7 Ways Black Women and Femmes of Color Can Fund Their Businesses and Initiatives
By Jovoney Morton
Here at Ipade, we are passionate about being able to provide the resources, tools, and space necessary for women and femmes of color to make change within their communities. In April 2021, we hosted a Clubhouse conversation with some impactful Black women who all work within the funding space focusing on Black women and femmes of color.
Olivia Owens, creator and general manager of IFundWomen of Color, Tynesha McHarris, co-founder of Black Feminist Fund, and Melinda Jackson, social impact strategist and philanthropy consultant, described alternative funding options for women of color.
Read on for seven key takeaways from the conversation that can help you build, grow, and scale your social impact business.
“Sometimes it’s not an issue of the availability of money, so much as it is an access issue - especially for Black women and Black non-binary folk.” - Melinda Jackson
#1: Venture Capital
When evaluating your funding options, you should first look at the funding journey of your business. The stage your company currently is in and where you want it to go should go hand in hand. If you wish to scale quickly and have an exit set in place, then venture capital might be a viable option for you. Less than one percent of venture capital goes to Black women, but a few funds are working to change that. Check out these 8 Black women making waves in the venture capital space.
If you want to continue to run your business and even leave it as a legacy to your family and plan to have slower growth, venture capital may not be the best choice. If retaining ownership and avoiding dilution is important for you, check out the other funding options below.
#2: Rewards-Based Crowdfunding
“You can learn a lot from crowdfunding: what works, what doesn’t work, what your audience actually wants to see, and what they will pay for. This gives you the guide you need to start generating revenue.” - Olivia Owens
Regardless of your goals for your business, Olivia recommends always starting with crowdfunding. One of the first and most vital steps to determining whether your idea is something people will buy into can be demonstrated with a crowdfunding campaign. Crowdfunding also allows you to not go into debt during the initial stages of your startup. You can use various platforms to meet your funding goals and, in fact, one of our participants mentioned that she utilizes Clubhouse to market her crowdfunding campaign and was able to meet 20% of her goal in a mere 6 hours. Being able to share your story and networking are big components in crowdfunding. Storytelling is a key skill to have in order to make crowdfunding work for you in the most effective way.
#3: Equity Crowdfunding
When it comes to equity crowdfunding, the issue of ownership comes to the forefront. If you are willing to give stakeholders equity, then this is a great route to go. Equity crowdfunding is the process whereby people (i.e. the 'crowd') invest in an early-stage company in exchange for shares in that company. A shareholder has partial ownership of a company and stands to profit should the company do well. Arlan Hamilton, founder of Backstage Capital, did this recently and raised $5 million dollars in equity crowdfunding.
It’s important to look out for more democratic ways to fund your business and pay attention to the shifts of the doors of access as it relates to Black women and women of color entrepreneurs getting the resources needed to grow their business.
“Look at funds and opportunities as actually democratized resourcing and philanthropy because a few people should not be making all the decisions.” - Tynesha McHarris
#4: Giving Circles
Giving circles build on a rich cultural legacy of mutual aid and community philanthropy in communities of color, borne out of necessity to care and look after each other. Speakers shared that Black women are the most philanthropic in both formal and informal ways by consistently giving and showing up for each other. For example, during the COVID-19 pandemic, giving circles experienced a revival. In giving circles, individuals donate a set amount of money once or every month and are able to access those funds for their project or initiative.
Tynesha emphasized that networking with high net-worth Black women, creating community and a deeper connection, and developing a space to fund businesses directly or through a fund such as the Black Feminist Fund are instrumental to getting resources and capital in the hands of Black women founders.
The combination of white guilt related to racial injustice and the stewardship of Black people has really unleashed resources over the past year, allowing organizations like Tynesha’s to create vehicles for micro and macro donations for Black women who want to give to other Black women.
“There is too much wealth concentrated in a few people’s hands…. and it’s part of how things are taken away from equitable distribution and resources of wealth.” - Tynesha McHarris
#5: Grants
Grants are another great way to secure funding for your business or organization. They are debt-free monetary awards given by institutions. IFundWomen partners with organizations such as Visa, American Express, and Adidas who want to put money right into the hands of women of color entrepreneurs. In fact, the founder of Ipade, Elizabeth Dawes Gay, received the American Express grant and was selected as a participant in their 100 for 100 program. IFundWomen of Color has a variety of grants that you can apply for so check them out here.
If you are creating positive change through your initiatives, you should definitely consider grant funding. People and companies care about making the world a better place and being able to use their dollars to do so through social impact entrepreneurs. In 2020, the impact investment market was worth over $500 billion. Despite COVID, the significant growth of this market continues to rise.
#6: Debt-Financing
If you are confident in your company’s ability to consistently hit revenue goals, then this may be a viable option for you. That confidence in your ability to repay the debt and also keeping your funding journey in mind will both help in determining whether you should explore debt-financing. Our panelists recommended that you should try to avoid debt as much as possible, but it could be a great help if your business can handle it by proving demand and traction. You can maintain ownership, but also get capital infusions you need to take your business to the next level.
“We all can have some great ideas about solutions we want to see in the world, but the most important thing to determine in creating a business is will this be something people are willing to pay for.” - Olivia Owens
Small Business Administration (SBA) loans and community development financial institutions (CDFIs) are loan sources that are viewed as most favorable to new companies and small businesses.
#7: Friends, Family, and Bootstrapping
Although there is a significant gap between white and Black and Latinx founders being able to fund themselves through family and friends, it is still an option for new founders. This initial funding can help further build proof of concept and launch the business. A friends and family round of funding can help you be a more credible and quality candidate to receive additional funding elsewhere. You can also fund your initiative yourself, known as bootstrapping. Dedicate partial amounts from your salaried job or put money aside from other financial endeavors.