For women and people of color who are entrepreneurs, finding funding for their start-ups has been a struggle, especially since the start of the pandemic. According to Crunchbase, as of July 2021, Black female startup founders had only received 0.34% of the total venture capital spent in the U.S. Lamont Young, head of digital and customer experience at Citizens, says that lack of accessibility to capital and mentorship are "critical" hindrances to closing the minority VC gap.
Though last year showed some breakthrough for female-founded startups, there is still room for improvement in diversity. Though Black founders raised almost $2 billion in funding last year, that number is minuscule compared to the $147 billion startups raised collectively. According to Young, who's also an entrepreneur, many VCs still deal with an "unconscious bias" when it comes to founders of color.
"The types of questions that founders of color are asked [by VCs] tend to be slightly different. There's a little bit more scrutiny… a little bit more skepticism," he tells CNBC Make It. "Whether it's on the product or the market opportunity, there's definitely more hesitance."
According to Young, these are key components to minority entrepreneurial success and closing the POC venture capital gap.
Young says that mentorship is a factor that "not a lot of people talk about" but is critical to start-up growth.
"Mentors understand market opportunities, and more importantly, the viability of your product or platform," he says. "Mentor relationships also allow the founder to connect with other professionals that are necessary for raising capital or managing staff. It's really important that these founders of color and women entrepreneurs have the right relationships so they can just get into that first seat."
Mentorship has been proven to be beneficial to businesses and organizations struggling with funding, according to Guider, a workplace mentorship hub. Guider found that 67% of businesses saw an increase in productivity due to mentorship. In addition to this, over half (55%) of businesses feel that mentoring has had a positive impact on their profits.
Finding a business mentor can be as simple as searching professional, social platforms like LinkedIn, or attending industry events, conferences, and virtual hangouts. There are also online and professional matching services that can help you find mentors to work with.
Young also says that the struggle of searching for funding can be detrimental to entrepreneurs, as minority founders are often drained so much that they have little time for product development and market opportunities. To combat this issue, diversity in VC firms themselves is essential, as hiring investors from underserved communities results in a more inclusive roster of start-ups and companies.
At Citizens, Young and his colleagues are finding diverse founders with early age start-ups and technologies and helping them find mentorship. They're also working to start a cohort specifically for Black and brown founders and angel investors to make access to capital more attainable and close the gap between POC and white, male founders.
"I've spent enough time in Silicon Valley to see how many Black and Brown founders aren't given the same opportunities and resources," he says. "Just by helping people get to that first seat, we can help build an infrastructure that opens doors to tons of different boards and investors looking to get a return on their capital."