Written by: Sandeep Panikkal
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Racism has been a scar on our society, which still exists even after years of struggle and policy interventions. This has resulted in a glaring wealth gap brought again to the limelight during the recent black lives matter protests. “At $171,000, the net worth of a typical white family in the USA is nearly ten times greater than that of a Black family ($17,150) in 2016”.
One reason for this inequality is the lack of funding for business ideas generated by people of colour. Studies show that less than 1% of all Venture Capital (VC) funding goes to Black founders, and only “3% of VC funds employ black or other minority professionals”. This results in a lack of compassion towards black entrepreneurs, especially when the problem they aim to solve is not faced by the people who decide to fund these ventures.
SoftBank has recently created a separate $100 million fund specifically dedicated to people of colour. To start with, SoftBank will invest $2 million or more in 14 US startups led by black founders and other underrepresented groups. Though this is a welcomed step, it amounts to only a fraction of the overall funds managed by SoftBank. Their flagship, $100 Billion Vision Fund had invested “in just one company with a sole founder who was black, and one other company with a black co-founder, over its three-year existence”. The real success will come when black entrepreneurs can easily access mainstream banks and investors for funding their future growth and scale-up.
It makes sense to invest in ventures started by people of colour, as pointed out in this HBR study. For that, they require committed and compassionate investors to fund their ventures whom they can depend for navigating through the various unique challenges their business faces.
Softbank needs to fix the systemic issues in its funds that keep out black founders and limit their growth. This, apart from unleashing talent, can lead to much-needed wealth creation among the black community.
