Editor’s Note: This article is the first in an ongoing partnership between Austin Inno and BLNDED Media to increase coverage of diverse founders, innovators and investors. Learn more about this collaboration here.
At some point in every business journey, founders realize that funding is necessary to move forward with a grand idea. For some, early funding may come from personal savings, a prosperous network and then progress into funds from an accelerator program or pitch competition.
For select founders, receiving funding at any stage can be difficult due to what Charlie Jackson, chief happiness officer at Diversity Fund, says is “outright bias.” While the tech industry has improved the quantity of stories related to diversity in tech, it’s still difficult for underrepresented founders to secure funding as easily as their counterparts even in a city as resourceful as Austin.
We spoke to Jackson, a 20-year investing veteran, about how founders of color, women founders and veteran founders can achieve their end goal.
BLNDED Media: How does a founder go about securing/receiving funding in Austin?
Charlie Jackson: Getting funding in Austin varies depending on the type of business. Both technology and non-technology businesses can get funding, and a majority of founders get help from friends and family in the very beginning. Once they outgrow that immediate network, most will look to outside funding such as micro loans, bank loans and funding from an accelerator or angel groups. Once it’s time for the big dollars, they’ll look into receiving venture capitalist (VC) funding.
For some founders, there’s been a big gap between the friends and family stage and the VC funding stage. This is where crowdfunding makes a big impact.
BLNDED: How do founders start the funding conversation?
Jackson: In all cases, there are three things all investors want to know:
● Who is on your team?
● What is your story?
● What are you trying to deliver to the market?
Of those three questions, the third question is easily the most important in every single case. Once an investor is interested, they’ll get info on the company’s financials including:
● What will you do with the money?
● What have you spent already?
● What are your long term projections?
From there, an investor has a good idea about whether or not they will decide to move forward.
BLNDED: On the other hand, what questions should founders ask investors when first meeting them?
Jackson: Founders should first understand the investor’s profile and risk. Looking into the types of businesses or industries the investor has funded is key as well as understanding the stage a particular investor prefers to participate in. Some investors like to get in early, while others like to wait until a company needs a million dollars. Some VC firms won’t invest until two to five million dollars are needed.
BLNDED: Why does it appear to be more difficult for women and founders of color to secure funding?
Jackson: Outright bias. It’s always been a challenge for underrepresented groups whether you are trying to get traditional funding or high tech and startup funding. The fact of the matter is, every investor has their own personal bias. It also doesn’t help when investors reach out to their investor friends who live in the same area and know all of the same people. It takes investors stepping outside of their bubble to make a change.
While there are a lot of stories on diversity in tech, we’re still not seeing the diversity in funding here in Austin and elsewhere. Diversity Fund is working to help founders face these challenges each day.
BLNDED: What types of companies/ideas excite investors in Austin?
Jackson: Investors like to see different types of businesses. It’s known that almost anything is interesting to someone, but the trick is figuring out which investors are interested in what.
Many investors in Austin follow the trends in Silicon Valley and also take interest in healthcare tech, consumer goods, professional services, gaming and AR/VR technologies.
BLNDED: How can new and upcoming entrepreneurs best learn about the VC/investment world? What tips and resources are available?
Jackson: Incubators and accelerators have good resources and a lot of knowledge can be found by reading and speaking with mentors. Diversity Fund provides mentoring and will discuss the funding landscape to founders based on their type of company. We know if certain types of companies should speak to a particular person while another type of company should talk to a micro lender or a bank.
One thing startups forget to do is reach out to customers for input as well as their suppliers. Since startups are creating a product that may use certain parts and products, suppliers can potentially become investors because they want to see the success of their supply chain. For example, Shell and GE have ventures for specific startups and work as their own VCs that are focused on their particular industry.
BLNDED: In closing, what are your thoughts on diversity in tech and how can founders and investors bridge the gap?
Jackson: Diversity Fund is working hard to bridge the gap online. We understand that meeting with investors to get a story told is difficult, especially if founders and specific investors don’t have the network or live in the same city. By having founders and investors reach out online, small businesses have the opportunity to meet with investors all across the world. Since it’s online, circles will cross all of the time. Using the power of social media will also bring people together to make magic.
What do you think can help bridge the gap between diverse founders and investors? Let us know in the comments.
This is part of a collaboration between Austin Inno and BLNDED Media to increase coverage of diverse startups. BLNDED Media’s Investor Series provides insight on funding for diverse startups and businesses. To be featured as an investor, or to nominate an investor, email email@example.com.