Raising Investment As An Underrepresented Founder

Investment while being underrepresented

The great majority of startup funding is raised by white male founders from white male investors. This is despite the well-known fact that diverse teams perform better and also that more women, and those from diverse backgrounds, are entering the investment space these days. 

According to sec.gov (US Securities and Exchange Commission), 77% of VC-backed startups have white founders, with only 1% being black, 2% Latino, 2% Middle Eastern, and 18% Asian. 

Founders from ethnic and social minorities, of underrepresented genders and those lacking in education, still find it difficult - impossible sometimes - to raise funds needed to grow their businesses. The crux of the problem seems to be that as an underrepresented founder you do not align with the pattern matching systems that investors use. Those are typically based on your professional network, the education you received, the market your idea serves and the problem that it solves, and, lastly, your location.

What can underrepresented founders do to position themselves optimally for attracting investment? Firstly, given your business is at the right stage, it may be a good idea to join an accelerator program or acquire helpful and well-connected advisors who will be able to introduce you to investors when it’s time to raise.

Secondly - if possible - move to a location that has a critical mass of startups and focuses on expanding your network. Get to know founders in your space who have successfully raised investment. Chances are that - given they believe in the potential of your venture - they will be eager to put you in front of their investors too.

Also, do your best not to belong in more than one disadvantaged category. For example, if you are from an ethnic minority, get educated at a well-established university which is more likely to get you funded. Alternatively - if possible - change your location to that of a major entrepreneurial hub.

Lastly, research the investors you approach to make sure you only speak with those who are relevant in terms of sector and ticket size. There is nothing more wasteful of everybody’s time than to blanket email all investors you’ve been able to find (on Angel List or elsewhere) with a message that hasn’t been adapted and personalised. Always ask investors you’ve been able to get a meeting with for feedback on your pitch and learn from rejections of which there will be plenty. 

To sum up, raising funding as an underrepresented founder is tough. There are steps you can take though to put your best foot forward and increase the odds. With the appearance of incubators and funds focusing specifically on supporting founders from ethnic and gender minorities, with time, completing a financing round should get easier. Typically overlooked founders often work extra hard to become experts in their domain and are therefore a wise investment decision. Hopefully, more and more investors will take advantage of this unique opportunity.