Starting a business has long been a way for Americans to rise up while serving others. Before the pandemic, the number of new enterprises launched by members of the Black and Latinx communities was growing impressively, a phenomenon that didn’t attract much media attention. As the pandemic recedes, such entrepreneurial activity will revive.
However, well before Covid-19, the drive to launch or expand a new business had been seriously hampered by the lack of capital. Decades ago, banks were a major source of such funding, but that hasn’t been the case for quite a while. Thus, growth was stunted or, all too often, promising startups never saw the light of day.
That’s why the unique collaboration described below is of such crucial importance. It provides a creative model for capital access for Black and Latinx entrepreneurs that can be replicated across the nation.
Guest post by Nia C. Mathis, Verizon Vice President of State and Local Government Affairs—Central/New England Region.
In spite of the racial reexamining America has been going through for more than a year now, Black and Latinx tech entrepreneurs still don’t have equitable access to the startup capital that could make their dreams a reality. TechRise, a Chicago collaboration of Verizon, nonprofit P33 and business incubator 1871, aims to change that.
Chicago is rapidly becoming a hub for tech entrepreneurism, on track to achieve a startup valuation of at least $1 billion this year. It is also one of the most racially distributed cities in America, with Black and Latinx communities each making up roughly 30% of the population. Yet only 1.9% of venture capital goes to founders of color, less than the national average and far below the more than 5% they receive in Atlanta and New York City. Talent and good ideas that could transform communities and move the world forward are being left on the table.
The challenges to greater inclusion are real. Banks and Wall Street have long overlooked the potential of founders of color, who need outside access to capital. And many of these diverse would-be entrepreneurs also often lack a network of wealthy friends and family that many businesspeople look to for the initial funding that’s needed to move past the idea stage to develop a workable pitch and formal proposal.
TechRise takes steps to fill that gap by providing access not only to capital but also to community and connections. It will support Black and Latinx founders through the lifecycles of the businesses, from the initial concept to success and exit.
The goal is to deploy $5 million in nondilutive grant funding, meaning that diverse founders won’t have to give up equity in their startups in exchange for the seed money. Profits generated by their ideas and hard work will stay in the community. The grants will be given out in amounts of $10,000 to $50,000 to Black and Latinx entrepreneurs across the Chicago metro area.
This program is working and producing tangible results. After 31 pitch competitions, TechRise awarded more than $920K in nondilutive grants to 42 startups in 2021. They include Season One winners Christine Izuakor, PhD, CISSP, founder of Cyber Pop-up, who won the $100K grand prize, and Eric Alvarez, founder of Grapefruit Health, who won the $25K People’s Choice Award at the live finale. The initial round of 10 competitions awarded more than $200K to winning founders who were 60% women, 60% Black and 40% Latino. Their innovative ideas have already created 29 new jobs.
Cyber Pop-up is a real success story. It secures companies through an on-demand cybersecurity platform powered by vetted and highly skilled freelancers. Christine, a PhD in Security Engineering, developed the Cyber Pop-up platform but was having issues expanding her business until she won a TechRise pitch competition prize of $25,000. Christine used that money to increase advertising, which led to her victory over a field of 20 other semifinalists and the $100,000 grand prize at the recent Atlanta Startup Battle. Add to this Christine’s TechRise finale grand prize and you begin to see how programs like TechRise can really propel early-stage entrepreneurs forward.
And this is only the beginning. TechRise will return in spring 2022, so stay tuned for Season Two.
With help from TechRise, companies like Cyber Pop-up have the potential to make a profound impact on the city of Chicago. It’s estimated that $5 million in grant funding (like that of TechRise) can have a significant multiplier effect, enabling additional funding for Black and Latinx founders that will create thousands of jobs across the Chicago tech ecosystem.
Research from the Kauffman Foundation predicts that early investments in Black and Latinx founders can increase the annual growth of diverse startups by 20%, creating 170,000 tech job openings. Further, these entrepreneurs will look to employ people of color and women, which will help shrink the unacceptably high wealth gap in Chicago and the nation.
TechRise is a project that is long overdue, and Verizon—bringing its unique ability to connect tech entrepreneurs with the 5G network—is excited and honored to be a part of it. We look forward to the success of TechRise in Chicago and to seeing it replicated in cities all across the nation. Together we rise!
—Nia C. Mathis, Verizon Vice President of State and Local Government Affairs— Central/New England Region
By Steve Forbes, Forbes Staff