The world of startups has long had a problem with homogeny.
It is estimated that 72% of startup founders are white, 35% are based in Silicon Valley and 14% received Ivy League education.
In the time period between 2013 and 2018, out of $68 billion invested by the top 100 venture capital firms in the United States, 90% of that money went to companies with male founders.
Bringing the Problem into Focus
Following the murder of George Floyd in 2018, conversations surrounding racial equity have increased significantly; yet, an increase in the funding allocated to startups led by founders from disadvantaged communities has been slow to catch up with the discourse. However, there are signs that progress has begun.
For example, in the first half of 2021, $1.8 billion was allocated to startups led by black founders, a more than 4X increase from the same time period in 2020. In fact, that $1.8 billion figure is more than was invested in the first halves of the previous five years combined.
While this progress is noteworthy, it further underscores the ground that needed to be made up.
Unraveling the Knot
It appears the United States government is acknowledging its part in this deficit.
The allocation of the roughly $3.5 trillion of funds to provide COVID relief to businesses was subject to widespread scrutiny. In Los Angeles, predominately white areas received loans at twice the rate of that in predominately Hispanic areas; in predominately black areas, this figure was still 1.5X.
In New York, white areas were funded at 2X the rate of Latin communities, and 1.8X the rate of black ones.
These statistics held true across the majority of U.S. metropolitan regions.
However, in the newly announced $10 billion relief package, the U.S. government has set aside a quarter of that pool for economically disadvantaged businesses. While this won’t come close to fully bridging the investment gap, it acknowledges the deficiency and attempts to start remedying the problem.
The Power of Equality
Reports suggest that the economic impact of achieving racial equity could be worth up to $8 trillion to U.S. GDP by the year 2050.
This statistic was central to the rollout of “The 8 Trill Pils Grant” from Crowns & Hops brewery, a black-, female- and veteran-owned craft beer company based out of Inglewood, California. In the overwhelmingly white-owned craft beer industry – less than 1% of founders in the $22 billion craft beer industry are black – co-founders Teo Hunter and Beny Ashburn set out to provide representation to their communities and empower them to establish change.
“It gives us a perspective that allows us to approach the market like no one else does,” Hunter said at the 2021 Angels & Entrepreneurs Retreat from Austin, Texas. “We’re able to project our culture on our artwork, on our messaging, and ultimately to attract a consumer who never saw themselves in this particular industry. It’s a major point of differentiation for us and also a point of differentiation we think investors should be looking at themselves.”
The angel-investing world took note. With Crowns & Hops’ Reg CF offering officially closing January 17, it became the first women-owned, black-owned company to max out its raise, and the first of its kind to top $1 million in funds raised in the crowdfunding space by a craft beer company.
The topic of investing in black communities is central to the mission of Crowns & Hops – the company intends to open its first brewpub in Inglewood sometime in 2022 – and was a prominent theme of the founders’ presentation at the aforementioned A&E Retreat in December 2021.
You can watch that presentation in its entirety below.
I loove the energy! It’s very palpable and dope!