Rechelle Balanzat, an Asian-American founder, has led her startup juliet, a self-funded, app-enabled dry cleaning company since 2014. As a double minority in tech, Balanzat said she faced gender bias with investors and also encountered investors inflicting racial bias. Investors often expected Balanzat to speak with an accent and, if not, were surprised that he could speak English, he said.
Balanzat said his decision to self-fund his startup was born out of necessity. In fact, she’s not the only founder of color who finds VC fundraising more like a marathon than a sprint. In reality, many report that the process is more like running on a hamster wheel, endlessly with no positive outcome.
During the pandemic and the nationwide racial reckoning following the murder of George Floyd, the challenges facing Balanzat and so many other marginalized founders were underscored.
As a Filipino-American, Balanzat feared that she or her loved ones would be targeted by the growing number of Asian hate crimes during the covid-19 pandemic. As a businesswoman and technology executive, she feared for the life of Juliette, a company she tenderly nurtured and worked to build.
“Given my previous experience trying to raise funds early on in my company (and failing at it), I didn’t try to raise funds because I was in survival mode,” he said. “I knew I wasn’t present enough mentally, psychologically or emotionally to do it.”
Social justice movements in 2020 put a huge spotlight on the disenfranchisement faced by communities of color. From the nationwide Black Lives Matter protests to the anti-Asian hate rallies during the pandemic, across the country witnessed a yearning for equity across multiple marginalized groups and business sectors.
And while social media users rallied over hashtags, posts, or created mutual aid funds to combat racial and housing issues, the world of risk capital he was pushed to respond to the social unrest by funding start-ups run by people of color.
“Most of the time, men receive investments based on their potential and women receive investments based on their performance,” Balanzat said.
Rise and bust of financing
Venture capital, which typically involves investors in a company owning a percentage of a company or tech company in exchange for money to grow, has long been an industry that is unfavorable to marginalized founders and has been criticized for disparities. of financing.
And yet, those calls for equitable funding opportunities have historically gone unheeded. Under mandatory Covid stay-at-home orders, investors had no choice but to listen and learn from communities that are often silenced.
In 2020, Black and Latino founders together raised $2.3 billion in funding, of the total $87.3bn in venture capital dollars that were invested. Startups led by women, regardless of race or ethnicity, raised just over $2 billion during the same year.
After 2020, it seemed like the voices of marginalized founders started to be heard.
In return, founders of color experienced a record year of VC funding in 2021. Of the $309 billion US venture dollars deployed in 2021, black founders raised $4.2 billion Crunchbase reported. Although this funding milestone marked a huge increase overall for black founders, it’s still far less compared to the money given to startups founded by white men.
Nonetheless, Latinx-led startups saw a similar rise in 2021, raising $6.8 billion, which is a tremendous increase compared to $2.8 billion. raised in 2020.
The concept of equitable funding among disenfranchised founders of all backgrounds seemed to be on the horizon, but with the thought of a possible recession, tech companies slashed staff and investors cut cash deployment in 2022.
Consequently, funding for founders of color and women fell sharply again.
Last year, the black founders raised a estimated $2.2 billion of the $215.9 billion of US venture capital deployed, which is almost half of what was raised the previous year.
“The 2022 decline could mean that many investors may have wanted to check a diversity box in 2021, rather than commit to consistently investing in founders of color,” Balanzat said.
‘They weren’t that interested’
Marcus Medley, founder of real estate deal signing platform Quickly shares similar sentiments to Balanzat. Medley began fundraising for Apace in September 2020. But after feeling like a diversity fee to some of the investors he worked with during his fundraising efforts, Medley decided to remain self-funded.
His fundraising process occurred in a time period when funding from black founders was on the rise. Yet despite having a previous career at Silicon Valley Bank and a network of connections in space, Medley told The Guardian that as a black man, he still encountered many affairs like racial bias and discrimination that many founders of color have said after interacting with investors.
“I knew what they were looking for,” Medley said. “But I felt like a lot of the investors I talked to were just talking to me just to say they talked to a black founder. I could tell, based on the little research they did on the Apace, that they weren’t that interested.”
On the opposite side of the fundraising spectrum, Kimberly Bryant, founder of Black Girls Who Code, a Stem education nonprofit, grew her grassroots program into a $30 million organization over the past 10 years.
While Bryant revealed that nonprofit fundraising is different from VC funding because nonprofits can get government grants and donations to boost their efforts, he noted that founders of Colored in both sectors often have to outperform their whites. colleagues to access financing.
Regarding the funding peak and plateau for marginalized founders since 2020, Bryant predicted that the window of opportunity for equitable funding would not be open for long.
“It was a good milestone and it’s a good marker for those who could take advantage of that opportunity,” Bryant said. “That being said in tone, what I have seen as a benefit to the rise and fall of funding is a very strong emergence of internal communities, founding communities, and ecosystems in places one might not have expected before.”
with his latest adventure AscendBryant hopes to become a solution creator by contributing to the growing networking spaces created for underserved founders.
Launched early last year, Ascend Ventures will provide African-American founders with the space, tools and support to move from the idea stage to funding.
Bryant plans to build an innovation lab that aims to better equip black founders to raise funding despite industry bias and limited access to resources.
‘I need to start judging by metrics’
In addition to using innovation labs and similar programs to help prepare for fundraising, Bryant encourages founders of color to also rethink their business models and become less reliant on the venture capital model, especially in the tight market of 2023. .
Similarly, Balanzat believes that founders of color need to empower themselves as they pursue investment opportunities. Rather than view VC funding as an opportunity for investors to get their money back, for Balanzat, founders need to remember that they are the ones offering investors an opportunity for financial growth.
“I am very confident in my vision, operating as if I don’t need the money (which, by the way, I really do),” Balanzat said. “But, I’m not going to beg for it. Every entrepreneur, regardless of their stage or background, needs to go to meetings with the mindset.”
When it comes to solutions for investors, Medley believes that venture capitalists have to break the rule book they’ve used for years to determine how they invest in companies.
“They need to stop investing in companies strictly based on what their founder looks like,” Medley said. “They need to start judging from their metrics and take into account external factors beyond the founder’s technical background or Ivy League affiliation.”
