We have all heard the underwhelming statistics about the success of Black technology founders (men and women) raising money from venture capital investors.
A recent article in the Baltimore Business Journal states that “despite gains, most Black female founders still get no funding”, and the last Project Diane “State of Black Women Founders” report in 2016, found that since 2009, black women have collectively raised 0.0006 percent of all tech venture funding (yes 0 percent).
These numbers do not mean that Black founders are not starting innovative, game changing and potentially billion dollar companies, it just means that we are not securing funding proportionately to our “non-Black” peers by institutional investors. Because of this, now more than ever, start-up founders are looking at non-traditional ways to raise capital for their companies, including me.
I am a Black woman who has raised close to $1.5M in seed funding from VCs and angels collectively for my companies Flat Out of Heels and PopCom. I have some great investors on my cap table and a large network of investors across the country, however, when it was time to raise our next round I wanted to take a different approach, and thanks to our “forever President” Barak Obama, yes, I can.
In 2012, President Obama signed into law the JOBS Act that required the SEC to write rules and issue studies on capital formation, disclosure, and registration requirements. For the first time in SEC history companies can raise money using an exemption under this act called the Title III Regulation Crowdfunding (CF), which is an offering for the general public, meaning both accredited and non-accredited investors can participate in the offering up to $1,070,000 per year.
This means ANYONE (including you) can invest in a startup company. This is an example of group economics that we have never experienced before. The ability to offer my friends, family, and network an opportunity to get in on an early stage deal alongside major VC investors is why I decided to raise capital using the Reg CF exemption. I am excited about all of the possibilities now that many of the restrictions around raising capital have been removed.
To give you some context: too often, Black people and under-represented communities are left out of early-stage deals and can only invest when the company goes public because early stage deals are reserved for accredited investors (i.e. wealthy individuals and couples). The opportunity to invest early, take bigger risks for a potentially greater return is how the rich get wealthy. Investing early and exercising group economics is how we will build up our tech companies to rival the “unicorns” of Silicon Valley.