Nicole Homer expected the pursuit of venture capital funding to be hard.
She expected it to take a long time. And, as a Black woman founder, she knew she would face challenges securing VC funding for Hx Innovations, the Middletown-based sportstech company she runs with her husband, Von. After all, Black women received less than 1% of VC funding in 2020, a year when overall VC investing increased by 4%.
Actually experiencing those challenges is something else.
Homer has the numbers. She has proof of concept. She and Von meticulously ran a successful friends and family round (the lack of which is often cited as a roadblock to VC for Black founders). The couple themselves were able to invest $80,000 of their own money, supported by consulting work and Von’s work as a professor at Delaware State University and Western University.
“I’ve spoken with a lot of venture firms,” Nicole Homer said. “We’re in the seed stage, we have a proof of concept, but we need funding to develop the software platform.”
The back and forth has gone something like this:
VC: “Well, who’s going to take it to market?”
Homer: “What do you mean who’s going to take it to market? We’re going to take it to market.”
VC: “Oh, well, who’s going to run things?”
Homer pauses as she relays the scenario.
“I have to be very careful with my words, where I’m not leading with my offense,” she said of the assumption that they’re unable to run the business themselves. “But it is there. There is a subconscious bias that they’re basically saying it’s a good idea, but you can’t do it.”
At the same time, in some entrepreneurship cohorts she’s participated in, Homer has seen startups close deals for a million dollars within six months without a concise pitch deck.
“It had nothing to do with the deck like when we went,” she said “We have to have a proof of concept — they have an idea. They were able to bring someone on board because they can relate to them and I’m like, who is going to relate [to me]? None of the investors are Black women. …
“At the end of the day, if you don’t feel comfortable taking me out for cigars or playing 19 holes, it’s a disadvantage, and I think that’s what needs to change. These deals happen because people like people like them, not really because they like the idea.”
Finding funding when VC doesn’t work
Some sources of funding are far less feelings-based, such as Startup 302, where Hx Innovations was awarded $60,000 in 2021. These kinds of pitch completions require paperwork, decks and financials. In that setting, Startup 302 — which is designed for underrepresented founders — is a more even playing field, and Hx Innovations had no problem advancing to the award stage.
But these kinds of funding events, which are often sponsored by state agencies and private corporations, don’t sustain businesses. They’re one-time awards that are relatively small compared to multimillion dollar VC deals.
After a few years of struggling to find VC firms interested in Hx Innovations, Homer is now working with a firm that specifically invests in startups founded by Black women, and her outlook on funding is changing — especially when it comes to crowdfunding.
“I’m like, ‘Gary, VCs look down on crowdfunding. They feel like if you’re crowdfunding that means you can’t raise real money,'” Homer recalled. “It means that your idea isn’t that good. He said, ‘Is that the case, though? You know how VCs are.’ I didn’t understand what he meant by that. But he’s in this world, right?”
Six months later, Homer realized that Johnson was right. It didn’t hurt that one of the VCs she was talking with said they wanted Hx Innovations to open a crowdfunding campaign.
She was confused at first, but the VC explained that Wefunder makes vetting startups cost effective for them, because the process of setting up a campaign requires a due diligence, screening by the SEC, and other steps that otherwise would come out of the VC’s pocket.
Hx Innovations campaign was recently launched, and will be published publicly when it reaches $50,000.
Startup support in unexpected places
More than anything, Homer said, underrepresented founders should seek out places where they won’t be marginalized or underestimated, even if some of those places are not local. One example: the Bronze Valley Accelerator, a Birmingham nonprofit that supports underrepresented founders.
“We’re not even present in Alabama, and they really welcomed us with open arms and gave us these resources — and the people who came in, if they weren’t able to give resources, they were able to be a good sounding board. I was able to connect with a Black woman founder out of New York who just moved down to Atlanta because it has a stronger [Black founder] support system,” she said. “We do have that in Delaware, too, but it seems like there’s still a disconnect.”
One person she has found support from here in Delaware from Ayanna Khan, who founded the Delaware Black Chamber of Commerce in 2020, who has advised her to “lead with the numbers.”
“Make sure your due diligence is on point first,” Homer said. “Some startup companies can raise capital without reoccurring revenues as a proof of concept. That does not apply to us.”
With realistic expectations, good numbers and a support system, Black woman founders can beat the odds.
“This is going to be a long process,” Homer said. “I want more technology startup companies that are Black-owned to be empowered to actually do this, but also understand the realities that come with it. Knowing that there are other people out there that are going through this — they may not be [nearby], but they’re out there.”