Inside the Black-Owned Diversity Movement’s Strategy to Find a Venture Capitalist

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SEARCH PARK OF THE TRISANGLE – You’ve probably heard the phrase, “It takes money to make money.” It also helps to have a breakthrough concept with clear market appeal.

In 2019, the founders of The Diversity Movement acted on one of these disruptive notions and breathed new life into old-fashioned corporate diversity, equity and inclusion (DEI) training. These experts recognized a business imperative for effective diversity and inclusion education that would help organizations create thriving and sustainable work cultures.

The diversity movement now offers a suite of employee experience products that personalize DEI education through data, technology, and expert-curated content. Its microlearning platform, Microvideos by The Diversity Movementwas named one of fast business‘s”World Changing Ideas 2022.”

“We will produce diversity, equity, inclusion so that businesses can grow at scale. Who does this exactly? Answer: nobody. It was a story that had never been told before,” says Donald Thompson, CEO and co-founder. “Now we’re taking that vision and creating speed to make it real.”

But to keep growing the business, to maintain its momentum, Thompson and his team needed additional capital – the money to make money.

Black founders and the scarcity of capital

It helps to understand that Thompson is a black founder: he is part of a community of entrepreneurs who have traditionally struggled to attract the kind of financial investment that leads to business success. According to 2018 Small Business Credit Survey, big banks approved only 29% of loans sought by black business owners, compared to 60% of white entrepreneurs and 50% of Latino or Hispanic small business owners. In 2020, venture capitalists funneled around $150 billion to startups, Accenture says, but only 1% of these funds were invested in black-owned businesses.

These statistics and their real-world consequences have informed Thompson’s entrepreneurial journey. In his previous business ventures, he mainly invested his own money and deliberately expanded the businesses, relying on sales to fuel growth. Along the way, he learned to value efficiency and pay close attention to the bottom line.

“What’s important in a startup business is that I think it makes you harder, because we have to have happy customers to survive,” he says. “We don’t have the opportunity to theorize on how to market our products and services. We have to build them, market them, sell them and deliver them in order to make our payroll. This means we are faster; it means we are more agile.

“As an African American in tech, understanding the difficulties we have in getting money, I don’t have the opportunity to lose money on purpose. I have to make money now, then you will believe in my future goals.

However, The Diversity Movement was different from Thompson’s previous ventures. The potential for growth was greater, and due to the growing demand for corporate diversity training following the murder of George Floyd, the timeline was shorter.

“Most of the businesses I’ve run in the past, which we’ve grown and left, have almost completely closed without outside money,” he says. “This is really the first company where my goals and the company’s goals are so big that we need outside capital to not miss the moment.”

Partner with the right venture capital firm

Resilient businessesfounded by Dr. Keith M. Daniel and Thomas Droege, recently provided this timely injection of outside capital. The impact fund targets startups led by black founders and aims to “close the existing wealth gap by expanding access to capital, networks and opportunities,” according to the company’s website.

The racial wealth gap reflects disparities in access to resources and opportunities. For every dollar the average white American has, the average black American has about 17 cents; it’s a wealth gap of 6 to 1. The numbers are worse – about 10 to 1 – when looking at median earnings. But comparing white and black business owners, the numbers change to 3 to 1.

“Creating wealth through business is one of the primary ways to build wealth. If we have a wealth gap, let’s be intentional about it,” Droege says.

“We really want to be part of the solution to closing this wealth gap,” adds Daniel. “And in the directions where wealth is acquired, it is only accessible to a few through this type of investment.”

The venture capital funding will allow the Diversity Movement to invest in its technology tools, which help companies scale DEI learning. In addition to its award-winning MicroVideos platform, the company offers a conversational AI tool, Online course, data-driven adviceand a subscription service for small and medium businesses, called IED Browser.

“We were very fortunate to have started our business from zero to our first 100 clients, from zero to our first million dollars in revenue, which allows Resilient Ventures’ investment to allow us to be a bit more aggressive,” says Thompson.

The company will also be better equipped to market its innovative business model, suite of tools and services, and proven impact on customers.

“Nobody knows nationwide that this DEI company that was created six months before the pandemic has grown from zero to 100 enterprise clients and serves Fortune 1000 startups,” Thompson says. “When people know us, we are among the first to consider their IED needs. If people don’t know us, how can they choose us?

Build relationships and a community of like-minded entrepreneurs

Alongside their financial investment, Droege and Daniel provide expertise and advice to the companies in their portfolio. These relationships provide tangible benefits, and when looking for investors, Thompson looked for a company that would be a lifelong business partner.

“We’re looking for people who don’t just write a check because we’re a good company, but who want to actively participate in our success in terms of funding, advice and networks,” he says.

“Even during the due diligence process with Resilient Ventures, they made several key recommendations to both potential employees and other investment firms who might be happy to work with us.”

The current relationship between the two companies has developed over time. In addition to being an entrepreneur and CEO, Thompson has been an angel investor, committing his own money to other high-potential small businesses. He, Droege, and Daniel move in similar business circles and have seen each other’s businesses flourish.

“We didn’t invest in The Diversity Movement when they started because we viewed them as an advisory organization,” says Droege. “When they came back with us and said, ‘We’re going to expand our teaching materials with digital learning and MicroVideos‘, so that was a different story. Now it’s a different opportunity, not to mention they have an amazing team.

Droege and Daniel clarify that Resilient Ventures is not a philanthropic project. The co-founders want to close the racial wealth gap, but they expect to make a profit on their investments. They care who they support, and they know that entrepreneurs with various profiles have diverse worldviews that allow them to be more innovative.

“What I say most about diversity is innovation, not diversity for diversity or diversity for the marketplace. It’s innovation,” says Droege.

Investment, innovation and a compelling story

Although the partnership between Resilient Ventures and The Diversity Movement is a success, it remains difficult for black founders to secure funding. A few best practices make the process easier, say the three veteran entrepreneurs.

Their best advice for founders looking for venture capital money is to make sure outside funding is needed to grow the business. Resilient Ventures seeks business partners who have had at least one year of revenue and have exhausted readily available sources of capital like personal networks, pitch competitions, and personal courage.

“There are a lot of risks, so you put so much time, energy, effort and money into it,” says Daniel. “We call it getting started, but it’s being able to respond to growth opportunities that don’t immediately put you in a position where you’re looking for dollars or capital from traditional investors.”

Thompson agrees, saying The Diversity Movement had a few years of revenue before the company sought outside funding to expand.

“I’m very proud of the fact that we’ve built a self-sustaining business to prove our case with our own money, our own sweat capital,” he says. “Now we are starting to get support from the angel investor community to help us accelerate.”

Thompson also notes that entrepreneurs must be able to articulate their vision concisely and passionately, with a clear business case. This skill allows founders to recruit the right people to help them achieve their goals.

“You have to get people to believe in your vision, because at the start, the facts are not always there. You’re starting something new, so you need to create that compelling case for people to bet on you with their time and energy. For me, it’s all about the adventure,” says Thompson, who honed her communication skills during years in sales.

“Selling the vision of how an employee can benefit from being part of an emerging, fast-growing startup is a style of communication. It’s a point of view. It helps you find the right customers, good employees, good investments, who want to be part of something amazing.

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