Lost in Cyber Space


VCsA recent study about online startup companies revealed some startling news–at least for digital entrepreneurs of color. According to a study by private investment research firm CB Insights, African-Americans make up a mere 1% of Internet company founders nationally.

In addition, the majority of the black founders were part of an all-black founding team. The median amount of funding secured by an all-black founding team was $1.3 million, compared to $2.2M for a racially mixed team, and $2.3M for an all-white team. Asian teams secured the most funding with a median range of $4 million. The study concluded that unfortunately, “overall, African-Americans are still underrepresented in both the tech and entrepreneurial sectors.”
The study also found that while young prodigies often receive the spotlight for their exciting new start-ups, most companies are founded by those in their mid-thirties and early forties and many were CEOs or founders at some time.
Lauren DeLisa Coleman, the CEO and founder of Punch Media Group, a digital media and entertainment start-up that develops pop culture experience and branding strategy across digital platforms, is not at all surprised by the findings. “I think it’s a tell-tale sign of the discrimination which exists within venture capitals (VCs) today which are mostly all white, all male and have little sensitivity to the need for diversity in forging relationships,” she points out. “This is why so many of the projects in which they invest fail: too homogeneous. As someone who has even written to the famed Tom Perkins of the huge venture capital company Kleiner Perkins just for advice of navigating the VC world as a Black female in the digital space and received not so much as a postcard back in two years, I have found there are also way too many hoops to jump through with VCs. I think we have to admit there has been some white bias which needs to change.”
Anand Sanwal , CEO and co-founder at CB Insights, too was not surprised by the study´s data. “Many of the findings we expected, but it was interesting to see them supported with hard data,” he notes, adding, “In terms of surprises, there were a couple. The fact that Internet entrepreneurs backed by venture capitalists tended to be older was one such surprise. There is a popular conception that Internet entrepreneurs are these teenage prodigies, and of course, there are individuals like Mark Zuckerberg of Facebook or Sergey Brin of Google-fame, but the data showed that venture capitalists generally are backing entrepreneurs with some experience. The other surprise was that we expected many more founders to have advanced technical degrees a la Master’s of Science or PhDs since we were focused on Internet companies. But we saw that founders with MBAs were very prevalent and actually raised larger funding rounds from VCs on average.”
But despite the findings, Coleman sees opportunity in the digital arena for African-Americans. “Now is the time, given that all the numbers in our favor (Blacks out-index in social media frequency, we are the fastest growing in broadband, we spend more and use more features on mobile phones, we out number in Twitter presence, etc); this is an opportunity for smart investors to not only invest in but seek out those of us with digital concepts,” she notes. “It just makes good business sense. Corporations would also benefit from being savvier in this area for joint ventures and partnerships. The fact that NBCU and Comcast need to be reminded by me to have digital element inclusions in their diversity initiatives shows a bit of short sightedness. Those who wade in with digital entrepreneurs of color today will be those who have the competitive leverage and advantage for tomorrow. Look at the census forecasts. The browning of America coupled with our desire for all things digital is a perfect storm of opportunity.”