Iddris Sandu, founder of a company called Spatial Labs, recently closed on $10 million in seed funding led by Blockchain Capital. While this may be a huge win for Black founders in the Web3 space, it isn’t the norm. A global report done by TechCrunch showed that Web3 startups raised $21.5 billion dollars in 2022. What portion of that was raised by Black founders in the United States? $60 million. Surprisingly, this is an increase from 2021 when Black founders in the U.S. raised only $16 million for their Web3 startups.
Where is the disconnect? I decided to go directly to the source and discuss the matter with innovators in the space.
I spoke with Travis L. Rice, the founder of a Black-owned NFT development studio and Web3 accelerator called W3bbie. He mentioned that he wasn’t even thinking about fundraising based on the struggles and horror stories he has heard from his peers. Rice said, “We’ve taken more of a bootstrap route to start by launching our Found on Mars project and winning hackathon bounties. The fact that the current state of raising for Black founders is so bad that people are dismayed from even trying is very telling.”
Uche is the Black female founder of the AON Collective. She also decided to take a non-traditional approach to funding and start applying for grants. Though the response rate has been slow, she revealed she hopes to use the money to amplify more Black artists and provide them exposure to get their art purchased.
Ikechi Nwabuisi is the founder of Tribl, a crypto-powered community and moneypooling platform. Nwabuisi mentioned that while many Web3 companies are raising pre-product and pre-revenue funding at valuations of $20 million, that is not the case for Black founders. He also said, “Most diversity funds don’t really invest in Web3 and/or find valuations too high. Black founders aren’t really given the capacity to innovate; they’d prefer to see us copy an existing thing, and in a field built on innovation, it doesn’t bode well for us.”
Jason Robinson, who is the founder of Playbook Five, stated that minorities have to prove themselves more than others. “I’ve had funds tell me that we were too early and then turn around and find out they have funded a competitor that had not even built a product,” Robinson explained.
An anonymous founder told me that his biggest challenge was not being in the know of venture capitalist (VC) networks. He said, “I’m close to having an MVP built, and I have seen other pre-seed raises with pre-product and pre-revenue get funding because they already have a VC network. White founders have a biased network that benefits them that Black founders don’t.” He also mentioned that a lot of VC firms are run by white people, which leans into the bias of more funding for white founders. “The VC funds are seeded by [limited partners] that are public institutions [pension funds], so it’s really a systematic issue where diverse money [and Black people’s pensions] are being funneled to those institutions disproportionately to fund white founders.”
The next question that needs to be asked is: What are the solutions? Well, one common thread I saw amongst founders is that there is a lack of knowledge about fundraising when it comes to decks, outreach, and information to present. Tech companies should provide more educational resources around funding and the process — outside of just accelerators. Another issue to tackle is access to a network of VCs. We need to provide more spaces for Black founders to engage and meet with potential investors and share what they are working on. This can be done via group chats, virtually, or even at one of the many Web3 conferences that are held throughout the year.
I asked two founders what their thoughts were regarding improving the current state of funding for the Black community. Jordan Olmstead provided this insight: “1. Find mentors who will go to bat for you and leverage their networks for you. 2. Find models and best practices for decks (YC), companies that are highly effective (Amazon), and emulate them. Investors pattern match, so if you present stuff in a way that’s familiar to them, you’re more likely to succeed 3. A lot of people have imposter syndrome. If they don’t have examples of people in their lives who have done this, they will feel like they are not ready. People from privileged backgrounds think they deserve this, so it’s less of an issue for them.”
While speaking with Andre Millwood, a thought leader in the Web3 space, he stated that companies like Microsoft and Google have been making a vigorous effort to engage with startups and provide resources, money, and even accelerator programs to give founders of all backgrounds a fighting chance to be successful.
So the question remains: Is there hope for Black Web3 founders? YES! There has been an increase in tech programs curated specifically for Web3 projects that will allow for more startups to get funding opportunities. Not to mention, the increase of Black VCs and other minority-led investment groups has provided more funding for Black startups across the board. Should we have to solely rely on Black investors to get the funding? NO. But, the fact that there are more emerging into the space will increase opportunities overall for the community. A win is a win in my book, but it doesn’t negate the fact that more VC companies need to provide an even playing field for Black Web3 founders to get the same funding opportunities as their white counterparts.