Here’s How Black Founders Can Access Venture Capital in 2021

What is Venture Capital?

Venture capital is a major subset of of a financial institution known as private markets. Harvard Business School explains that The U.S. venture-capital industry is envied throughout the world — viewed as an engine that drives economic growth.

Though, the current situation of African-American business climate may appear to romanticizes the industry, however, the current realities in 2021 is essential to understanding how this important piece of the U.S. Venture Capital operates today.

Black-owned businesses have increased significantly in the United States in recent times. It is projected that the support garnered for Black-owned business increased at over 7,000 percent in 2021.

With the consistent growth in business, comes challenges especially when it comes to securing venture capital (VC), Black-owned businesses, however, still remain far behind their white counterparts in business. A recent study shows that Black and Latinx founders received less than 3% of VC funding in 2020, and have only been represented just 2.4% of the total VC raised.4.

The Challenges Black Founders Face in 2021

The question, therefore is — why are Black-owned businesses going through more challenges in accessing venture capital?

There are a multitude of reasons, largely due to investors’ negative biases against minorities. One of which is the fears of a larger risk of failure with Black-owned businesses, and as a result, the clear lack of representation at VC firms as it were.

Furthermore, Black owners may also face challenges in different areas of their life, access to grants for Black-owned business, to loans, and other financial opportunities that may boost their business potential.

Venture Capital Investment

Venture capital investment is a form of equity that is provided by the private markets in the form of financing that venture funds investors provide to startup ups and small businesses in the hopes or belief of having a long-term growth potential.

Venture capital usually comes from well-established investors, agencies, investment banks and any other financial institutions and corporations. There are discrepancies that happen when it comes to access the availability of these venture capital funds, especially as a Black or other minority business owner.

Accessing venture capital funds come with several factors that a business owner would have to be aware of to be a successful recipient. The availability of funds for business growth that may happen with Black-business owners who are interested in pursuing funding for their business.

Accessing Venture Capital as a Black Business Owner

To get access funds from you have to have some things ready that show your commitment to getting funded. If you think your startup or small business would benefit from accessing venture capital, then you should take a look at the things you should have in place.

1. Know What Outcome You Anticipate

The number one thing that you have to have in mind as Black-business owner looking for funds to grow your business is — to decide on the outcome you hope for. This is very important, as it would help you plan accordingly for the application process to get funded. Without an adequate plan, you are more likely to miss the point of why you applied for Venture capital funding in the first place.

2. Patent Your Intellectual Property

It is very important that you are prepared for what you hope to accomplish with your interest in venture capital, especially if your business utilizes new technology or a new and improved process, you should not hesitate to file for a patent so you can be in a better position to apply for funding with Venture capital investors.

3. Be Knowledgeable about Venture Capital Funds

Learning more about Venture capital, what they represent, who they are, how they make money and much more can be so helpful in several ways. Your knowledge of the process that Venture capital work with would be tested when you apply to get your business funded by them. So to avoid any pleasant situation, you should get your hands on everything you can about Venture capital funds and stay a step ahead.

4. Prepare the Right Documents for Venture Capitalists

When you eventually get in front of a Venture capitalist, the times has finally come for you to it’s time to close the deal.

Check out some of the things you’ll need:

Business plan: Your business plan is the sum total of all the full details of how you plan to run, maintain and grow your business. This dpciment may include your current financial situation, your managerial and financial projectings, and more importantly, how you plan to utlize an investor’s funds, , and how these investors will get a return.

Presentation: This is a key part of what you should plan for. Endeavor to create a slideshow that highlights your business plan in the form of a story and ensure you include a lot of visuals such as charts and images of your products or services. Even Please note: Even if the case were not for the purposes of pitching in person, this presentation method still remains very effective.

Forget about non-disclosure agreement : Be aware that most Venture capitalists will not agree to signing a non-disclosure agreement (NDA). This is largely because they believe that NDAs can create too many legal headaches for Venture capitalists, s especially when a when they get several pitches from similar businesses like yours.

Have a team of Advisors

Consider reaching out to a team of advisors. This will be one of the most efficient and profitable business strategy you could be making when it comes to getting a team on your side. This will also, in many ways, improved your chances of getting the funding that you hope for when it comes to accessing Venture capital.

In searching for a team, makes sure that you go for a team that understands your business goals, share in your business interest, and are ready to work with you provided they understand your projected business outcome. This is very helpful so as to create some sense of togetherness when you finally decide it’s time to apply and go get the funds for your business.

Conclusion

Venture capitalists are extremely weary when it comes to parting their funds, especially when there is any doubt for expected returns. Therefore, making sure that one has ticked the boxes can go a long way to help one stay prepared for when the opportunity finally comes. Make sure that you have shown that your business is able to handle the amount of funding that you are searching for, and that you are able to deliver if awarded.

There are other funding opportunities that exist for small businesses, from grants to nonprofits to grants for minority women and much . If you would like to explore the world of other financing opportunities, then you have come to the right place. Make sure you take your time to understand the criteria needed to get these funding awarded for your business before you proceed to actually applying for them.

Facebook Comments