Dr. Marlo Rencher is an entrepreneur, anthropologist and educator with over two decades of experience in startup and small business development. She has founded or co-founded three tech startups and currently serves as TechTown Detroit’s director of technology-based programs.
Detroit has a deep and growing pipeline of tech founders with validated ideas, strong value propositions and great potential to create jobs and wealth in our city. But in a majority Black city, these entrepreneurs are bogged down by racial disparities in community wealth and capital bias.
One of the most significant barriers to Black entrepreneurs launching their own company is the lack of access to and knowledge about capital. Most angel investors and venture capitalists are not Black and may not feel connected enough personally to make a financial bet on a Black founder.
Think about this – only one percent of venture-backed founders are Black. Just one percent.
In addition, the family and friends round of early stage capital that many White founders typically access is much more difficult to obtain for Black entrepreneurs. This is the $25,000-$150,000 it takes to build the business before generating revenue; paying for services, human capital and creating a minimum viable product. According to the Brookings Foundation, the net worth of a typical White family in 2016 was $171,000 — nearly 10 times greater than that of a Black family at $17,150.
So how do we help Detroit’s Black tech founders survive the startup “valley of death” between idea-validation and product creation and cover costs before they generate revenue?
To start, some of this dynamic would be significantly mitigated if more Black people controlled the capital. There also needs to be more training for entrepreneurs about how different types of funding work so that founders can craft better strategies. And perhaps what makes me most hopeful for Black tech founders of the future are the equity crowdfunding and other emerging asset classes that can increase the diversity of investors and put more capital in startups.
I envision a world where a very diverse group of people have the resources to explore how they can create value with access to the tools, network and capital to make it happen. At TechTown Detroit, we are helping bring this vision closer to reality.
While many incubators recruit startup founders who may have already generated revenue or have a physical product close to being commercialized, TechTown recognizes that serving founders from this majority Black city means doing things differently. We value the critical “idea-validation” stage – the earliest – to ensure a radically inclusive pipeline. Start Studio, launched in 2019, creates a welcoming on-ramp to tech by connecting with potential founders before barriers that disproportionally impact Black people make them less likely to participate in tech entrepreneurship.
Thanks to programs like Start Studio, the percentage of Black tech clients that TechTown services nearly tripled from 2018 to 2020.
We also introduced the Capital Program which teaches how different types of funding work and enables founders to craft better strategies. Independent virtual learning puts the founder in the driver’s seat and expert advice results in milestone-driven funding plans. We’re filling knowledge and network gaps and celebrating creativity, inspired by our clients.
And now, TechTown is taking another innovative approach to removing barriers for Black founders – a crowdfunded pool of cash called the Startup Fund which will make grants to Black alumni of the Capital Program. By complimenting the knowledge and networks that TechTown helps leverage, the Startup Fund will provide immediate access to capital for founders. Through the fund, Detroiters can essentially be the family and friends round and flip the traditional, exclusive, broken tech funding model.
TechTown, Detroit’s tech community and national leaders are ready to embrace racial equity and social impact as the philosophy for smart investing. Together, we can bridge the gap for Black tech founders.