For startup businesses that are strapped for cash and not yet strong enough to gain the attention of traditional investors such as limited partners and venture capital firms, angel investors often serve as their only opportunity to gain access to capital. Female angel investors of color, in particular.
But in this case, the term angel investor doesn’t just refer to providing capital to cash-strapped startups. As we’ll soon explore, these black female investors serve as angels to help lift many black entrepreneurs off their feet—specifically entrepreneurs who have found their businesses starving for investment and cut off from traditional funding sources.
In this article, we’ll dive into the issues making it so hard for black entrepreneurs to secure funding, how black angel investors are providing these entrepreneurs with access to capital and new opportunities, and three examples of noteworthy female black angel investors who are working to close the racial funding gap.
Why is it so hard for black entrepreneurs to secure funding?
Black entrepreneurs facing income inequality in the Western world is nothing new. Although recent events in the news relating to minority inequalities and systematic racism have (at long last) brought global attention to the issue, numerous seemingly insurmountable challenges still remain.
In the U.S., less than 10% of entrepreneurs pitching to investors are black, and of those, less than 20% manage to get their pitch translated into an actual investment. There are many areas that need to be changed when it comes to institutional biases against people of color in the U.S., but perhaps the most overlooked one is in the investment that provides fuel to entrepreneurship and up-and-coming businesses.
There is a massive barrier that exists in between novice black entrepreneurs and established VC investors looking for success patterns in potential prospects. To put it simply, most new black entrepreneurs just getting their startups off the ground lack access to networks, proximity to accredited investors and easy funding to other sources of capital such as banks (as a lack of available collateral makes many banks hesitant to invest in any startup).
It’s not that black entrepreneurs aren’t trying. But the aforementioned statistic shows that there is a clear problem that needs to be addressed. Part of the solution may lie in the black angel investors working hard to help catalyze investments into minority entrepreneurs and reduce the inequality gap as a whole. Doing so isn’t just good for the entrepreneurs themselves, it’s also good for consumers and for the American economy as a whole.
The Rise of Black Angel Investors for Building Wealth
Did you know that under 1% of total venture capital in the U.S. goes to black entrepreneurs? To help close the gap and give black entrepreneurs a shot, several black angel investors (also known as ‘black angels’) are stepping up to the plate.
As with any angel investor, these black angels do share the common goal of making more money. But in doing so, they want to help give overlooked entrepreneurs in the black community. For these entrepreneurs cut off from other funding sources, the black angels truly do seem like angels.
In a bit, we’ll dive into the stories of three female black angel investors who are paving the way forward. They do more than just provide badly needed investments into startups. They also offer inspiration to future generations of minority women seeking to build generational wealth, and can provide badly needed advice and education to many African American business owners who simply do not have investors in their network.
So who are some of these black angels?
3 Female Black Angel Investors Working to Close the Funding Gap
Three female black angels whose stories stand out are:
Arlan Hamilton of Backstage Capital
Backstage Capital is a venture capital fund that has invested in more than 130 startups led by either POC or LGBT founders. But the real inspiration is that of its founder, Arlan Hamilton, who built the fund from the ground up while she was still homeless and dependent on food stamps.
Featured on the cover of Fast Company in late 2018, Hamilton gained attention when she announced that Backstage Capital would raise a $36 million fund exclusively for startups founded by African-American women.
Her story is shared in her autobiography It’s About Damn Time.
Sarah Knust of Cleo Capital
Having invested in more than 40 different startups and with big names like Apple and Red Bull in her resume of companies she’s worked for, Sarah Knust has established herself as a major force in the investment world. Knust is regularly cited by major publications like Vanity Fair and Business Insider as an investor who can teach success before the age of 35 and who will continue to be a force into the future.
Tiffany Aliche of the Budgetnista
Tiffany Aliche founded and runs Budgetnista, a financial education company that has helped more than 1 million women across the globe save hundreds of millions of dollars, and pay down an equivalent amount in debt.
Aliche says she was motivated to start the company after conducting intense research into how black women are paid less than their peers and also suffer from other massive struggles such as devalued housing. Budgetnista is the result of Aliche’s desire to help those women get back on their feet with a firm financial foundation and debt-free lifestyle.
Aliche’s story and her advice is told in the book Get Good with Money.
At the end of the day, Aliche, Van Court, and Kimberlin aren’t just making a difference when it comes to representation and equality. They’re making a difference in people’s lives by creating more opportunities for entrepreneurs of color.
For all of the challenges they’ve faced, black-founded startups are on the rise, and they’re on the rise because of investors like the three women whose stories we’ve shared today.
Photo by mimagephotography/Shutterstock