Black British entrepreneurs seek to overcome VC funding declines

Senior Goldman Sachs executive Ayesha Ofori was convinced that investors would be willing to fund her investment platform startup – then came the wall of rejection.

Some of the venture capitalists who gave Ofori’s the cold shoulder women-focused financial investment platform, Propellehe ultimately turned it down, citing his lack of experience. Ofori notes his background at Morgan Stanley, Goldman Sachs and his MBA from the London Business School.

“Fundraising is phenomenally difficult,” Ofori told CNBC. “I try not to think about it, because it gets you down… It’s like your gender and the color of your skin is the reason why you don’t progress like other people.”

Ofori was one of a small number of black founders in the UK who eventually secured funding for their businesses. But black founders overall received only 0.23% of venture capital in 2018, according to data from Extend Ventures. This market share for the minority group has increased slightly since then.

Britain’s tech sector saw record investment levels of more than $40 billion in 2021. Of that amount, black founders saw their proportion of investment by value rise to a high of 1.13%, as the company’s diversity and inclusion efforts increased after The Black Lives Matter movement. The investment value represented by the group has since fallen to 0.95% in 2023, according to data from Extend Ventures.

Ofori was confident that he “ticked every box” in terms of what VCs look for in founders.

“Through the grapevine, talking to people behind closed doors, I was told that a few Black women took a chance. They raised VC funding. It failed and went bad, and so did some of these businesses Particular VCs are not willing to take the risk on us,” Ofori explained.

Only 13 black women raised venture funding between 2019 and 2023, compared to more than 3,700 white men, according to Extend Ventures.

Like other Black founders in the UK, Ofori is trying to buck the downward trend in funding by targeting high-profile investors and taking a more community-focused approach that includes support from family and friends .

They have partnered with some of the biggest names in the sector, such as the owner of Facebook MetaGoogle, PwC and JPMorgan.

Google also supported Ofori of Propelle and Wernér of Husmus, offering funding through their Google for Startups Black Founders Fund. Ofori, who received an initial investment sum of $100,000, said that entering Google for Startups was a “catalyst” for the money to start coming.

Even when people who had previously rejected him became interested, Ofori decided to focus on leaning on his own community and network to move forward.

He also approached some of his former Goldman colleagues and got high-profile investors, including female entrepreneurs on board. One of Propelle’s investors is former Goldman partner Stefan Bollinger, the current CEO of Julius Baer.

Wernér referred to this support as the “friends and family” round – a type of early stage fundraising when founders ask friends and family to invest in their business. She said that her first check towards her adventure was from a university friend who offered her £10,000, which encouraged her to reach for other knowledge.

“These are the people who know you. You’ve been in the trenches with them. You’ve pulled all-nighters in the library with them. They know you and they trust you, and they’ve given you money out of their own pockets. And there’s nothing more more humiliating than that to be honest,” he told CNBC.

A peak in diversity and inclusion programs in 2020 when the assassination of George Floyd led to protests and racial unrest, it failed to inspire long-term investment in the Black community — a failure that comes to the detriment of the tech sector, according to Colorintech’s McKenzie and Ainsley.

A more diverse workforce leads to “better products, better teams and ultimately more revenue,” McKenzie said, adding that more inclusive employers allow companies to secure the “best of talent.”

“If we think about the whole concept of growing Britain and making us a more productive country, then we can’t do that by increasing productivity disparities in particular social groups,” Ainsley said, stressing that while these social groups could be minorities. , are not “insignificant”.

Four years after the Black Lives Matter Moment, the sentiment around diversity efforts has shifted. Various companies including McDonald’s, Google, Ford, Lowe’s and Walmart to get complement diversity efforts in the United States for reasons ranging from cost reduction to political pressures. Donald Trump’s incoming White House administration has raised concerns about DEI’s future, given the president-elect’s proposals to roll back federally funded diversity programs.

In the United Kingdom, the pre-election commitment of the Labor Party to break down barriers to opportunity with the introduction of the Racial Equality Act offers a stark contrast to US perspectives. While the rollback of corporate DEI programs may be less prevalent in Great Britain, the investment value represented by black founders in the country has not yet exceeded 1% as in 2021 and 2022, according to Extend Ventures.

Ainsley and McKenzie said DEI has become “politicized” and “weaponized” as a term as a way to silence the efforts of organizations like Colorintech.

“For better or worse, DEI will certainly be a focal point during the next administration. We’ve heard a lot of anti-DEI rhetoric in the run-up to the election and planned actions once in office, but ultimately the business leaders need to make a choice if they, their employees and shareholders see the value of being diverse, inclusive and equitable or if the alternative is better for the creation of value and attracts the best. talent,” McKenzie said.