How to Beat Inequity in Investment
Here are some tips on how to play the game, get ahead, and get funded.
With the recent influx of startups, there is a lot of competition for venture capital funding. However, the majority of venture capital goes to men, with only 16.8% of global VC deals going to companies with at least one female founder. On top of this, only 2–3% of VC deals go to companies where the founder is a person of color.
Unfortunately, this is largely due to our institutional structures, but, while we can’t tell you how to topple the institution, we can give some tips on how to play the game, get ahead, and get funded.
Build Your Network
POC entrepreneurs typically have smaller networks compared to white entrepreneurs, and women typically have smaller networks compared to men. This is something that, again, may not be controllable due to institutional structures at play. However, this doesn’t mean you can’t grow your network. Here are four ways to do it:
- Get a mentor. While being able to serve as a source to expand your network, mentors can also help entrepreneurs to recognize new opportunities for new ventures. Check out this advice from Austin tech leaders on how to find a mentor.
- Partner up. Latinos in particular are more likely to be organized as sole proprietorships, but by getting a partner you will have a whole new network to work with and have help in getting your startup off the ground.
- Practice. POC professionals have reported needing assistance with networking skills the most. Take every opportunity available to go and network with other people; this will help you practice while also building your network. Meetup.com is a great resource for those looking to develop their networking skills. Develop your elevator pitch, practice your handshake, and interact.
- Engage. Always follow up and don’t let all those new networks go to waste! A common misconception is that networking is exploitative, using people from your network for personal gain. However, networking is not a one-way street. It is a partnership of two people trying to help each other get ahead. If you are genuine and they are willing to help, then you have nothing to fear.
Capitalize on Your Weak Ties
POC tend to have less starting capital than whites on average, and a part of this is due to their inability to access financial resources from strong network ties like friends and family. This makes getting funded and off the ground even harder, but there is a solution: capitalizing on weak network ties.
This all goes back to building your network but with an emphasis on expanding it and engaging. Though it may be difficult, diversify your network beyond family and friends if they are not a viable option for financial recourses. Meet with other business owners and local business associations, join organizations and groups, and go beyond your usual social circle. A good place to start is by checking your local Chambers of Commerce, such as Austin’s Asian, Black, Hispanic and Women’s Chambers.
Be Confident
While the figures may be daunting if you are a woman, POC, or both, it should not be discouraging. Things are looking up for the disadvantaged.
Latino-owned businesses have grown by 43.7% and represent 8.3% of all small businesses, generating more than $400 billion annually in revenues. Blacks are 57% more likely to participate in a startup compared to whites and more likely to endure during poor economic conditions. Women-owned businesses typically experience higher growth rates, with 42% exceeding their growth expectations, than men-owned businesses, at 29%.
If you don’t ask, you don’t receive. Go the distance and ask for more involvement, more funding and better contracts. A little confidence can go a long way.
Apply!
After gaining all that confidence all that is left is to apply and go get funded! Women and POC are frequently discouraged to apply for supplier credit, loans, auditions, competitions, and incubators. This plays a role in the dismal display of diversity in VC’s but now you can change that. So what are you waiting for?
By: David Contreras
David is a writer at SputnikATX, Austin’s new incubator / accelerator coming 10.4.17. He is currently earning his Bachelors of Business Administration at UT.
Sources
- Olsen D. Female-founded, VC-funded: The numbers behind venture investment in women [datagraphic]. PitchBook News. Published March 15, 2017.
- Challet A. Venture Capital Doesn’t Invest In Blacks And Latinos, But That’s Changing In Oakland. Published August 18, 2016.
- Ortiz-Walters R, Gavino M, Williams D. SOCIAL NETWORKS OF LATINO AND LATINA ENTREPRENEURS AND THEIR IMPACT ON VENTURE PERFORMANCE. Academy Of Entrepreneurship Journal [serial online]. January 2015;21(1):58–81. Available from: Business Source Complete, Ipswich, MA. Accessed September 18, 2017.
- Freeland RE, Keister LA. How Does Race and Ethnicity Affect Persistence in Immature Ventures? Journal of Small Business Management. 2016;54:210–228.
- Kelley E. New Research Shows That Women-Owned Firms Exceed Growth Expectations, But Still Lack Access To Capital | National Women’s Business Council. National Women’s Business Council, advisors to the President, Congress, and SBA.
