Black founders receive less than 1 percent of venture capital, according to Harvard Business Review. Black women founders represent less than 0.2% of companies that receive such funding. Also, 81% of venture capital fund have no black investors while 70% of VCs are white and only 3% are Black.
Apart from these challenges, Black entrepreneurs also have difficulties raising funds to finance or expand their business, in addition to systemic racism and lack of diversity and inclusion. To address these challenges, wealth management firm Northwestern Mutual has created a new venture fund to invest in Black businesses.
The venture fund, Northwestern Mutual Future Ventures, will commit $20 million to invest in startup companies founded by Black entrepreneurs. The initiative is to help address the racial VC funding gap, drive change and create impact within the company, industry and the communities it serves.
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“At Northwestern Mutual we’re dedicated to supporting and promoting diversity not just within our company, but within our communities and the businesses we partner with nationwide,” said John Grogan, chief product and innovation officer, Northwestern Mutual.
“Allocating $20 million is only the beginning – we will continue to invest in and provide opportunities for Black founders and are committed to providing access to capital and resources to help them grow their businesses,” Grogan added.
Northwestern Mutual Future Ventures is focused on advancing the company’s investment strategy of engaging startups whose technologies have the potential to transform how people experience financial security.
For Black founders who want to apply for the $20 million Black founder funding, they must align with Northwestern Mutual Future Ventures’ key strategic areas of focus:
- Building for consumers’ changing financial preferences
- Reimagining the client experience
- The digital health revolution
- Transformational analytics and technologies
“Innovative thinking is required to drive breakthrough solutions to close the racial equity gap, and by supporting Black founders through Northwestern Mutual Future Ventures and the new accelerator program in partnership with gener8tor, we can make a difference to close this funding gap,” said Abim Kolawole, vice president, digital innovation, Northwestern Mutual.
“Our company’s Sustained Action for Racial Equity task force, which launched earlier this year, is looking at racism and inequality from every perspective. These initiatives will drive change and create impact within our company and communities.”
The firm also plans to launch the Northwestern Mutual Black Founder Accelerator powered by gener8tor to exclusively focused on advancing Black founders. The 12-week accelerator will run up to two cohorts of five companies a year and startups must be aligned to Northwestern Mutual Future Ventures’ investment areas of focus. The first cohort will begin in early 2021.