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Funding and Fear: Two Gatekeepers Barring Black Tech Startup Founders From Entering Silicon Valley

When the lack of diversity in Silicon Valley was brought to the nation’s attention, tech lovers and entrepreneurs from all backgrounds quickly began discussing exactly what was keeping Black people barred from the world of tech.

Disparities in quality of education, lack of access to resources for students interested in STEM (science, technology, engineering and mathematics) and racially biased hiring practices quickly emerged as some of the most popular ideas.

Statistically speaking, there is more than enough data to back up these claims and suggest that fixing these issues could be key to diversifying the world of tech.

As the national discourse continues, however, some tech entrepreneurs are highlighting two more major obstacles that are preventing Black people from not only getting into tech but also discouraging them from launching their own startups.

Funding and fear.

This intimidating duo could possibly be among the great adversaries for aspiring Black business owners, especially in the world of tech.

The number of Black employees at tech giants like Google and Facebook was well below the 5 percent mark in recent years. The number of Black tech-savvy entrepreneurs who launched their own startups plummets to a measly 1 percent.

One key reason for this is the lack of funding.

Even outside the world of tech, Black people have historically faced much greater obstacles than their white counterparts when it comes to seeking financial assistance via loans, grants, investments or donations.

Without the necessary funding to get a startup off the ground, it may be nearly impossible for Black-owned startups to stand a chance in the rapidly expanding tech field.

Companies like Y Combinator are hoping to level the playing the field.

Y Combinator is a major incubator for startups and provides seed money to projects that show great potential.

In the past, the company has backed startups like Airbnb and Dropbox.

Now the company is expanding its reach with a particular focus on Black entrepreneurs.

Even as other programs like Y Combinator have started to shift focus in order to find more Black entrepreneurs with promising tech startups, it’s the other enemy that is still causing many to shy away from opportunity — fear.

At least, that’s how Michael Seibel sees it.

Seibel, the first Black partner at Y Combinator, explained that many Black people have a negative perception of launching their own startups.

“We have to convince Black engineers that they have more control of their careers than they realize and they will always be in demand,” Seibel told The Root.

Statistics would also work to support Seibel’s point.

Less than 5 percent of Y Combinator applicants for the winter program were Black.

It suggests that these entrepreneurs simply don’t know about the opportunity or are convincing themselves to not even take a chance in stepping out on their own.

As frightening of a decision as that may be, it’s a decision that has already led Black entrepreneurs like Riana Lynn and Talib Graves-Manns to life-changing opportunities.

Both of the Black startup founders were announced as a part of the first class of entrepreneurs in residence under Google and Code2040.

The coveted title means they will have access to free office space, mentoring teams from both Google and Code 2040 along with a $40,000 stipend.

They are both urging other Black entrepreneurs to overcome the fear of Silicon Valley and take a massive leap forward with their own tech startup.

Lynn explained that a part of the fear could come from a lack of knowledge or not feeling like one has enough experience in the field. It may seem like a legitimate reason to stay out of Silicon Valley’s deep waters, but Lynn says the solution to such a problem is simple.

“If you don’t have the skills to build exactly what you need, then you should at least have team members or freelancers that can help you move things along faster,” she told The Root. “Then you can also understand a little more about how long the project is supposed to take or how much it may cost, and that’s really key to launching a project as a startup founder with little or no capital.”

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Lack of Investor Support for Females, Minorities Continues to Stifle Diversity in Tech Industry

Black owned start ups

A recent study revealed that female and ethnic-minority entrepreneurs have more of a struggle garnering support from investors when compared to their white, male counterparts.

The study from Pepperdine University’s Graziado School of Business and Management has exposed yet another way females and minorities are placed at a severe disadvantage in the tech industry.

“We find consistent evidence that minority (non-Caucasian), women and foreign business owners’ establishments are significantly less likely to receive PE (private equity) or VC (venture capital) financing,” the study said, according to a blog post by the Wall Street Journal.

The study analyzed fundraising data from the years 1995 to 2009 and found that female-owned business are 2.6 percent less likely to raise private equity funding than white males.

Female-owned businesses were also found to be 18.7 percent less likely to successfully raise a venture round than companies run by white males.

The numbers were even more troubling for minority-owned business.

Minority-owned businesses were 21.7 percent less likely to raise private equity funding and 22.2 percent less likely to successfully raise a venture round than their white male counterparts.

While the study focused on fundraising on all types of businesses, these statistics are particularly troublesome for minorities and females in the tech industry.

The tech industry heavily relies on private equity to launch innovative start-ups and sustain the growth of smaller companies.

With this industry already struggling with a severe lack of diversity, the inability of minorities and females to garner the same financial backing as white males means the industry’s 2 percent problem could persist.

Earlier this year, tech giants like Facebook and Google released their diversity reports, which revealed that only about 2 percent of their employees were Black.

Out of that 2 percent, very few of the employees had leadership positions with the company.

The authors of the report believe the lack of financial backing is not necessarily a result of overt racism but can still be connected to racial bias.

According to the Wall Street Journal, the venture capital industry is still dominated by white men.

A survey conducted by the National Venture Capital Association (NVCA) and Dow Jones VentureSource back in 2011 found that only 11 percent of investors were women while nearly 90 percent were men.

Researchers suggest that these white men are more comfortable investing in what is familiar to them – other businesses run by white men.

The NVCA claims it is taking steps towards changing this demographic and boosting diversity in investment firms.

Meanwhile, other leaders in the Black community are taking matters into their own hands.

Former NAACP president Ben Jealous stepped down as the head of the nation’s largest civil rights organization and is now working on the West Coast as a venture capitalist.

Back in March, Jealous explained that becoming a venture capitalist would allow him to continue making more opportunities for Blacks and Latinos.

“My life’s mission has been leveling the playing field and closing gaps in opportunity and success,” he told the Associated Press. “I’m excited about trying a different approach.”