Today in a twist, New Jersey Governor Phil Murphy announced a proposed allocation of $ 10 million from the state budget to create a seed fund for Black and Latinx startups, TechCrunch exclusively learned. The Black and Latinx Seed Fund will be administered by the New Economic Development Authority (NJEDA).
NJEDA CEO Tim Sullivan said, based on state research, that New Jersey is the first state in the country to develop such a fund.
He said this decision was a “direct response systemic racial inequalities in access to capital for black and brown entrepreneurs ”and aimed at closing the“ racial wealth gap ”.
“I think two of the cornerstones of Governor Murphy’s overall strategy for the economy is to build a stronger, fairer New Jersey and a stronger, fairer economy,” Sullivan said, adding that the state is also focused on “reclaiming New Jersey’s legacy of leadership, innovation and entrepreneurship.”
It is a known fact that the number of venture capital dollars paid to the founders of Black and Latinx is extremely low.
As proof of this, last year Crunchbase found that as of August 31, the founders of Black and Latinx had raised $ 2.3 billion in funding, which is only 2.6% of the total $ 87.3 billion in funding allocated to all founders up to this point in 2020.
Additionally, Digitalundivided’s ProjectDiane 2020 report found that the black and Latinx founders received just $ 1.7 billion out of the total of $ 276.7 billion in venture capital invested between 2018 and 2019.
In recent months – following the murder of George Floyd and the Black Lives Matter movement – we’ve seen a growing number of venture capital funds announce initiatives towards funding a larger group of founders.
“Before there was a Silicon Valley, whether you were talking about people like Thomas Edison, Bell Labs or Sarnoff Labs, we were perhaps more than any other place that fueled 20th century American entrepreneurial growth,” said Sullivan at TechCrunch. . “And the reality is we’ve lost a bit of that. We’re still one of the best places for innovation and entrepreneurship, but other places – whether it’s in the west or in places like Austin and Boston – have really upped their game and we want to recapture that. undisputed leadership position in innovation and entrepreneurship.
Beyond that, under the leadership of Governor Murphy, the state wants to “build America’s most diverse and inclusive innovation ecosystem.”
“This is much easier said than done, especially given not only centuries of systemic discrimination and racism, but also some very specific manifestations of this systemic deprivation and discrimination, particularly around the venture capital funding and early stage seed funding, ”added Sullivan, who previously worked at Barclays Capital as Chief of Staff to the Head of Global Investment Banking.
Zakiya Smith Ellis, chief policy adviser to Governor Murphy, said the initiative came after conversations with black and Latinx business investors.
“Tit was developed with input from people who could be direct beneficiaries of this program and this community had a direct impact on the design and development of this proposal, ”Smith Ellis told TechCrunch. “We hear from them ‘we don’t have the family members, we don’t have the friends who are just going to write me a check at the very beginning, I think that’s really informative.”
Lawmakers are expected to vote on the proposal by July 1.
While it has been difficult to find examples of governments doing similar things, there are a number of organizations that have pledged to fund various founders.
In February, several national and Chicago-based organizations came together to support early career Black and Latinx tech entrepreneurs through a new program called TechRise. The nonprofit organization P33 started the program in partnership with Verizon and 1871, a private business incubator and technology hub, among others, with the goal of “bridging the wealth gap in Chicago, generating income. thousands of tech-related jobs and giving $ 5 million in grants. to black and Latino entrepreneurs, ”according to the Chicago Sun Times. (Disclosure: Verizon is the parent company of TechCrunch).
Additionally, Detroit-based ID Ventures says it invests in businesses run by minorities and women “at a rate of four times the national average.”
“By providing opportunities for under-represented entrepreneurs, we can ensure representation, respect the diversity of our state and create a startup community like no other,” the organization’s website says.
Also in Austin, DivInc is a nonprofit pre-accelerator that runs 12-week programs for under-represented tech founders. Founded in 2016 by former Dell executive Preston James, the organization aims to ‘eempower people of color and women entrepreneurs and help them build successfully high-growth companies by giving them access to education, mentorship and essential networks. “