Diversity, equity, and inclusion initiatives are helping startup entrepreneurs overcome obstacles.

• In the U.S., less than 0.5% of all venture dollars allocated went to black founders of startup companies, which is the lowest amount in two years.
• Risky investments have become less attractive for startups seeking funding due to the rise of higher interest rates.
• A few years ago, some entrepreneurs built momentum, and now others are rising to the challenge and continuing that momentum.

In 2023, black founders of startup companies in the U.S. received less than half of 1% of all venture dollars allocated, which is a decline from the previous year, according to Crunchbase.

Over the past year, startups seeking funding have faced significant challenges as higher interest rates have made risky investments less attractive. Black founders have been particularly affected, with their numbers dwindling after a brief surge in funding following the murder of George Floyd in 2020.

A few years ago, some entrepreneurs built momentum, and now others are rising to the challenge and continuing that momentum.

The tax filing season has arrived. It is important to be aware of the financial scams that may arise in 2024. Additionally, it is important to understand the changes in financial advice that policymakers are considering.

Startup aimed at solving dating problem

An attorney from Washington, D.C., Naza Shelley, was frustrated with dating apps that she believed did not cater to professional Black women, so she created her own. In 2018, she founded CarpeDM, a dating service app that offers a personal touch with a dedicated human matchmaker. The cost of the app ranges from $300 to $1,800 per year, depending on the services and subscription length.

In order to launch her business, she sold her condo, depleted her savings, and sought funding from friends and family.

In 2022, the startup received its largest investment from Elevate Capital, a venture capital fund based in Portland, Oregon that focuses on investing in underrepresented entrepreneurs, including women, Blacks, Latinos, people of color, LGBTQ+ communities, and those with limited access to regional capital.

Shelley stated that obtaining initial capital was crucial for the success of dating apps, as it provided a pathway to getting off the ground.

The company's growth was fueled by increased funding for marketing, technology investments, and matchmaking hires, which resulted in more customers and stronger relationships with investors.

Steve Kaufer, the founder and former CEO of TripAdvisor, who recently invested in CarpeDM, stated, "I love the category because it brings happiness to people when they can find great matches. When I can find investments where I feel my experience can add value, those become my favorites."

What to consider when investing in a startup

In 2019, Jason Ray founded his wealth management firm in response to the need for addressing racial and gender-based wealth inequality in investment advice.

According to Ray, president and chief investment officer at Zenith Wealth Partners in Philadelphia, individuals with ambitious financial goals are unable to obtain high-quality advice.

Several of the company's clients are drawn to investing in early-stage firms as a means of reducing stock market fluctuations and enhancing overall returns.

Startup founders often begin by seeking funding from friends and family. However, once a startup seeks external funding, accredited investors are required. To become accredited, individuals must have an annual earned income of $200,000 or $300,000 for married couples, or a total net worth of at least $1 million, excluding the value of their primary residence.

Ray advises clients that if they want to invest, they should be aware that the investment will be illiquid, meaning they won't be able to access their money for a long time. Additionally, there is a high chance that they may not make any profit, as two-thirds of startups never show a positive return, according to Harvard Business Review.

In order to determine whether to invest in a startup, Ray advises investors to assess the company's operations and competitive edge. They should also examine the management team's background and performance, and above all, comprehend the investment terms.

Ray stated that if the company's valuation is too high and the investor is not receiving sufficient rights, ownership, control, or any other benefits, then the deal may not be suitable for the investor.

‘We’re just gonna keep climbing’

Despite a slowdown in startup funding, Elevate Capital intends to launch a new venture fund in the near future, increasing its support for diverse entrepreneurs in new regions.

Nitin Rai, founder and managing partner of Elevate Capital, stated, "We'll keep climbing, just like mountain goats, and we'll keep doing it."

Ray predicts that early-stage investing will have its share of ups and downs, similar to the stock market. However, he believes that the trend seems positive, and people will continue to invest in and support businesses run by Black people and people of color.