Reaching Full Potential: Removing Barriers and Elevating Black Entrepreneurs

Photo: A member of the audience asks the panel a question during the Black Innovation Fellowship Launch at the DMZ in Toronto, Canada – May 2019. Courtesy: DMZ.

In the first part of this series released on Tuesday, we broke down the importance of a diverse investing staff, the opportunity for funding Black-founded companies, and the existing barriers in the funding journey for Black entrepreneurs.

What can the venture capital and private equity industry do to remove existing barriers, what resources are available for Black founders, and what should Black entrepreneurs know about the current state of the ecosystem? We will look for the answers to these questions here in the final part of this series.

We know that as a Black entrepreneur, sourcing outside capital for your startup is difficult, but it’s not impossible. With a stronger focus on diversity over the last few years, the investment community has been more vocal in supporting Black founders and Black-owned companies. There are few funds in Canada that are dedicated to supporting diverse founders.

One of such funds is Dream Maker Ventures (DMV). DMV Launched in 2015, is the first Black-led venture fund in Canada, and is the investment arm of Dream Maker Corporation, a Toronto-based vertically integrated asset management firm.

DMV’s mission with their Diversity Fund is to change the narrative and showcase a successful top-tier VC fund is built around a thesis of supporting diverse, underrepresented founders within the tech community. You can read more about the DMV team and their thesis here.

Another option is CVCA member DMZ and their Black Innovation Program (BIP). BIP launched in May 2019 and is a collaboration between Dream Maker Ventures, Shopify, BMO, and the Canadian Women’s Foundation. It is a first-of-its-kind initiative designed to strengthen Black-led startups in Canada and beyond. The goal of the program was made specifically to help lower Black-led startups’ barriers to entry using the DMZ’s proven expertise in nurturing tech-based ventures.

The program gives companies hands-on programming, mentorship in the areas of sales, product, tech, marketing, hiring, business strategy, CEO leadership, training, peer-to-peer support, non-dilutive funding opportunities, access to investor networks, capital, affordable housing opportunities and so much more.

Abdullah Snobar, Executive Director, DMZ, and CEO, DMZ Ventures talked to us about the evolution of the program over the last year.

“In 2020, we announced a $1 million expansion to the program and began welcoming support from Canadian leaders and organizations. The support we received exceeded our expectations. Over the last six months, several Canadian organizations and leaders have come on board to support financially and help Black entrepreneurs succeed, including the City of Toronto, Harley Finkelstein (President of Shopify), Scotiabank, Accenture, and several more. We are proud to say BIP has now grown from one program to three to serve Black innovators at different experience levels: ranging from at-risk youth in search of role models and inspiration, to seasoned entrepreneurs with an investment-ready startup. The programs include Launchpad, Bootcamp, and Fellowship.”

The State of the Ecosystem

The investment climate is constantly evolving and even more rapidly these days. The pandemic has created an overall challenging funding climate, so how can Black entrepreneurs navigate the current ecosystem? Snobar explains that while funding focuses have shifted to later-stage deals, it’s not completely hopeless.

“On the bright side, angel funding and activity have steadily risen. During low investment periods, it is vital to position your company as having a strong growth trajectory and a unique value proposition to attract investors.”

Snobar also says the timing may be right for Black-led startups after the events of 2020.

“Following some of the worldwide uprisings that took place in 2020 surrounding the Black Lives Matter movement, many funders began taking steps to address the lack of diverse-owned businesses in their funding portfolios. Funders took a hard look at their activities and found that they were not investing in equitable or diverse ways and have created new theses or modified their existing theses to invest in more Black founders. Some of these funds include Backstage Capital, Andreesen Horowitz, and Softbank and could be worth looking into.”

Changing Our Ways

There are steps the private capital ecosystem can take to start to remove the barriers for Black-led companies.

“It’s not complicated — invest in Black founders,” explained Snobar. ​“VC firms must be more intersectional in their investments, and that starts with being mindful about creating a diverse team of investors. It’s also a good decision for business — VC and PE firms with diverse leadership teams are proven to have a competitive advantage when competing in the global arena.

In 2019, CVCA conducted our first diversity and inclusion study and the results identified several opportunities for improvement and meaningful action items that CVCA members can take to embed D&I best practices into their organizations. The association plans to do a follow-up to this study this year, with a formal announcement coming soon. The follow-up will distinguish areas where we are doing well from those that need improvement.

We’ve heard time and time again the business case for diversity and inclusion. We know the economic impact can be far-reaching. Snobar has some thoughts for firms that want to source and attract diverse founders and reap the benefits of a largely untapped market.

Video: Panelists from #IC18’s Diversity & Inclusion panel weigh in on championing D&I in our industry and in the workplace.

“If VCs and PEs are looking to invest in more diverse-owned startups, they can get involved in initiatives like DMZ’s Black Innovation Programs where they’ll have the opportunity to tap into a network of high-potential, Black-owned tech startups.”

Beyond DMZ’s BIP, Snobar provided us even more sources of deal flow for those organizations that are looking to expand funding opportunities for underrepresented founders, specifically Black founders.

“Typical sourcing options don’t always offer the ability to easily locate Black founders, but an excellent opportunity is engaging in programs supporting Black entrepreneurs. These programs bring Black founders together to grow and scale their companies with a community of peers. By working with these programs, VCs/​PEs can network with high potential Black founders and open the doors to further connections within the Black founder community. The DMZ is a member of the Coalition of Innovation Leaders Against Racism (CILAR), another great initiative that VC/​PEs can get involved with to engage with the community and help break down barriers for Black founders.”

Over the last few years, there have been massive structural changes to society. This reordering can unlock multi-year or multi-decade opportunities. Is it time to rethink your thesis? Snobar says depending on your goals, funds can re-examine their positions.

“For groups within the VC/PE community genuinely interested in investing in Black founders, it would be wise to explicitly pursue the opportunity with their thesis to attract more inbound opportunities — there is an incredible demand. Groups looking to invest in Black founders should also look at funds that have already invested in these founders. What programs have they participated in? Are they part of any networks or associations? VCs can also get involved with banks, such as BDC Capital, who are working to establish world-class funds for Black founders in Canada.”