Between 2009 and 2019 in the U.K., just 30 Black people received VC funding, equating to less than 0.4% of all funds allocated to founders. Though the latest figures haven’t been released, it’s safe to say that plenty of work needs to be done to ensure that more people receive funding.
One way to do this would be to launch more funds that specialize in backing diverse founders. There is an increasing number of funds saying they are dedicated toward backing diverse founders, and around five are known to be dedicated specifically to Black founders.
While funds targeting members of the Black community won’t fix systematic and cultural discrimination, there’s certainly no harm in having more. More Black funds, for example, could help support more businesses otherwise overlooked. This, in turn, would increase the possibility of a Black unicorn and may spawn new sectors and create new jobs. Smaller VCs also tend to offer more than just money, such as money and a dependable ecosystem, which could prove essential for many founders.
There is a growing desire for more funds and resources in the UK targeting Black founders, according to several that we spoke with. But angel investor Andy Ayim points out that there are two major roadblocks to this: For one, Black people make up just 4% of the U.K. population, compared to 14% in the U.S.
“The wheels are starting to turn, but we’ve got a long road ahead.” Karl Lokko, Black Seed
“This drastically shrinks down the available market for investors to find category-winning startups that can grow big enough to return the fund,” he told TechCrunch+. The other hurdle, he said, is where the funding comes from. “This group is very homogenous and tends to favor emerging fund managers with general partner experience at an established fund as well as a track record with their fellow GPs,” he said.
Mandy Nyarko, an investor looking to raise a fund, said that many potential limited partners see Black businesses as non-fund returners that exist mainly within the lifestyle sectors; that makes the pitch for dedicating a fund to scale such businesses almost impossible.
Right now, only 1% of asset investment managers in the U.K. identify as being Black, and many of them are independent investors or working at a firm. Last week, venture firm Black Seed announced a £5M raise for its inaugural fund targeting Black founders. The team raised that amount in just six months, much faster than anticipated. Karl Lokko, the firm’s co-founder, said this represented an appetite from investors in the U.K. to back Black British founders.