Why it matters:
- Even before the pandemic, founders of color, especially Black women, were among the fastest-growing group of founders and business owners but received less than 1% of investor funding.
- Many founders of color have personal experience with their product or service and have needs that aren’t being met in their markets.
- Companies pledged to support Black-owned businesses in record numbers after the racial justice movement of 2020.
In the year since George Floyd’s murder, a racial reckoning across the U.S. illuminated the systemic inequities faced by people of color. In the business sector, Floyd’s death and the Black Lives Matter movement gave rise to myriad corporate pledges to support greater inclusion and equity in the workplace as well as investments in underrepresented founders from A-listers like Shaquille O'Neal to the former CEO of McDonald's. Yet landing funding continues to be an uphill battle for people of color.
Even though Black founders, and Black women, in particular, are starting businesses faster than anyone else, a new report from digitalundivided’s Project Diane reveals that funding for these women-led startups is still dismally low compared to their white, male counterparts.
While total investments in Black and Latina women's companies is higher in 2020 than it was in 2019 ($715 million versus $687 million), for one, that number doesn’t paint the full picture.
Total VC (venture capital) funding in 2020 reached an all-time high of $69.1 billion in the U.S., yet these founders receive less than half of 1% of funding overall.
In spite of those odds, a number of BIPOC (Black, indigenous and people of color) and AAPI (Asian Americans and Pacific Islanders) founders landed investment for their growing businesses over the past year, some snagging over a million dollars. This is no small feat considering the pandemic hit businesses led by underrepresented founders hard in 2020.
CO— chatted with a small cadre of these founders who started Mielle Organics, Yappa, Thrilling and Muniq about their experiences building brands that scaled as well as captured the attention of investors. Each credits their salient offerings as well as a hefty dose of stick-to-itiveness, sweat equity and sheer force of will for their success.
As Shilla Kim-Parker, the CEO and cofounder of Thrilling, put it: “In order to build something meaningful that is really going to push the world forward, it has to be hard.” If it’s not, she cautioned, “Maybe you’re not pushing hard enough or you’re not being bold enough.”
Muniq: LA-based consumer health and food tech brand shaking up the wellness sector with a $8.2 million Series A investment round
Armed with degrees from Princeton and Harvard Business School, Marc Washington made his way to the C-suite of such enterprises as Fiji Water and Beachbody. And while he always felt a business calling to the wellness industry, Washington says becoming an entrepreneur and starting Muniq wasn’t really part of the plan. That is until he lost his sister, Monica. “She is my inspiration,” he told CO—.
Despite living with multiple chronic conditions including diabetes, obesity and hypertension, he said, she was “always the life of the party.” That shining light went out when she and her baby didn’t make it through a high-risk pregnancy. “It was unbelievably painful,” said Washington, “and it also lit a fire that had been building in me, just thinking through why this happened, why it didn't have to happen.”
Washington notes that these chronic health conditions are pervasive in the U.S. (estimates suggest that more than 100 million people are afflicted) but particularly affect communities of color.
As a Black man, Washington felt called to be part of the solution. Coming from the health and wellness industry, he knew the sector was an incredibly crowded market in terms of nutritional protein shakes, vitamins and supplements, but there weren’t many companies specifically doing what he proposed for Muniq. “We're definitely not just a shake company,” he said. “We're targeted for those who are living with underlying conditions and really we want to bend the curve of their health outcomes, based on science and clinical studies.” Muniq’s nutritional shakes are formulated with ingredients including prebiotic resistant starch, that can improve blood sugar control, weight management and digestive health.
Yet despite being an experienced executive in the space, Washington admits he wasn’t a shoe-in for investment. He estimated that he spoke to about 40 VC firms. “I definitely did not feel as though the process was any easier for me, despite the fact that we are serving multicultural communities and being a Black founder and with all of the public statements of aspirations of doing more to support Black founders,” he said. It might have helped start a conversation, but Washington said only two firms came through with “appropriate” investments.
“So don't expect any favors because of the popularity or resurgence of the Black Lives Matter movement,” he said. “You have to absolutely do your work and believe in yourself, because it's quite a thing to go through mentally, to talk to so many people and hear so many direct or indirect noes.”
Washington advised aspiring entrepreneurs to get ready for rejection and take notes because it can make the pitch— and the product— better. “The world needs more of what we're doing,” he said, “and frankly it needs more of what others are doing as well to innovate and help those who need it the most.”
[Read here on funding options for minority-owned businesses.]
Mielle Organics: Black-owned hair care brand attracts Series A investment of $100 million-plus from private equity firm Berkshire Partners
Seven years ago, Monique and Melvin Rodriguez started Mielle Organics out of their garage in Indiana. In the early stages, the couple bootstrapped their business with wages from their respective day jobs. But they soon grew and landed a partnership with chain retailer Sally Beauty. To expand and fulfill orders from its stores, Monique Rodriguez says they landed a seed investment from a friend of her husband’s that was about $250,000. “It was basically like a loan that they gave us to fund us to go into retail,” she said.
But like the ingredients in all the hair care products she develops, Rodriguez relies on such organic relationships that have helped the brand evolve and achieve exponential growth since launching in May 2014.
One such relationship forged at a trade show for natural hair care called Textures on the Runway proved to be the key that unlocked this latest Series A round that is poised to push Mielle Organics to the next level.
Rodriguez remembers chatting with Richelieu Dennis, the founder of Sundial Brands, parent of the breakout Shea Moisture product line, five years ago. “I met him when he was considered a competitor to my brand,” Rodriguez recalled, and despite that, “we still developed a friendly relationship.” Dennis would go on to sell his company to Unilever for an estimated $1.6 billion, and Rodriguez said they continued to be in touch.
When Dennis opened the New Voices Fund, aimed at investing in women of color who are growing businesses that support and impact Black communities, Rodriguez says they didn't reach out right away for him to invest. “It took about a year for us to really get to know each other a little bit more.”
Ultimately, Dennis did invest and he also helped open the door to Berkshire Partners, the firm that put up more than $100 million to support Mielle Organics’ next stage of growth.
Rodriguez confessed that she always felt certain of her brand’s place in what’s becoming an increasingly crowded market. “Being the consumer as well [as the founder], I saw a void in the industry,” she explained. “There was a lack of relatability, a lack of education and a lack of a CEO that looked like me and understood my hair challenges. And that's what allowed us to stand out and deepen our connection and engagement with our consumers.”
That’s also part of what compelled Berkshire to invest, according to Rodriguez. “They invest in people first and then the brands,” she said.
Additionally, Rodriguez said that what the investors “loved” about her and her husband is that they were very honest about not knowing everything about the business and that they needed help to scale. “We wanted their help in order to do so.”
Although she’s a firm believer in developing relationships face-to-face and letting them unfold naturally, this past pandemic-shaped year has thrown a wrench in that plan. But Rodriguez still banks on continuing to meet people and make connections. “I’m … balancing being a mom and being a wife,” she said. “I'm very blessed to have a very supportive husband.”
[More here on top resources for minority-owned businesses.]
I don't think it's about dismissing [your] feelings and the hurt, but I think it's about acknowledging the experience. And then, when you're ready, picking yourself back up again and going in for another conversation.
Shilla Kim-Parker, founder and CEO, Thrilling
Thrilling: Black- and Asian-owned digital vintage marketplace raises $8.5 million Series A funding to create a more sustainable fashion future
“I grew up in New York City, where for me, secondhand shopping was just shopping,” quipped Shilla Kim-Parker. But as the founder of Thrilling became a working mom, she had less and less time for the “thrill of the hunt” she got from browsing brick-and-mortar resale boutiques.
“I yearned for a way to shop and support those stores from my phone,” she said. So, part of launching Thrilling, an online marketplace where these small retailers can create digital storefronts, was selfish, she admitted.
What’s more, Kim-Parker’s grandparents started a dry-cleaning business, the first business that was Black-owned in their tiny North Carolina town over 50 years ago, so entrepreneurship—and apparel—is in her blood.
She was also troubled by the climate crisis and the lack of sustainability in fashion. “If you look at the market side of secondhand clothing, it's $30 billion projected to grow to $50 billion over the next few years, growing faster than fast fashion,” she said. “So, it's a big enough playground and the problem is urgent enough that I'm excited by and welcome other people contributing towards solutions in their own ways.”
But Thrilling is a different kind of marketplace, she says: They don’t resell any fast fashion or much high-end luxury merchandise, focusing solely on items that are 20-plus years old.
“We are powered entirely by small businesses and every item on our site is sold and shipped from that small business,” Kim-Parker noted. “Our consumer proposition is accessibly priced, high quality clothes that are going to last you for decades.”
Although sustainability is an increasingly popular cause in the business sector, when Kim-Parker initially did try to get institutional sources of funding, even organizations that claimed to support such efforts were risk averse and wanted to wait to see if her business got more traction, she said. “So, I did end up turning to friends of friends to raise angel funding.”
That was soon followed by a seed round, and ultimately the latest Series A.
But it wasn’t easy. Kim-Parker said as a Black woman she “absolutely felt the brunt of dismissiveness, condescension, racism, sexism, all of it.” But some of the conversations she found most frustrating contained nuggets that would help her be smarter about the way she approached the next one.
One conversation she will never forget when trying to raise a seed round was with an investor who told her that she was unprepared and ill-suited to being an entrepreneur. “It was such an aggressively condescending conversation, where he made a decision about me as a person, entrepreneur, as a business builder,” she recounted. Although she took a page from Michelle Obama's playbook and remained calm and polite, she never engaged with his firm again, even when it offered to invest in the recent Series A.
The key to surviving this phase of the fundraising process was about enduring the sheer quantity of conversations she had because it took so many to find the investors who aligned with her values. “I don't think it's about dismissing [your] feelings and the hurt, but I think it's about acknowledging the experience. And then, when you're ready, picking yourself back up again and going in for another conversation,” she explained.
Ultimately, she keeps her eye on the prize. “The apparel industry’s contribution to the climate crisis is devastating,” said Kim-Parker. “I think there's growing mainstream awareness around it, which is wonderful. And if we can provide a platform to help support a more sustainable way to shop, that's the goal.”
Yappa: Social and audio chat platform for brands to interact with their communities closes Series A of more than $3.5 million
Jennifer Dyer and Kiaran Sim admit that starting a social media platform in 2019 — in the run up to the contentious presidential election of 2020 — was like jumping into the fire to test and see if people really could communicate with emotional intelligence online. But that’s just what they did with Yappa, a widget that lives on the bottom of publishers’ content pages that allows readers to comment on what they’re seeing.
“We just really wanted to offer a tool to allows [for] better conversations, better debate, better connectedness, better community building,” said Sim.
Over the past year, the two said they’ve seen Yappa begin to grow across different verticals and publishers including The Hill, Vox, iHeartRADIO and Perez Hilton, as these platforms talk more with their customers — “just people calling each other by their first names and talking and listening, building a more empathetic way to communicate online,” said Dyer.
As such, Yappa has grown in the past year from 20 million page views to 487 million page views and the startup now has a valuation of $200 million. This, they believe, reflects the fact that the tool uses audio and real identities so people can’t hide behind a keyboard and spout toxic remarks anonymously — a problem that has dogged social media since its inception.
That said, given all the investment dollars that tend to flow towards startups offering tech solutions, landing investment wasn’t easy, according to Dyer and Sim.
There's somewhat of a lack of understanding when it comes to people of color, the two asserted, in part because most investors make decisions based on past successes with founders who were primarily white men in their professional networks. “There’s a lack of trust to take a risk,” said Dyer, “It comes down to perception.”
To counter that headwind, Yappa strategized to build relationships with high-net-worth individuals, as it was an easier task to convince one person to invest than a committee or a board. “It wasn't necessarily about how viable the business is,” said Dyer. “It was really focused on who we are as people and really selling ourselves rather than selling the concept.”
The concept and its founders prevailed. “Like everything in business, it's always about being in the right place at the right time,” said Sim. “And always being able to detect or to anticipate what the need is going to be and provide a solution for those needs,” he said. “So, Yappa has benefited from the pandemic 100%. We have a communication tool in a world of isolation.”
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