extend Ventures.
Verto, the cross-border payments fintech startup my co-founder Anthony Oduwole and I founded, is lucky to be among those companies. To date, we have raised two rounds of funding from venture capitalists: a seed round of $2.1 million and a $10 million Series A.
So what can minority founders do to optimize their chances of raising venture capital?
Here are some thoughts.
But first, one caveat: Not every business or idea requires venture capital funding. Most can be bootstrapped or funded with money from friends, family or loans. Venture capital funding is ideal for businesses or disruptive ideas that are looking to achieve billion-dollar outcomes (not millions), so you want to seek venture capital for your business idea only if it has the potential to be incredibly massive if it’s successful.
Still think venture capital is for you? Following are some ways you can increase your chances of a successful raise.
Join an accelerator
Accelerators and incubators are a good way to gain an instant network and credibility. They also provide an immediate community of like-minded entrepreneurs from whom you can learn. Verto was part of the Winter 2019 batch of Y Combinator, and while we benefited immensely from the months spent as part of the program, we believe we are continuing to reap the benefits.
Accelerators typically provide funding for an equity stake in the business, and because they are willing to invest at an early stage of a company’s life, the funding can be pivotal in giving a minority founder much-needed resources to quit their job to focus on the idea full-time.
Show traction and progress
Early signs of progress and traction, such as double-digit monthly user or revenue growth, are a great way to show that you have built a product or are solving a problem that will ultimately lead to a significant upside for investors.
Be great at storytelling and have a good fundraising deck
In the early stages of a company’s life, the ability of a founder to tell a compelling story about the company is such an important factor in getting funding—and a well-designed, understandable deck is a critical component of this.
While there are lots of resources and information out there on how to prepare a fundraising deck, I personally recommend Keith Teare’s video and Crunchbase article on this topic. VCs rely a lot on decks to articulate your vision or the problem you are solving for, and they are critical to getting funded.
Always get a warm introduction
The venture community is quite small, and early-stage investors almost always require a warm introduction from someone they know before they will evaluate an opportunity or meet a founder.
This is arguably the single most important reason why it is much harder for Black founders to get funded by venture capitalists—as many of us do not typically have the network to facilitate these introductions. This is another key area where that accelerator can be handy; accelerators can be great sources of warm introductions, whether part of their demo days or not.
These are unique funding times as there is a significant amount of capital looking to invest in world-class businesses. I hope these tips can help increase the chances that more of it will go to Black-founded startups.
Ola Oyetayo is co-founder and CEO of VertoFX, a global B2B payments platform that provides a fast, simple and reliable way for small and medium-sized enterprises to make payments to their suppliers in more than 200 countries across 39 currencies.
Illustration: Dom Guzman
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