Spike Lee may be using Kickstater to fund his next film. But next time, he and other Black entrepreneurs will have another option. Six Morehouse alumni and Omega Psi Phi fraternity brothers have created BlackStartup, which they hope will become the go-to site for Black-based crowdfunding.
It lets Black businesses and social-cause projects to raise capital through small investments from both within and outside of the Black community.
According to one of the six co-founders, Nathan Bennett Fleming, 28, BlackStartup is the first Black-owned business to be awarded the Yale Entrepreneur Institute Fellowship, which granted the company $20,000 in seed money and a 10-week boot camp at Yale University.
Now in its beta testing phrase, BlackStartup has 17 start-up businesses and social-cause projects using the platform. An engineering summer camp for youth in New York; Girls Gone Global, an organization sending at-risk girls to study abroad; Make Music Count, an algebra group teaching math through pianos; and others, have received funding through BlackStartup.
TNJ.com: How did the idea come about?
Nathan Bennett Fleming: The co-founders of BlackStartup met as students at Morehouse College. We grew close as members of the school’s Omega Psi Phi chapter. We recognized that the Internet was creating a new era of financial innovation, and that because of the democratizing elements of the Internet, we could possibly create some online vehicle to address the access to capital challenges for Black entrepreneurs. We pledged to work on building such a company later in our twenties.
Following Morehouse, all of the co-founders pursued graduate and professional experiences. 4 of the 6 founders attended law school. Immediately following my time in residency at U.C. Berkeley School of Law, I was a legal fellow for a House Financial Service Subcommittee. Here, I worked on legislation that later became the JOBS Act, which created an exemption to the Securities Acts to allow for unaccredited investors to invest on crowdfunding platforms.
While working on this legislation, it became clear to me that a crowdfunding platform for the African-American community could be a viable option and could be a project that met the objectives of the company that we outlined while in college. I took the suggestion to the team, and they decided that it was a good idea. So we started working on building what became BlackStartup.
TNJ.com: How did you get the grant?
NBF: Two members of our team are students at Yale University. Yale has an Entrepreneurial Institute that has several programs to promote innovation throughout the university. We were accepted first into a new program called the Venture Creation Program, which gave us a small amount of funding to build a prototype of our site. The Fellowship was a more competitive program, which came with $20,000 in seed funding; top level mentors; access to legal/accounting/marketing firms; and a 10-week business boot camp to accelerate your venture through events, connections to advisers/investors, speakers, etc.
We had to compete with projects from each campus at the university, through a two-stage process, that culminated with us pitching our projects in front of the Yale Entrepreneurial Institute operating board. We advanced from that stage as one of eight teams to be awarded the fellowship. We are the first Black-owned business to win the Yale Entrepreneurial Institute Fellowship.
TNJ.com: What did you take from the Yale Boot Camp?
NBF: We completed the camp at the end of July. We took so much from the experience that outlining it can be quite exhaustive…But in general, we filled our knowledge gaps surrounding entrepreneurship and early stage business creation, while connecting with some of our nation’s top minds in innovation. Particularly worthwhile were the relationships we built with the other teams in the fellowship program. They have ideas that will be transforming and disrupting a variety of industries, so it was great to learn from our peers. We now have mentors and advisers that are at the highest levels of the American business landscape.
For example, we have been working with David Rose, the founder and CEO of Gust.com. He is one of the world’s foremost experts on crowdfunding. It is the global platform for startup funding, which has affiliations with all the major national and global angel investing groups. His expertise has been invaluable. One of our mentors is the president of a investment house and was the former CFO of McKinsey and Co. We met and worked with a board member from Profounder.com, the first crowdfunding site to get traction that led to the JOBS act implementation. We had the opportunity to develop relationships with investors, we pitched and worked with product managers at Google in NYC, and even built team camaraderie playing softball for the YEI team!
TNJ.com: Why do you think the idea of crowdfunding has taken off?
NBF: Crowdfunding has taken off for several reasons, the most important is that it lowers transaction costs related to fundraising. Previously, to fund your ideas you had to take the time and have the money to undergo fundraising activities that often did not yield enough results to justify the associated costs. Using platforms on the Internet allows you to potentially reach millions with greatly reduced costs in time and money. That is the basic value proposition, but beyond that, crowdfunding has democratized the financial industry, which for far too long has been dominated by elites and powerful institutions that can create an intimidating climate. Crowdfunding is the exact opposite: it is transparent and allows for the community to empower your vision. That is a truly groundbreaking development, and we at BlackStartup are thrilled to be on the forefront of leveraging this technology for our community.
TNJ.com: Do you think the crowdfunding craze will peak?
NBF: I think it cannot be stressed enough that crowdfunding has already had a transformative effect on capital raising, and we are only in the early stages of the phenomenon. Currently, there are regulatory hurdles to the growth of the market that are being removed, so the peak of the industry will not come until after crowdsourcing has fundamentally changed the scope and makeup of the financial services industry. It’s a revolution of sorts. And currently we are in the early stage, high-growth phase, with growth rates of 80% or more expected over the next few years. This year, $5.3 billion will be raised on crowdfunding platforms, and this number will be well over $10 billion next year.
TNJ.com: When do you expect to launch?
NBF: We soft-launched a MVP/beta version of the platform in May of this year. This was to get feedback from the customers directly, before we proceeded with a large scale launch of the platform. We were encouraged by the results and momentum accrued during our beta testing phase. We expect to launch in the fall of this year.
TNJ.com: What has the response been?
NBF: Our mission to create the largest community of African-American innovators that the world has ever seen is really resonating in the community. We are getting our message in the traditional mainstream media, in Black-targeted media, and on social-media. We will be presenting at the Congressional Black Caucus’ Foundation’s Annual Legislative Conference this September.
TNJ.com: What are your goals this year?
NBF: Our goals are to take the lessons we’ve learned in our beta testing phase to improve on our platform. We are working very hard to get our message out to as wide of an audience as possible and to develop and build as large of a crowd/community as possible. Those are our two most important goals. We also are building and developing strategic partnerships and are looking to build an online startup/non-profit incubator on the website.
TNJ.com: Long-term goals?
NBF: Our goal is to create the largest community of African-American innovators that the world has ever seen. It is our hope to develop tools to encourage the development of sustainable social and entrepreneurial ventures that can contribute to the narrowing of the Black entrepreneurship/wealth gaps. We want to continue to leverage technology and financial innovation to solve problems and create value propositions for the Black community.