How Black founders can get funding
There are high barriers to funding for Black founders, especially first-time ones. I know this because I’m a first-time Black founder who has raised (and is still raising) money. I’ve made a lot of mistakes, but also a lot of progress. Here’s what I’ve learned along the way.
How to prepare
Before considering how to get funding, you must be sure that you are operating a dynamic and interesting business model where there are opportunities for growth, that you are offering a workable solution to a problem in your chosen sector, and that you know exactly how much you want to raise.
Take care over your pitch deck
Next, you need a professional pitch deck. A well-designed pitch deck shows you’re serious. Templates exist, but consider getting your deck professionally designed. If you’re a Black founder, you may encounter prejudice so it's especially important that your deck is beautifully designed and coherent.
Convey your business plan as a story. If you can frame your ideas and your research as a story, you’ll grab the attention of the people you want to invest in you, you’ll see more investor engagement, and have more productive conversations.
Practice your pitch
Practice your pitch. The first time I pitched I could hear my voice shaking. Eventually, I became more confident and the nervousness disappeared. Practicing will give you a sense of ease and confidence over your material, and that will give weight to your idea. You can rope in your friends to hear you speak and give you feedback, or film yourself presenting and fine-tune your pitch.
The most important thing is your mindset. Understand that fundraising is a sales process; you become a salesperson when you pitch your business. Convey the message that if someone backs your idea, they will make money and social impact. Adopting this mindset will give you confidence.
Build a pipeline
Create an investment pipeline. Make a list of between 50 and 100 angels and VCs in your space who invest in your stage. Remember pre-seed investors are backing your potential; they haven’t seen proof that your idea works. They’re taking a lot more risk than seed investors. Use your pipeline to track your progress with each investor and make notes about your conversations with them. Share that pipeline with your network and ask for introductions, since it’s unlikely you’ll get access to an investor without an introduction.
Break down your raise
Let’s say you’re raising £400,000. Break your raise intro tranches. This means you can reach out to a select group of investors first, and there will be many investors investing between £10,000 and £50,000. Make sure you say that you’re raising in tranches or early investors will be skeptical that you’ll hit your £400,000 target.
Join an accelerator
If you can get an accelerator or incubator into your startup journey and it sends a positive signal - especially to investors. Organisations like YC have free programmes that will help you prepare to be investor-facing and give you access to a big network of investors who can come into your round.
Give a discount to early investors
Reach out to friends and family and the investors who give between £5,000 and £50,000 first. They’ll be easier to pitch to and sell to. Give them a low company valuation for an attractive equity share, and let them know that the valuation will go up at later stages, and they’ll be a lot more likely to invest quickly to get the better deal. You can also track your progress towards your tranche target figure to create FOMO in other potential investors: if you’re nearly at your tranche target, other investors won’t want to miss out.
It gets easier
By the time you get to your second tranche, you’ll be able to show through the success of the first that other investors want to back you. Investors invest in what other investors invest in, so closing each round will get easier. As with the first tranche, offer lower company valuations at the start so that investors act quickly to get the better equity deal.
How to close
Use a simple fundraising mechanism to close your round at pre-seed stage. Use a convertible loan such as enabled by SeedFAST. These allow investors to subscribe for shares in the next funding round in exchange for their giving you money now. Once an investor has committed, you can use a platform like SeedLegals to make that commitment watertight.
A final word
Fundraising costs time and money. It’s a full-time activity. I did not make progress fundraising until I quit my job. But know that it is entirely possible to get funding. With the right attitude and preparation, you will find those people who want to make your idea a reality.