Capital is Oxygen
It’s Thursday. Thursdays mean INTRO to Finance. This is Jason. In this issue, we’re going to be looking at the numbers behind a large financing problem in the context of an even larger societal issue we’re all wrestling with today.
For those who don’t experience it, systemic racism can seem like an abstract concept. But the numbers behind it can help us understand just how real it is for those that do. We’d all like to believe in a land of opportunity where entrepreneurship can be an equal option for all — the numbers tell a different story.
Historically, Black founders have only raised less than 1% of all venture capital. (Not for a lack of trying.) Their access to other forms of financing is equally out of reach with Black business owners being denied loans at twice the rate of their White counterparts.
Even when they’re approved, Black and Hispanic-owned businesses found they’ve been required to produce more documentation, received less information about fees, and experienced less friendly service when working with a small business lender. This has led to a higher level of discouragement in seeking loans or being able to build productive financial relationships with lenders.
Black business owners have less access to banking relationships. It was estimated that 90-95% of Black business owners were going to be shut out of the COVID-relief funds made available through the SBA as PPP loans. In an effort to improve those numbers, we developed a simple set of guides. Our goal was to help business owners without access to expensive legal or financial advisors navigate the complex and continually evolving programs being developed by the SBA. With the help of our Scout program, and through amplifications from The Shade Room and Melody Ehsani, we launched our guides on April 6th.
Within days we had tens of thousands of visits to the site. In an effort to make the guides more useful, we plugged in Lendio as a financial partner who could help turn readers into applicants whether they had an existing relationship with a lender or not.
Of the 2,000 businesses that applied, nearly 200 were approved. Despite unlocking nearly $12M in PPP funding, our numbers confirmed the warning that many had raised. Over 90% of Black business owners who applied through our guides were rejected for funding. Just one more example of the systemic racism inherent in finance.
If capital is the oxygen of business, then Black business owners can’t breathe. We’ve systematically starved them of the oxygen they need to survive, to create, and to leave their legacy on the technology industry at large.
This experience early in the life of INTRO has only deepened our resolve to unlock opportunity and access. Both through education and developing systems that connect founders to financial resources regardless of their networks. With that said, we are grateful for the networks around us that support our work. Watching our Scouts jump into action and play such an outsized role in our PPP efforts, has brought much needed clarity and emphasis to our broader goal of not just developing a community, or even an Indie.vc ecosystem, but an entirely new kind of economy built around Indie ideals.
To that end, we want to recirculate dollars within that developing economy.
As part of the partnership with Lendio for the SBA guides, we’ll receive around $25,000 of referral fees in the coming weeks. Within the ranks of our Scouts, there are leaders of high-impact grassroots organizations working to bring equality and access to Black founders and funders in the VC and tech community. Now, more than ever, this is needed work with outsized impact.
We’re donating those referral fees to the following five Indie.vc Scout-led organizations:
— HBCU.vc
— Black and Brown Founders
— Project Include
— The Human Utility
— Black Girls Code
We are not doing this alone.
Our INTRO partners are aligned with us in building a more equitable funding ecosystem. With the help of a handful partners — including donations from Bigfoot Capital, Decathlon Partners, and Clearbanc — we’re adding another $10,000 in donations alongside ours. We invite you to match the $35,000 by donating to each of these orgs. Screenshot your donations and email or tweet the receipt to us.
At Indie.vc, we don’t see investing and supporting Black owned businesses as charity or checkboxes, but as core to the world we want to live in. Supporting and growing an inclusive and expansive Indie economy is central to our investments, our work with INTRO, our Scout program, and with the many other initiatives we’re quietly developing behind the scenes.
Black founders — we love you and believe in you. Your lives, and your work, matter.
