The Black Angels nonprofit organization focuses on education to transform the landscape of angel investing.

• According to research from the Angel Capital Association, only 2% of "angel" investments in 2021 were directed towards Black startup founders.
• Early capital and industry expertise, along with networking opportunities, are offered by angel investors to founders.
• To be an angel investor in the U.S., an individual must meet the criteria of being an "accredited investor," which includes having earned income of over $200,000 or a net worth of over $1 million, excluding the value of their primary residence.

Dr. Elizabeth Clayborne, a young physician working in a hospital, recognized the need for a more effective solution to stop nosebleeds, a common condition among children. She invented a bandage-like device called "NasaClip" and secured patents for it. In 2020, she launched a business to market the device in the Washington, D.C.-Baltimore area.

As CEO of NasaClip and an emergency room physician, Clayborne stated that he aimed to make the product accessible to everyday parents, as approximately one-third of U.S. households experience common, recurrent nosebleeds.

Many startups, like NasaClip, seek funding from individual investors, known as "angel investors," at an early stage of their business. However, only a small percentage of these investors are Black.

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"Without the support of angel investors who are interested in female and minority-owned businesses, I would not be able to take the essential first steps to get to where I am today," said Clayborne.

Despite the challenges of obtaining funding for startups, Black entrepreneurs and founders have made progress in recent years. In 2020, they received a record 16% of angel investments, up from 0.5% in 2019. However, this progress was short-lived, as the figure fell to just 2% in 2021, according to research from the Angel Capital Association.

Pat Gouhin, CEO of the Angel Capital Association, expressed disappointment over the sharp drop in funding going to Black founders. Despite this, he stated that the organization is still working to increase the amount of funds allocated to underrepresented communities.

Boosting founder and funder diversity

Jill Johnson, CEO of the Institute for Entrepreneurial Leadership, stated that Black companies are not receiving adequate funding, with Black women receiving even less.

In 2002, Johnson founded IFEL with the goal of assisting entrepreneurs and small business owners. However, over time, they realized that their efforts were not enough to secure access to capital.

Johnson stated, "In 20 years, I don't want to have the same conversation about access to capital with my children, who will be trying to start a business and struggling to find capital."

In 2020, Johnson created a program called "Black Angels" to educate potential investors and connect them with Black entrepreneurs, aiding startups in securing essential funding.

Although there is an abundance of capital in the United States, some groups have been historically excluded from access to it, and we must work to change that.

Johnson emphasized that Black-owned businesses require access to capital, and anyone with financial capacity should participate in the investor ecosystem to provide it.

Becoming an angel investor

To qualify as an accredited investor and make early-stage investments as an angel investor, individuals must meet the criteria set forth by the U.S. Securities and Exchange Commission. This includes having earned income of more than $200,000 (or combined income of $300,000 with a spouse) in each of the prior two years or a net worth exceeding $1,000,000, either alone or with a spouse, excluding the value of their primary residence.

The SEC advises that early-stage investments carry significant risks and that investors should conduct thorough research before making any investment decisions. Additionally, more than two-thirds of startups do not generate a positive return.

Risks and rewards of angel investing

Despite the statistics, investor Gina Nisbeth continues to research and invest in companies she believes in.

Nisbeth, one of the over 250 attendees of the Making of Black Angels virtual course and other events, stated, "I definitely anticipate an economic return; I have faith in these companies."

Nisbeth, a resident of Annapolis, Maryland, initially invested $7,000 in Clayborne's NasaClip pitch at a virtual meeting hosted by IFEL, which introduced Black startup founders to potential angel investors. Following the pitch, Nisbeth invested an additional $10,000 and became a company advisor.

Nisbeth stated that she has invested in several startups in the past two years. "I believe the companies themselves will grow," she said. "I believe they'll hire people of color and that's putting capital in the hands of people of color - to me, that's addressing the racial wealth gap."

Nisbeth, who previously worked in community development finance at Citigroup, is now thrilled to be starting her own consulting firm and helping founders in more ways than just offering capital.

Nisbeth stated that she can utilize her 25 years of experience at Citi to help other organizations gain access to capital and information through her networks.

Nisbeth, an angel investor, has helped Clayborne raise over $1.1 million for early stage capital. The company expects to launch NasaClip in April.

According to Clayborne, although the success rate of many startups is high, angel investing is still a risky investment. However, she believes that it is a fascinating and effective way to invest money that not only supports a business but also promotes communities, values, and interests that align with what is important in one's life.