Black British businessman relies on foreign investment while domestic funds turn away

Rich Serunjogi, founder of Business Score, said: “Clearly the UK is not the place to try funding your startup. “Only the best [UK] Interested VCs. Tier 2 funds tend to ignore Black founders and give excuses like ‘the market size of the business is not big enough or the idea is ‘too niche’. “

Britain also got its first Black-owned unicorns this year. Zepz (formerly WorldRemit) raised £218 million ($292 million) and £62 million ($85 million) of Marshmallow, bringing them to valuations of $5 billion and $1.25 billion, respectively.

But at the critical early stage of a startup’s lifecycle, Black founders face a much tougher time. They say there is not enough UK funding coming their way.

“It’s a mixed bag,” said Izzy Obeng, chief executive officer of Foundervine, a social enterprise that specializes in helping underrepresented entrepreneurs who want to start a business.

“The challenge is that there are a lot of gestures, but not enough investors looking at the data on investments in Black-owned startups, as well as funds run by Black fund managers. created and the money goes to diverse founders,” she added.

Britain’s Venture Capital and Private Equity Association told CNN Business it is “deeply aware of the challenges faced by founders from Black and other ethnically diverse backgrounds.” added that it has held discussions with Extend Ventures and venture capital firms to discuss possible action.

“Our most recent report shows that some progress has been made on gender since 2019, but it is clear that more work needs to be done to ensure adequate representation for all, including ethnicity,” the report said in a statement.

No Black CEO heads Britain's biggest companies

Some entrepreneurs like Benedict Odoom, founder of an agritech startup called Kilimo IOT, gave up venture capital and self-funded their business through side projects or family and friends while hoping for the arrival of an angel investor – a wealthy individual or family backing small businesses with early-stage funding.

“It was a bit difficult trying to get through,” Odoom said. He recalls meetings with venture capitalists, where he was deemed “too early” or too ambitious. His lack of experience in this field was also repeatedly pointed out.

In this context, foreign investors are bringing a very necessary. American, and more recently Japanese, venture capital targeting ethnic and social minorities across Europe is helping some black British tech entrepreneurs.

In October 2020, Google (GOOGLE) Venture firms brought their Black Founders Fund to Europe. It is a The $2 million version of the US accelerator it launched after protests sparked by the killing of George Floyd in May 2020. The European program selected 12 startups from 800 applications members, offering them $330,000 (£249,527) each in cash and Google Ad funding and credits for use on the Google Cloud Platform.
This year, Japanese investment giant SoftBank also brought a version of the U.S. accelerator Emerge to Europe, providing early-stage funding for ethnic and other ethnic minorities in the region. area. SoftBank (SFTBF) is partnering with five European venture capitalists, who have selected nine underrepresented founders from 600 applicants in 30 countries. Of the nine chosen, three were black British. They are scheduled to go on sale to some investors on December 9.

Black British business owners say they face long-term obstacles beyond a lack of capital.

“If you’re a minority, you’re going to be treated differently. This is not anecdotal,” said Gary Stewart, UK-African-American founder of two UK startups and one in the West. Spain, say.

A former venture capitalist and visiting professor at Yale Law School, Stewart was on the British Corporate Bank working group commissioned by the government following the 2020 protests to investigate discrimination. of black business owners. He told CNN Business that the government ultimately rejected the group’s recommendations, which included “how entrepreneurs/business owners of ethnic minorities are represented in national policy debate and adoption of financial services” and “increasing the availability of data on businesses” people belonging to ethnic minority groups.”

When asked why the proposals were rejected, a Cabinet Office spokesman said the UK the government has been “fully committed to building an economy where everyone, regardless of background or income, can access the financial products and services they need.”

Stewart says British investors’ caution in engaging with Black founders following last summer’s unrest is consistent with Denial of the UK government belong to The existence of apartheid and its effect on people of color in the UK in a report published in March of this year. Report received widespread condemnation, including the word United Nation.

“The majority don’t even understand why you need to have these conversations. And the government matches the perception of the nation,” says Stewart.

A UK government spokesman said it would put forward proposals aimed at creating “a step change in attitudes towards racing” in due time.

The story of two founders

That leaves entrepreneurs looking across the Atlantic.

“Do your best to get funding from the US and [experience with] Serunjogi advises others who are starting on the funding path.

After two months of fruitless UK seed investment searches, Serunjogi secured a spot in 2019 in the highly competitive Y Combinator accelerator in San Francisco, an experience he describes as “wonderful.”

“Really great networking and a lot of advice. I felt very lucky at the time,” he said.

Microsoft's Jacky Wright had to leave the UK to become the most influential Black person
Serunjogi’s experience in America echoes that of other frustrated black British talents who have forced to pursue opportunities in the United States to realize thwarted ambitions at home.

Back in London, Serunjogi received £1.4 million ($1.9 million) in funding from four investors: Y Combinator and privately from British-born founder Paul Graham, London-based LocalGlobe and Impact X Capital, a black-run venture fund. Two years later, Business Score is seeking £5 million ($6.74 million) in a second round of funding. That proves more challenging.

“They expect you to have more traction,” says Serunjogi.

At Kilimo IOT, which is trying to break into the global vertical farming market, Odoom says that if he takes a turn down “at face value,” he’ll say it’s because of his company. is in the early stages of development without a signed client.

Benedict Odoom, founder of Kilomo IOT, Glasgow, UK.

But he said that foreign investors are willing to testify more for him. At this year’s Web Summit in Lisbon, Portugal, he was amazed at the level of international interest, especially from a US-based angel investment organization and several investors. invest in Romania, Poland and Latin America.

Odoom said: “That opens up to me the fact that we need to look beyond the UK. “If you had told me two weeks ago that there would be so much interest, I wouldn’t have thought of it.”

Green shoots of black funds

One bright spot for Black founders is the recent emergence of grassroots organizations working to bridge the gap between minority entrepreneurs and the funding environment that often excludes them.

Some so-called “impact” VCs or angel investors like 10X10 and Impact X Capital also have an impact on social change as a financial gain.

Others are social enterprise companies like YSYS and Foundervine, which help Black and other excluded minority founders through training and familiarization. venture capital world, even in some cases connecting them with potential investors.

From what they say, some of that background is starting to pay off.

Andy Davis, co-founder and partner of 10×10 – a team of Black VCs and founders and angel investors in minority-run startups.

Last year, Davis published the Black Report, the first piece of research on the founders of Black pre-seed startups in the UK.

“In the third quarter [of 2021], you have a founder who took 18 months to make £150,000 ($198,000) on their first round and suddenly ended up with £2 million ($2.6 million) in the next round very quick. Yes [VC] confident in the markets you enter, especially in the software sector. The VC market respects ambition,” he said.

Foundervine’s Obeng says she’s recently seen “positive growth factors” in black founders. Foundervine has developed an accelerator program for minority founders with Barclays (BCS), now is the second year.

“I think we’re starting to see founders acquire skills and invest. We’re definitely seeing more companies entering into investment readiness programs,” which she said has shifted into more funding in some cases.

Davis and Obeng both named AudioMob, a startup that provides uninterrupted audio advertising in video games, as a recent beneficiary. AudioMob has raised £10.6 million ($14 million .)) in November.

Three out of four investors are American.


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