Black Americans have dramatically shaped the way we socialize online and the media we consume and generate there – but no major social app has been founded today by black entrepreneurs.
Why is this important: As in the rest of the startup world, it comes down to the funding gap that black entrepreneurs were able to close.
Between 2015 and August 2020, black and Latino founders raised over $ 15 billion –fair 2.4% of the total venture capital raised during this period, by Crunchbase.
The big picture: Almost all of the major social apps today were started by white males, but not for lack of interest or effort on the part of black entrepreneurs.
- Even before MySpace and Facebook (even Friendster), there was BlackPlanet, a social network launched in 1999 for the black community.
- Since then, a number of black entrepreneurs have ventured into social media technologies, ranging from content sharing apps (e.g. Socialcam) to futuristic avatar tech (Lil Miquela Brud creator and Network social Eternal) to sports applications (Locker Room, Prediction Strike).
Contributions from black users to social networks and their cultural and zeitgeist norms – which in turn fuel the financial success of owners and managers – have also not gone unnoticed.
- Last year, the Clubhouse audio chat app (which raised over $ 110 million in January) came under heavy criticism from Black and other users of color for benefiting from the creativity and efforts of moderators from conversation, many of whom are people of color, without compensation. The company has since announced a monetization fund for certain creators and features.
- Apps like TikTok – where short videos of dance routines created by young black users regularly go viral or are co-opted by more famous white influencers – have received similar criticism.
Between the lines: “The people who had these ideas never got the funding to push them to this level,” says Dan Runcie, founder of the hip-hop newsletter Trapital.
- He points out that Ryan Leslie, a black musician (and alumnus of Harvard), founded SMS marketing company SuperPhone in 2013, but has been eclipsed by new competitors like Community, who have raised a lot more venture capital.
- “It’s not even about scaling, it’s about experimenting and creating,” says Vernon Coleman, co-founder and CEO of Realtime.
- Naj Austin, founder of social media Ethel’s Club and Somewhere Good, adds that unlike Caucasian founders who can raise large sums of money just to try out ideas, she has to meticulously allocate funds to run her business. “I don’t think black founders necessarily have the same opportunity to fail while receiving money.”
The‘is also the challenge of the target market when introducing investors, whether it’s because they assume it’s not an app for them or because they don’t understand the size of a market that doesn’t include them.
- “How many people of color can there be?” Austin remembers being interviewed by white investors.
There is optimism that things change (slowly).
- “It’s changing and the way it is changing is you get a lot of black and brown managers… and some of those managers manage over $ 100 million like us,” says Marlon Nichols, Managing Partner of MaC Venture Capital .
- Austin says the second-time fundraiser went smoothly, largely because it focused on showcasing investors who personally understood the need for social apps specifically with people of color. in mind.
The bottom line: “I’m 100% sure that … if a black founder creates a social platform and it’s properly capitalized and properly targeted to the users who typically blow these things up, then it’s going to show up,” Nichols says.