Black entrepreneurs adapt to funding challenges as diversity initiatives are abandoned.

• Since 2018, the percentage of venture funds secured by Black founders has remained relatively low at 0.23%, according to data from Extend Ventures.
• In the U.K., black founders are determined to break the pattern of funding decreases by attracting high-profile investors and embracing a community-centric strategy that involves "family and friends" funding rounds.
• Sarah Wernér, co-founder of Husmus, stated on CNBC that pitting Black people against each other for a single space on a portfolio allocated for a person of color is absurd.

Ayesha Ofori, a former executive, was certain that her investment platform startup would attract funding from investors. However, she was met with a series of rejections.

Despite her background at Morgan Stanley, Goldman Sachs, and an MBA from London Business School, Ofori's female-focused financial investment platform, Propelle, was ultimately rejected by some venture capitalists who gave her the cold shoulder, citing her lack of experience.

"Ofori stated to CNBC that fundraising is incredibly challenging. He tries to avoid thinking about it because it can be disheartening. According to him, it feels like being held back because of one's gender or skin color."

Despite being one of a few Black entrepreneurs in the UK who secured funding for their businesses, Black founders still only received 0.23% of venture funds in 2018, according to Extend Ventures data. This share of the market for the minority group has not significantly increased since then.

In 2021, Britain's tech sector experienced unprecedented investment levels of over $40 billion. During this time, Black founders experienced a significant increase in their share of investment value, reaching a high of 1.13%. However, this proportion has since decreased to 0.95% in 2023, according to data from Extend Ventures.

Ofori believed that she met all the criteria that VCs were searching for in founders.

Ofori revealed that he had learned through rumors that a few Black women had been given the opportunity to raise VC funding. Despite their efforts, the funding failed, and some VC firms are now hesitant to take on the risk of investing in them.

Between 2019 and 2023, only 13 Black women received venture funding, while over 3,700 white men did, according to Extend Ventures.

Ofori, like other Black founders in the U.K., aims to reverse the trend of funding declines by attracting high-profile investors and adopting a community-centric approach that involves the support of family and friends.

A battle for funding

Several founders and VCs spoke to CNBC about the systemic challenges that Black business leaders often face, including racial stereotypes and a lack of diversity in the sector.

Sarah Wernér, co-founder of property management company Husmus with her husband Mattias Wernér, stated that some VC firms adhere to quotas and reject Black founders once they reach their limit. On the other hand, some VC companies force Black founders to compete against each other for the limited funding they receive, according to Wernér.

"Fighting for the one space on your portfolio allocated for a person of color while pitting Black people against each other is absurd," she stated.

Wernér, the face of Husmus, revealed to CNBC that her nondescript name has helped her gain access to opportunities, as people do not initially recognize her race. Additionally, she admitted that using her white husband's email address allowed her to secure meetings with prominent investors.

To overcome prejudices, more diversity is required at the leadership level of VC firms, according to Karl Lokko, founder and managing partner of Black Seed, a VC fund for startups led by Black people.

"If the ICs [investment committees] have a more diverse perspective, then they can make more well-rounded decisions."

Friends and family

Thousands of students, VCs, CEOs, and DEI experts attended the fifth edition of Black Tech Fest in North London, organized by Ashleigh Ainsley and Dion McKenzie.

The scarcity of data on the funding and support received by ethnic minority founders was a recurring theme at this year's Black Tech Fest. McKenzie characterized Europe as a "data desert."

To address the lack of representation and data in their industry, McKenzie and Ainsley founded Colorintech with the goal of creating a new community for people of color. Since its launch, the program has helped underrepresented founders raise over $50 million in funds, and the community has grown to more than 60,000 members.

McKenzie stated that the goal was to highlight and provide a platform for underrepresented individuals in the industry.

They have collaborated with prominent companies in the industry, including Facebook's parent company, Google, PwC, and JPMorgan.

Google provided funding to Propelle's Ofori and Husmus' Wernér through its Google for Startups Black Founders Fund. Ofori, who received an initial investment of $100,000, stated that getting into Google for Startups was a "catalyst" for money to start coming in.

Despite the initial rejection of her by the people she had previously approached, Ofori remained determined and decided to focus on building relationships within her own community and network to achieve her goals.

She also reached out to some of her ex-colleagues at Goldman and secured high-profile investors, including female entrepreneurs, on board. One of Propelle's investors is former Goldman partner Stefan Bollinger, who is currently the CEO of Julius Baer.

Wernér described this funding as the "friends and family" round, a type of early-stage fundraising where founders seek investments from their personal network. She revealed that her first investment came from a university friend who gave her £10,000, which motivated her to reach out to other acquaintances.

CNBC reported that she said, "These are the people who know you best. You've shared tough times with them, including late-night study sessions in the library. They trust you and have even given you money out of their own pockets. Being humbled by their generosity is an honest feeling."

A world away from the U.S.

The increase in diversity and inclusion initiatives in 2020, triggered by the murder of George Floyd and resulting protests and racial unrest, has not led to sustained investment in the Black community, which is a setback for the tech sector, as stated by Colorintech's McKenzie and Ainsley.

McKenzie stated that a more diverse workforce results in "better products, better teams, and ultimately more revenue." He emphasized that inclusive employers can attract and retain the "best of the talent."

"Ainsley emphasized that while minorities may be small, they cannot be ignored when it comes to increasing productivity and making Britain a more productive country."

Since the Black Lives Matter Movement four years ago, the perception of diversity initiatives has shifted. Numerous corporations, including , , , and , have reduced their diversity efforts in the US due to various reasons, such as cost-cutting and political pressures. The incoming White House administration of Donald Trump has raised concerns about the future of DEI, as the president-elect has proposed to eliminate federally funded diversity programs.

In the UK, the Labour Party's pre-election promise to break down barriers to opportunity with the introduction of a Race Equality Act stands in stark contrast to the prospects in the US. While the rollback of corporate DEI programs may be less common in Britain, the investment value represented by Black founders in the country has yet to surpass 1% as it did in 2021 and 2022, according to Extend Ventures.

Colorintech's efforts to promote diversity, equity, and inclusion (DEI) have been silenced by the politicization and weaponization of the term as a means of shutting down organizations like Colorintech.

The topic of diversity, equity, and inclusion (DEI) will undoubtedly be a significant focus during the upcoming administration, as we have witnessed a lot of anti-DEI rhetoric in the lead-up to the elections and intended actions once in power. However, ultimately, business leaders must decide whether they, their employees, and shareholders view the benefits of being diverse, inclusive, and equitable or if the alternative is more advantageous for value creation and attracting top talent, as McKenzie stated.