former Goldman Sachs CEO Aisha Ofori was confident that investors would be keen to fund her startup venture, then came the wall of rejection.
Some venture capitalists who ignored Ofori's company Women-focused financial investment platform, PropelleHe eventually rejected her, citing her lack of experience. Ofori points to her background at Morgan Stanley and Goldman Sachs and her MBA from London Business School.
“Fundraising is very difficult,” Ofori told CNBC. “I try not to think about it, because it frustrates you… Your gender and skin color seems to be the reason why you're not progressing as quickly as others.”
Ofori was one of a small number of black founders in the UK who eventually secured funding for their business. But Black founders overall received just 0.23% of venture funds in 2018, according to data from Project extension. This minority group's market share has increased only slightly since then.
Britain's tech sector saw record investment levels of more than $40 billion in 2021. Of this, black founders saw the proportion of their investments by value rise to a high of 1.13%, as companies' diversity and inclusion efforts surged in the wake of the crisis. Black Lives Matter movement. Since then, the investment value represented by the group has fallen to 0.95% in 2023, according to Extend Ventures data.
Aisha Ofori, Founder and CEO of Propelle.
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Ofori was convinced she had “ticked all the boxes” in terms of what venture capitalists were looking for from founders.
“From talking to people behind closed doors, I've been told that very few Black women have been given the opportunity. They've actually raised venture capital funding. It failed and went poorly, and so some of these venture capital firms in particular are not.” “Willing to take risks on us anymore,” 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 looking to buck the trend of decline in funding by targeting high-profile investors and adopting a more community-focused approach that includes the support of family and friends.
Battle for funding
CNBC spoke to several founders and venture capitalists who noted that Black business leaders often face systemic challenges ranging from racial stereotypes to a general lack of diversity in the sector.
Some venture capital firms subscribe to quotas and reject black founders once they reach the threshold, said Sarah Werner, who co-founded the property management company Husmus with her Swedish husband, Matthias Werner. Other venture capital firms will pit black founders against each other to compete for the limited funding allocated to them, Werner said.
“You're pitting people who are already experiencing hardships against each other… Pitting black people against each other, fighting for the only space in your wallet that's reserved for a person of color is ridiculous,” she said.
Werner, who said she is the face of Homsous, told CNBC that her generic name often opened doors for her, because people didn't immediately know what color her skin was. She also said that using her white husband's email address enabled her to secure meetings with prominent investors.
Carl Lokko, founder and managing partner of Black Seed, a venture capital fund for Black-led startups, told CNBC that more diversity is needed at the leadership level of venture capital firms to overcome these biases.
“If investment committees reflected a more diverse perspective, there could be a more comprehensive consideration of the proposals that are evaluated and decided upon,” Lokko said. “So, yes, more diversity, but more diversity is actually in the sea of decision-making in terms of allocating funds.”
Friends and family
In late October, thousands of students, VCs, CEOs and diversity, equity and inclusion (DEI) experts gathered in North London for the fifth edition of Black Tech Fest – a festival organized by former Google employee Ashley Ainslie and Silicon Valley tech executive Dion. Mackenzie.
A recurring theme at this year's Black Tech Fest was the lack of available data showing the proportion of funding and support received by ethnic minority founders. McKinsey described Europe as a “data desert.”
In response to the lack of data and representation in their industry, Mackenzie and Ainsley created Colorintech to foster a new community for people of color. Since launching, they say underrepresented founders in their program have raised more than $50 million in funds, and the community has grown to more than 60,000 people.
“We wanted to highlight and give a platform to people in the industry who are underrepresented,” McKenzie said.
They have partnered with some of the biggest names in the sector, such as the owner of Facebook deadGoogle, PricewaterhouseCoopers, and JP Morgan.
Google has also backed Propelle's Ofori and Husmus' Wernér, providing funding through Google Startups Fund for Black Founders. Ofori, who received an initial investment of $100,000, said getting into Google for startups was a “catalyst” to start the money flowing.
Even as people who had previously rejected her became interested in her, Ofori decided to focus on leveraging her own community and network moving forward.
Black Tech Festival 2024
BTF by Colorintech
She also reached out to some of her former colleagues at Goldman and secured high-profile investors including female entrepreneurs. One of Propelle's investors is former Goldman partner Stefan Bollinger, now CEO of Julius Baer.
Werner referred to this backing 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 for her project was from a university friend who offered her £10,000, which encouraged her to reach out to other acquaintances.
“These are people who know you. You've been in the trenches with them. You've spent all night in the library with them. They know you, they trust you, and they gave you money out of their pockets.” “There's nothing more humbling than that to be honest,” she told CNBC.
A world away from the United States
Diversity and inclusion programs spike in 2020 when… George Floyd This has led to racial protests and unrest, and has not inspired long-term investment in the Black community — a failure that comes at the expense of the tech sector, according to Colorintech's MacKenzie and Ainsley.
If we think about the whole concept of developing Britain and making ourselves a more productive country, we cannot do that by increasing differences in productivity between particular social groups, especially when those social groups are… minorities, but they're not insignificant.
Ashley Ainsley
Colorintec
A more diverse workforce leads to “better products, better teams, and ultimately more revenue,” McKenzie said, adding that more inclusive employers enable companies to secure “the best talent.”
“If we think about the whole concept of developing Britain and making ourselves a more productive country, we cannot do that by increasing differences in productivity between certain social groups,” Ainsley said, stressing that although these social groups may be minorities, they are not “Insignificant.”
Four years after the Black Lives Matter moment, sentiment around diversity efforts has changed. Many companies including McDonald's, Google, Ford, Louie and Walmart He owns Reducing diversity efforts in the United States For reasons ranging from cost cutting to political pressures. Donald Trump's incoming White House administration has raised concerns about the future of DEI, given the president-elect's proposals to eliminate federally funded diversity programs.
Ashley Ainslie, a former Google employee, and Dion MacKenzie, a Silicon Valley technology executive
BTF by Colorintech
In the UK, Labor pledged before the election to break down barriers to opportunity by introducing a Racial Equality Act It presents a stark contrast to the prospects of the United States. While the pushback on corporate DEI programs may be less widespread in Britain, the investment value represented by black founders in the country has yet to exceed 1% as it did in 2021 and 2022, according to Extend Ventures.
DEI has become “politicized” and “weaponized” as a term as a way to silence the efforts of organizations like Colorintech, Ainslie and McKenzie said.
“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 the intended actions once we're in office, but ultimately business leaders will need to choose whether or not to do so,” McKenzie said. They, their employees and shareholders were seeing the value of diversity, inclusion and equity or whether the alternative was better for creating value and attracting top talent.”
