Despite attempts to bring more diverse leadership to the business world, women and racial minorities are still underrepresented in vendor-backed companies. In fact, three-quarters of startup founders who received venture funding between 2013 and 2017 were white, according to a report by RateMyInvestor in partnership with Diversity VC. The report also found that less than ten percent of those venture-backed startups were led by women.
It’s worth exploring what other funding options are available to founders from marginalized groups aside from venture capital.
Here’s a look at funding options to consider in your coverage.
The Small Business Administration (SBA) has loans available to minority-owned businesses. Some areas also have lending programs specifically aimed at underrepresented founders. For instance, NYC’s Department of Small Business Services has announced that it will offer lines of credit of up to $100k to women-owned businesses. Meanwhile, other founders take out personal loans to cover startup costs if they can’t get a business loan. How do the terms and interest rates compare for these different options? How do experts feel about borrowing to cover startup costs?
Unlike loans, grants do not not need to be paid back. Are any companies in your neck of the woods benefiting from small business grants? What is the application process like? How competitive is it? What is the typical grant amount? Grants.gov is the hub for federal grants, and the National Association for the Self-Employed also has a growth grants program. Are other grants available to minority business-owners in your community? Readers may be interested to know.
Some industries–for instance, developing cutting-edge medical devices or opening a brick and mortar retail location–are capital intensive by their very nature. But others offer more opportunities for founders to bootstrap without needing outside money. This Fast Company article profiles black founders who’ve done the latter. Can you find similar scrappy founders in your area?
While minority businesses often aren’t closing as many VC deals, if you can find one in your area that has, it’s worth exploring how they bucked the statistics to successfully raise capital, how that money is helping to grow or scale the business, and more. If possible, talk to investors to find out what drew them to that company and its founders.