Our Commitment to Racial Equity in Venture Capital
This post originally appeared on LinkedIn.
This summer, our nation reached a pivot point in the ongoing effort to combat systemic racial injustices that persist in our country today. In response, we’ve seen individuals and companies alike step up and commit to a better, more equitable future. For Northwestern Mutual’s part, under the leadership of CEO John Schlifske, a new Northwestern Mutual task force got to work with a mandate to build upon our company’s commitment to advancing diversity and inclusion by helping drive and accelerate racial equity and financial security in the communities we serve.
We have looked inward and outward for solutions to fulfill this mission. Through that process, one pressing issue became abundantly clear: the underrepresentation of Black founders receiving venture capital funding. This issue requires immediate attention not only to ensure we are cultivating and investing in a workforce that accurately reflects the people and communities we serve, but also to promote and provide a platform for new companies and initiatives led by diverse entrepreneurs who can deliver innovative, culturally relevant solutions that solve society’s most pressing challenges. The need to address this representation gap is unquestionable, given that:
- Black business founders receive less than 1% of venture capital funding annually;
- Black women represent less than 0.2% of the companies that receive such funding;
- 81% of VC funds have no Black investors;
- While 70% of VCs are white, only 3% are Black
Those disparate numbers add to the already-immense challenge that Black entrepreneurs face to raise venture capital. Kobby Amoah, founder of the startup River Health, a Northwestern Mutual Future Ventures portfolio company, sums up the situation well:
The biggest challenge for a lot of minority founders is that they are not plugged in to the circle of make decisions on venture capital. The traditional way is to get someone to make a warm introduction to a VC. In many cases, these founders don’t have connection to these people. That makes it hard. The second obstacle is finding someone who is willing to take a chance on you. For every investor, when you’re writing a check, you go in knowing there’s a good chance that that investment is not going to pan out. It’s a big risk. And if you haven’t seen a Black founder build a successful company before, your bias may tell you to avoid taking that risk.
The challenge is clear, but so is the opportunity. If VCs expand their networking circles to make them more diverse and inclusive, and if they can recognize and push back on potential racial biases they may have, it can make a huge impact.
Our Commitment to Change
It’s time for venture capital funds to invest in Black entrepreneurs, and today, Northwestern Mutual is turning words into actions. We’ve announced two new initiatives to support Black startup founders both nationally and locally in Milwaukee. Our venture capital fund, Northwestern Mutual Future Ventures, will dedicate $20 million to invest in startup companies founded by Black entrepreneurs. This initiative will help to close the racial VC funding gap, drive change and create impact within our company, industry and the communities we serve.
Beyond capital, we’re also providing counsel and coaching to Black entrepreneurs to help them successfully launch their startup. Entrepreneurs working with our new Northwestern Mutual Black Founder Accelerator – powered by gener8tor, a nationally ranked startup accelerator also based in our hometown of Milwaukee – will receive:
- Intensive coaching
- Business development support
- Talent and leadership development
- Marketing and communications counsel
- Access to both gener8tor’s and Northwestern Mutual’s nationwide network of mentors, customers, corporate partners and investors.
These investments and efforts are part of our company’s investment strategy. We are engaging startups whose technologies have the potential to transform how people experience financial security, with the following strategic areas of focus:
- Building for consumers' changing financial preferences
- Reimagining the client experience
- Furthering the digital health revolution
- Transforming analytics and technologies
What’s the potential impact? Kobby said it best:
It’s sowing the seeds for change. If there are more successful Black founders in the next five or ten years, the idea of funding Black founders doesn’t become alien anymore. And it inspires other Black entrepreneurs to try – because you see other people who have done it. Ten years from now, we may see diverse founders taking their companies public – and that’s going to change our world.
Racial equity in venture capital can only be achieved with a collective commitment to change, and I strongly urge other VCs to join us in our ongoing efforts. And, to every Black founder with an idea that transforms the way people experience and achieve financial security – we want to hear from you. Contact us on the Northwestern Mutual Future Ventures website and or apply for the Northwestern Mutual Black Founder Accelerator powered by gener8tor.
gener8tor is not an affiliate or partner of Northwestern Mutual or its subsidiaries.