Invest in black entrepreneurs because it's good business, not out of 'social obligation'

Charles hudsonSoftTech VCCharles Hudson, partner at SoftTech VC

Don’t invest in African-American led companies because of diversity, but because they’re a good business, argued African-American founders and venture capitalists at the PreMoney conference

“The more people think this is an obligation, a social obligation, that’s probably not a good thing,” said Hamet Watt, a venture partner at Upfront Ventures.

“There’s so much research that speaks to the importance of diversity and inclusion in the innovation process. The notion that people aren’t prioritising it is a little bit surprising to me, but also an opportunity.”

Many investors are missing out on the market opportunity because they’re just not doing the work, said Diishan Imira, CEO of Mayvenn, which uses stylists to sell hair extensions. Imira explained during the panel how he had to basically “start from zero” to get venture capitalists to understand what a hair weave is and why there is even a market around it.

Diishan ImiraLinkedInDiishan Imira, CEO of Mavven

“We don’t need support. You guys are investors, you want to make money,” Imira said. “What I’m saying, if you want to get some of this money, you should do the work and the research that there’s not going to be ten million other investors competing with you to go get.”

Of course, the ideas have to be viable in the first place, and it can be hard to know what’s a good idea for venture capital versus what’s a good idea for a small business unless you’re already in Silicon Valley. 

Charles Hudson, a partner at SoftTech VC and one of the most visible African-American venture capitalists in Silicon Valley, said he feels like he has to make himself accessible to African-American entrepreneurs.

“I also feel a certain pressure to try to help African entrepreneurs who I think are talented not work on terrible ideas,” Hudson said. “It’s not that they’re terrible ideas in general, it’s just that they’re not appropriate for venture. To me, that’s not unique to African Americans.”

He also admitted to feeling “an enormous amount of pressure backing an African American entrepreneur.”

“Pursuing an African American business, for whatever reason if that investment that doesn’t work, the buck stops with me,” Hudson said. “You realise that for whatever reason that investment’s failure is likely to be scrutinised to a greater degree than that SaaS company that didn’t work out. And I think about that. I wish I didn’t have to think about that.”

Here’s the “Black is the new Black” panel in full, which also included Shauntel Poulson of Reach Capital and Marlon Nichols of Intel Capital:

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