Black British entrepreneurs struggle to overcome decline in VC funding.

previous Goldman Sachs Executive Ayesha Ofori was confident investors would want to fund her investment platform startup, but she hit a wall of rejections.

Some venture capitalists who had treated Ofori’s female-focused financial investment platform, Propelle, eventually rejected her due to her lack of experience. Ofori cites careers at Morgan Stanley, Goldman Sachs and an MBA from London Business School.

“Fundraising is incredibly difficult,” Ofori told CNBC. “I try not to think about it, because it brings you down… It’s like your gender and the color of your skin is why you don’t progress as fast as other people.”

Ofori was one of the few black founders in the UK to eventually secure funding for his business. However, Black founders received only 0.23% of all venture funding in 2018, according to data from Extend Ventures. Minority groups’ market share has grown little since then.

The UK’s technology sector has seen record investment levels of over $40 billion in 2021. As corporate diversity and inclusion efforts surged following Black Lives, the value investment ratio of black founders rose to a record high of 1.13%. movement of matter. The value of investments represented by the group subsequently fell to 0.95% in 2023, according to Extend Ventures data.

Ofori was confident that the company “ticked all the boxes” in terms of what VCs want from a founder.

“I’ve been talking to people behind closed doors and hearing through the grapevine that a few black women have been given opportunities. They raised VC money. It failed and went badly, so some of these specific VC firms don’t.” This is the risk we are prepared to take,” Ofori explained.

According to Extend Ventures, between 2019 and 2023, more than 3,700 white men raised venture capital compared to just 13 Black women.

Like other black founders in the UK, Ofori is trying to buck the trend of declining funding by targeting high-profile investors and adopting a more community-led approach that includes support from family and friends.

CNBC spoke with several founders and VCs who noted that Black business leaders often face systemic issues, from racial stereotypes to an overall lack of diversity in their sectors.

Sarah Wernér, who co-founded property management company Husmus with her Swedish husband Mattias Wernér, said some VC firms apply quotas and turn away black founders when they reach a breaking point. Other VC firms will find Black founders competing with each other for the limited funds allocated to them, Wernér said.

“You’re pitting people who are already struggling against each other… It’s ridiculous to pit black people against each other and fight for a space in the portfolio that is reserved for people of color,” she said.

Berner, who said she is the face of Husmus, told CNBC that generic-sounding names often open doors for her because people don’t immediately recognize her skin color. She also said she was able to secure meetings with high-profile investors by using her white husband’s email address.

Karl Lokko, founder and managing partner of Black Seed, a VC fund for Black-led startups, told CNBC that more diversity is needed at the leadership level at VC firms to overcome these biases.

“If the IC (Investment Committee) reflects a more diverse range of perspectives, there can be more balanced consideration of proposals being evaluated and decisions made,” Lokko said. “Yes, we need more diversity, but there is actually more diversity in the sea of ​​decisions about where money is allocated.”

In late October, thousands of students, VCs, CEOs and diversity, equity and inclusion (DEI) experts gathered in north London for the 5th Black Tech Fest. Black Tech Fest is hosted by former Google employee Ashleigh Ainsley and Silicon Valley tech executive Dion. MacKenzie.

A recurring theme at this year’s Black Tech Fest was the lack of data charting the percentage of funding and support minority founders receive. McKenzie described Europe as “a desert in terms of data.”

In response to a lack of data and representation within the industry, McKenzie and Ainsley founded Colorintech to foster a new community for people of color. Since launching the program, a small group of founders have reportedly raised more than $50 million in funding and the community has grown to more than 60,000 people.

“We wanted to shine a spotlight and give a platform to people who are underrepresented in the industry,” McKenzie said.

They have partnered with some of the biggest names in the field, such as the owners of Facebook. meta, Google, With PwC JP Morgan.

Google also supported Ofori from Propelle and Wernér from Husmus, providing funding through the Google for Startups Black Founders Fund. Ofori, who received an initial investment of $100,000, said joining Google for Startups was the “catalyst” for the money to start flowing in.

Even with interest from those who had previously rejected her, Ofori decided to focus on leveraging her community and network to move forward.

She also reached out to her former colleagues at Goldman and got high-profile investors, including female entrepreneurs, on board. One of Propelle’s investors is Stefan Bollinger, a former Goldman partner and current CEO of Julius Baer.

Wernér called this support a “friends and family” round. This is a type of early-stage financing that occurs when entrepreneurs ask friends and family to invest in the business. She said the first confirmation of her venture came from a university friend who offered her £10,000, which encouraged her to reach out to other acquaintances.

“These are people who know you. You’ve been in the trenches with them. You’ve worked all night in the library with them. They know you, trust you, and give you money out of their pocket. Let’s be honest, it’s There is nothing more humbling,” she told CNBC.

Diversity and inclusion programs surged in 2020 when the killing of George Floyd sparked protests and racial unrest, but they failed to inspire long-term investments in Black communities. This is a failure that is damaging to the technology sector, say Colorintech’s McKenzie and Ainsley.

McKenzie added that a more diverse workforce leads to “better products, better teams and ultimately more revenue.” He added that more inclusive employers allow companies to attract “the best talent”.

“If you think about the whole concept of growing the UK and making ourselves a more productive nation, we cannot do that by increasing the productivity gap between certain social groups,” Ainsley emphasized. , they are not “trivial.”

Four years after the Black Lives Matter Moment, sentiment toward diversity efforts has shifted. several companies including mcdonalds, Google, ford, lowes and walmart Diversity efforts in the United States have been scaled back for a variety of reasons, from cost savings to political pressure. Donald Trump’s incoming White House administration has raised concerns about the future of DEI due to the president-elect’s proposal to cancel federally funded diversity programs.

In the UK, Labor’s pre-election pledge to break down barriers to opportunity by introducing racial equality legislation stands in stark contrast to its outlook in the US. Rollbacks of corporate DEI programs may be less common in the UK, but the value of investments represented by Black UK founders has yet to exceed 1% in 2021 and 2022, according to Extend Ventures.

Ainsley and McKenzie said DEI has been “politicized” and “weaponized” as a way to silence the efforts of organizations like Colorintech.

“For better or worse, DEI will certainly be a focus in the next administration. We’ve heard a lot of anti-DEI rhetoric in the run-up to the election and intended actions once in office. But ultimately, business leaders will need to protect themselves and their employees,” McKenzie said. , shareholders must choose whether they recognize the value of diversity, inclusion and equity, or whether alternatives are better for creating value and attracting top talent,” he said.