As a capstone to the 2023 NextGen Accelerator, a founder bootcamp for early-stage student founders from Historically Black Colleges and Universities (HBCUs) and universities in Sub-Saharan Africa, four leading Black venture capitalists shared their perspectives on the fundraising landscape for Black founders.
The panel featured Kofi Ampadu, partner at a16z; Daniel Acheampong (Harvard Kennedy School MPA 2020), founder and general partner at Visible Hands; Eunice Ajim, founding partner at Ajim Capital; and Javier Grevely, Boston Chapter co-lead at BLCK VC and an investor at Wellington Management.
Their discussion was wide-ranging, from why only one percent of venture capital money goes to Black founders to what they look for as they decide whether to invest in a startup. Watch the full NextGen Funder Panel, and read about a few of the insights they shared below.
Early-stage VCs play a crucial role in helping Black founders overcome biases in fundraising
Throughout the conversation, panelists acknowledged the many biases Black entrepreneurs face when fundraising. Grevely of BLCK VC highlighted Black founders’ institutional disadvantage, saying, “When we talk about the 1% funding [going to Black founders], we typically make it seem like it’s a mistake. The elephant in the room is that it’s intentional, right? A lot of these guys went to school together. They grew up together. We talk about things like generational wealth… We’re just trying to make sure that we are spending more time talking about these issues.”
Ajim of Ajim Capital added that the odds of raising successfully are even more daunting for African entrepreneurs, adding, “If you can imagine what it takes for African Americans to get funding, just multiply that by 100 – that’s how much harder it is for African founders… Instead of speaking of the challenges, I speak on the strategy of how to fundraise.”
Each of the panelists stressed the importance of Black founders working with VCs like themselves, who are not only going to invest in Black founders but also help them overcome these biases.
Ampadu at a16z shared that the thesis of his firm’s Opportunity Fund is that “talent is evenly distributed, but opportunity isn’t.” That’s why he’s investing in diverse founders who are building companies that are “informed by a cultural insight.” The Opportunity Fund has invested in 45 companies since 2020. Ampadu added, “What we’re doing is working… We just need to do more of it.”
Harvard Kennedy School alum Acheampong of Visible Hands recalled meeting four Black women from MIT and Wharton, who were struggling to raise $30,000 for a compelling venture. Visible Hands went on to become one of their first institutional investors, and helped the founders refine their story telling and pitches. The company went on to raise $5 million, with Serena Ventures as the lead. He said:
“We went through this training of really sharpening and refining their story, helping them understand that they belong in that room, and asking for more than the $30,000 and being confident in that ask. What I learned in that process was that… there [was] a bias that was happening — challenges that diverse founders face… and those are some of the things we’ve got to call out.”
Grevely added that diverse founders who are building in states where there’s less entrepreneurial activity may have more trouble raising, and early-stage VCs can play a role in helping more of these founders get funded:
“Capital allocators and investors are going to go where there’s innovation and entrepreneurs… so you end up becoming landlocked because you don’t fall within the status quo, or whatever you’re building might not necessarily be what’s prevalent within that area… We’ve mitigated that by making sure we’re intentionally spending time in areas that just aren’t as known to the market… [We’re] also trying to make sure that founders are introduced to the bigger markets — [even if] you’re not building in Boston, New York, San Francisco, that’s where the capital is.”
For African founders, Ajim stressed the importance of registering your company as a U.S. corporation to attract U.S. investors and learning how to speak the “VC language.” She said, “You have to be able to understand, what are [investors] looking for at the end of the day? They’re looking for returns. And it does not matter whether you have the beautiful idea, or the best thing in mind — you have to show them what they know and what they understand.”
Founders must be willing to hustle
When discussing the type of founder an early-stage VC firm wants to partner with, the panelists often came back to founders with a “hustle mentality.”
Ajim, who overcame homelessness to later found Ajim Capital, a firm that invests in African startups, says it’s a gut feeling: “You just know if somebody is a hustler. They will not give up no matter what. Because really, when you think about entrepreneurship, that’s what it takes… Will you stick around? Are you so passionate about this problem, that you’ll be working on it for the next 10 to 15 years, even if you get zero money or zero funding?”
Grevely added, “Think about a pre– seed company: Your capital is so tight, you’re going to have to wear a lot of hats… [I’m] looking at founders who are willing to stay after the events and clean up, who are willing to work with their CTOs a little bit closer than they need to, who are the ones [doing] founder lead sales and focusing on getting customers in the early days. That’s just a huge sign for us of someone who’s a hustler.”
“The [startup] idea actually is worth zero,” Acheampong pointed out. “It is [in] the execution of the idea where value is created… You and I can have the same idea. But if you’re pushing forward on it better than I am, you’re creating the value more than I am. So, I’m looking for founders who are obsessive about the problem.”
Don’t build in stealth — build in public
When it comes to fundraising, Ajim recalled being given very typical advice on going to events and getting leads through your networks of friends, family, and colleagues. She acknowledged the usefulness of this advice, but encouraged founders to go one step further to grow their networks, saying:
“This is not for everybody, but if you have the heart…build in public. And what I mean by that is share your story and your journey along the way. Whatever you’re doing, get whatever platform you feel comfortable with, whether it be LinkedIn, Twitter, Instagram, TikTok… and build in public…[Even] if you don’t have the ‘right’ network, the people [in your network] might just be one follower away from your next investor or your next customer or your next employee.”
Clear and consistent communication is just as important for the VCs who invest in you as those who don’t
Securing funding is a significant milestone for founders, but it’s only the beginning of their entrepreneurial journeys. Ampadu shared salient advice for founders on the importance of communicating with their investors frequently and honestly, saying, “I think a lot of times diverse founders get almost scared or nervous to share bad news with their investors… but it’s hard for me to help you [if you wait until] it’s too late.”
Ampadu advised founders to send monthly updates — not only to the VCs who invested in their company, but also to those who didn’t. He said, “I’m such a big believer in monthly updates, because [then] I’m seeing the progress that you’re making. My job as an investor is to find companies to invest in. If I met with you, and I thought, ‘Okay, there’s something there but it might be too early,’ and you’re updating me each month, and I’m seeing that there’s growth there… it gets me excited.”
These are just a few of the dozens of insights the four panelists shared. To hear more from leaders from a16z, Ajim Capital, BLCK VC, and Visible Hands, watch the NextGen Accelerator Funder Panel below.