Black Dollars Matter: How Venture Capital can be a Solution for Black Economic Liberation

June 19, 2021

By De’Vante Montgomery

A Day That Will Live In Infamy

Today marks 156 years since the last slaves were freed in Texas in 1865 after former President Abraham Lincoln signed the Emancipation Proclamation into law during the Civil War in 1862. Within the Black community, we call this day Juneteenth. (1) Despite the physical freeing of slaves from chattel slavery, the unjust toll the Black community faces after years of systematic and economic discrimination can still be felt to this day. I believe venture capital can close this economic gap by pouring billions of dollars in investments back into the Black community, ending the economic discrimination we face.

It was during the roaring 20s on Memorial Day weekend in 1921 that a 19-year-old black shoe shiner, Dick Rowland, was falsely accused of assaulting a 17-year-old white woman, Sarah Page, while at the Drexel Building in the Greenwood District, an affluent Black community, in Tulsa, Oklahoma. Rowland was taken into custody and placed in jail. Rumors were spreading through the city that Rowland was going to be lynched. Soon thereafter, a group of about 80 black men surrounded the jail to ensure Rowland’s safety. This was followed by a mob of white men who encountered the group of black men. Shortly after the encounter, a shot was fired and a massacre ensued.

The resulting conflict would go on to last for one day but caused well over 300 black deaths, 800 to be injured, 10,000 to become homeless, and the destruction of black businesses, homes, churches, and municipal buildings by a white mob that terrorized the community. This day would go on to be etched in history as a day of infamy within the black community. The day of the destruction of Black Wall Street.

Black Dollars Matter

This year marks 100 years later after the destruction of Black Wall Street and today 14 million black Americans have an economic buying power of almost $2 trillion within the total US GDP. (2) That’s more economic wealth than Mexico, Switzerland, Saudi Arabia, Turkey, and Luxembourg, and many other countries. What would happen if that same $2 trillion worth of black dollars were instead invested right into black-owned businesses, homes, churches, buildings, schools, etc? The ramifications would be astronomical and long-lasting throughout generations of black families. This is why social media influencers and users have come up with the Black Out Tuesday challenge to highlight the need for investing in black-owned businesses.

To be clear, I am not suggesting that the black community exclusively invest in the Black community. Black investors should invest in the best risk-adjusted opportunities they can find. The point is that the Black community does not receive their pro rata proportion of overall venture investment – and that’s because very few blacks are investing in venture capital, very few venture capital investors are black, and very few black founders are getting venture funding. I believe the Black community offers a massive investment opportunity to investors – and who knows the Black community better than us? And if we don’t start investing in ourselves, who will?

The overall value of the investment industry, which includes venture capital, is around $70 Trillion. Of that $70 Trillion Dollar investment industry, only 1% is managed by women or people of color. 99% of all investment dollars are managed by white men – and white men makeup only 30% of the population. So, 70% of the population gets 1%... Let’s just say if this were a bread line… It would be getting real about now.

In his article, “How Much Does Venture Capital Drive the U.S. Economy,” Dr. Llya A. Strebulaev, Professor of Finance and Venture Capital at Stanford University, states, “Over the past 30 years, venture capital has become a dominant force in the financing of innovative American companies. From Google to Intel to FedEx, companies supported by venture capital have profoundly changed the U.S. economy. Despite the young age of the venture capital industry, a fifth (20%) of current public U.S. companies received venture capital financing.” (3)

Dr. Strebulaev’s statement highlights the unique role venture capital (VC) has in financing start-up companies that over time turned into mega-corporations. His article also highlights the potential power venture capital has in re-igniting the black economic wealth engine we saw in Tulsa. To put it short: venture capital is like a stick of dynamite. It may be small compared to the overall finance industry, but it has a huge impact. According to Ivy Business Journal, currently “there are about 1,000 active venture capital firms in the US.” According to BLCK VC, out of the 1,000 active venture capital firms “black investors made up less than 3% of the overall venture capital industry. Out of those 1,000 active firms, just 1% had at least 3 black investors.” This has an impact on black founders. In 2020, just 2.6% of black founders received venture capital funding despite the fact that Blacks are 13.4% of the population.

In 2020, the value of venture capital investments in the U.S. amounted to approximately $130 Billion dollars (Statista). That amounts to roughly $3.4 Billion for 44 million black people, roughly $77 per black person. Imagine instead of 2.6% of funding, we put 5 times the dollars to work in the Black community – an additional $17 Billion – and invested into the $2 trillion worth of black economic buying power. If this additional investment was funded entirely by Black investors – from their IRAs and retirement accounts and pensions and investment accounts and bonuses and savings accounts – each black person would need to invest about $386 into their own community each year – into Black tech startups, Black Biotech startups, Black brands. What was once a stick of dynamite would have the power of a nuclear bomb - and shake the foundation of not just venture capital and the investment industry, but the Black community as a whole.

Investing B(L)ACK

I am fortunate enough to have become the new Chief of Staff here at H Venture Partners, a one of the few female-founded, owned, and controlled venture firms of its kind. And here we believe in Excellence through Inclusion. H Venture Partners is an early-stage venture capital fund that invests in consumer brands, with investments across North America. Here, we invest in Black founders, Female founders, and Hispanic founders, Asian founders, as well as white founders – our team and our investors and portfolio reflect the demographics of the United States. And when you think of how amazingly diverse our country is, why wouldn’t we?

When the founder of the firm, Elizabeth Edwards, hired me she said, “250 people applied to this job and you were the only person who wore a suit to the interview and the only one to come with references – you really made an impression.” She didn’t hire me right away, but gave me ten things to work on over the next several months – books to read, webinars to attend, exams to take – and I did it. And that’s why I have this job.

159 years since former President Lincoln signed the Emancipation Proclamation that freed my ancestors, being the Chief of Staff over a firm with a goal to not just raise venture capital funds and make investments in great companies, but also to provide an opportunity for female and minority owned consumer brands - is amazing to me. The H in our name stands for Human – and reflects our focus on brands that address timeless, fundamental human needs. It also highlights what happens when a venture capital firm plays the Infinite Game and seeks to invest in that nearly $2 Trillion worth of Black economic buying power. This core value will help close the wealth gap and provide an opportunity for Black-owned brands like NAZA to soar, thrive, and address those timeless and fundamental human needs within the Black community.

100 years later after the destruction of Black Wall Street, my membership into the small but elite group of black people working in venture capital is not just a blessing from God, but also an opportunity to help give back to the very community that has propelled me forward. Folks that look like me don’t normally have opportunities to be in spaces like venture capital because the industry itself is small - and relatively new. For us to be here - in the room and at the table - is incredibly important. We need to be active in this industry and help venture capital firms be a catalyst for change - and a catalyst for great investment returns - by pouring billions of dollars back into the Black community and ending the economic discrimination we face.

Like Elizabeth Edwards taking a shot in believing and investing in me, venture capital has a chance to take a shot at investing and believing in more Black start-ups, founders, and entrepreneurs to make the dream of black economic liberation after years of systematic injustice. Venture capital can be a solution towards re-investing back into the Black community and providing our business, families, and future generation economic liberation and proclamation of freedom. H Venture Partners is leading the way towards that freedom.

Works Cited 1. https://www.pbs.org/wnet/african-americans-many-rivers-to-cross/history/what-is-juneteenth/ 2. https://www.nielsen.com/wp-content/uploads/sites/3/2019/09/2019-african-american-DIS-report.pdf 3. https://www.gsb.stanford.edu/insights/how-much-does-venture-capital-drive-us-economy 4. https://www.blckvc.com 5. https://iveybusinessjournal.com/publication/venture-capital-firms-in-america-their-caste-system-and-other-secrets/

Investing in a beautiful life.

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