Impact Voices | March 17, 2021

How some corporations are driving capital to Black founders and investors

Marcelino Ford-Livene and Moses Choi
Guest Author

Marcelino Ford-Livene

Guest Author

Moses Choi

When Merck’s Ken Frazier last December announced the OneTen initiative, a coalition of 37 CEOs that aims to close the opportunity gap for Black Americans, he joined a growing chorus of corporate leaders calling for action for racial equity. 

A growing number of corporates are unlocking inclusive innovation by scaling not only what they invest in, but who they invest in. Dozens of companies including Apple, PepsiCo, and JP Morgan have announced initiatives in light of the social unrest precipitated by the murders of George Floyd, Ahmaud Arbery, Breonna Taylor and others.

A sampling of corporate venture capital and other initiatives from PayPal, Salesforce, Samsung and other companies suggests major corporations are beginning to see that dismantling systemic racism is not simply a moral imperative. Racial opportunity gaps cost the U.S. $16 trillion in economic productivity gains over the last two decades, according to Citi, and the conversation around how to address these gaps is at the forefront of environmental, social, and governance, or ESG, dialogues.

Purpose-led corporate leadership can spur innovation, growth, and inclusion. Companies with diverse teams also develop a more engaged, productive, and creative workforce. According to the Boston Consulting Group, diverse leadership catalyzes more ingenuity and innovation, and as a result, fosters stronger financial performance. By scaling and partnering with diverse investors and entrepreneurs, corporates can activate purpose and unlock new avenues for inclusive innovation.

Black venture capitalists

Venture capital has played a critical role in establishing dynamic new companies and contributing to economic growth. What many may not know is that research suggests that diversity significantly improves venture capital performance at the individual portfolio-company level and for overall fund returns. 

Despite the compelling performance data, only 8% of the venture capitalists are women, 2% are Hispanic, and fewer than 1% are Black. 

PayPal is backing Black and Latinx-led venture capital funds as part of its efforts to advance on racial equity and social justice. The $50 million commitment has backed managers such as Chingona Ventures, Vamos Ventures, and Zeal Capital Partners

“Black and Latinx founders have been underrepresented in venture capital funding for far too long,” said PayPal’s Dan Schulman. “By directing our dollars to investors from underrepresented communities, we’re supporting their investment in Black and Latinx entrepreneurs at the earliest stages.”

Salesforce Ventures, in partnership with BLCK VC, Operator Collective, and UC Berkeley’s Haas School of Business, co-launched the Black Venture Institute to onboard more Black venture capitalists. The intensive, curriculum-based program is designed to give Black operators and executives the education, experience, and connections needed to pursue careers in venture capital investing. 

There are approximately 75 Black check writers in venture capital today. The Black Venture Institute will graduate 300 fellows in three years to potentially 5x that number by 2023. The institute complements the company’s commitment to invest $100 million of “intentional capital to empower companies” led by Black and underrepresented minority founders.

“It is our belief that by making venture capital knowledge and networks more accessible, we can help empower the Black technology community and provide a path to accelerate innovation, opportunity and access,” writes Salesforce’s Jackson Cummings, a co-creator of BVI.

Investing in diverse founders

Black entrepreneurs in the U.S. have faced and continue to face tremendous challenges when trying raising venture capital to fund their businesses. Silicon Valley has historically been an insulated network, relying on familial and familiar relationships. Not surprisingly, underrepresented founders face an uphill battle in Silicon Valley to secure funding. Only 1% of venture-backed startups have Black entrepreneurs. Micro-aggressions persist. 

Samsung Next, an innovation group focused on software and services for Samsung Electronics, established its Diverse Founders Initiative “to source innovation and create innovation that is inclusive and representative of the population.” Samsung Next recognizes that the future U.S. consumer will be more “diverse, empowered, and expressive than ever before.” Brands that are able to capture the imagination of the future “majority minority” country will establish more loyalty and customer value. The company has partnered with Techstars to “empower an ecosystem of builders” with access to capital, mentorship, and value-add resources.

“Our goal is to create equal access to capital and expertise for all innovators in the world,” says Samsung’s Brendon Kim. “We want to lower the barrier of opportunity to reach founders who have traditionally been overlooked as a result of race/ethnicity, gender, religion or geographic location.”

Samsung Next is also building programmatic efforts around diversity and inclusion, and is among the only venture capital firms to have a team dedicated to diversity and inclusion.

Capital for communities

Last fall, Mastercard announced a $20 million commitment to the CNote Promise Account. CNote is a female-founded impact investment platform that makes it easy to invest in underserved communities. Through CNote, Mastercard’s funds will be deposited into community development financial institutions, or CDFSs, and credit unions that focus on supporting low-income and communities of color across the U.S. 

“The inequalities that exist are deeply ingrained in historic systems and processes, which means we have to make an ongoing, active effort to redesign them,” said CNote’s Catherine Berman. “Financial freedom and economic opportunity should be accessible to all – and not denied because of the color of someone’s skin or where they were born.”

Earlier this year, Starbucks announced that by 2025 its Starbucks Community Resilience Fund will invest $100 million to advance racial equity and environmental resilience by partnering with CDFIs to deploy capital in underserved communities. Similarly, companies such as Netflix, Twitter, and Square have each announced new $100 million commitments to support racial equity and inclusion.

Scaling inclusive innovation

Inclusive innovation can be expressed in capital markets for later-stage and mature companies. When Alphabet sold $5.75 billion in sustainability bonds last fall, the company developed its framework to include racial equity. Proceeds from the bonds can invest in diverse startup founders, fund small businesses in underserved communities, and support the YouTube fund to amplify the voices of Black creators and artists. It’s worth noting that when Alphabet issued the bonds, the company included minority-owned broker dealers such as CastleOak Securities. 

The special purpose acquisition company, or SPAC, market also represents an opportunity to demonstrate board and leadership diversity. Among the few SPACs to prioritize diversity include Aequi Acquisition. The company is led by Chairman and CEO Hope Taitz, and target companies must demonstrate a dedication to Diversity, Equity and Inclusion and strong ESG principles.

Progress to advance diversity is a multidimensional endeavor, from creating a talent and leadership pipeline to prioritizing spend with minority-owned businesses to creating economic opportunity. As corporate leadership teams seek new opportunity, we believe they also advance an inclusive enterprise. Doing so can further drive innovation, performance, and resilience. 

Fully embracing diversity as innovation will require a willingness to acknowledge our biases, take new risks, and break into unfamiliar territory. We are optimistic about what corporates can do.

Marcelino Ford-Livene is a portfolio development executive at a corporate venture capital group. He is the recipient of the Digital Diversity Network’s 2019 Impact Award.

Moses Choi has led sustainable and impact investing at Citi, Morgan Stanley and Orange.