OPM (Other People’s Money) Funding Strategies for Tech

funding

Learn how savvy minority tech entrepreneurs accelerate past early funding constraints; sourcing cash from customers, lenders, and investors

Minority business ownership in tech growth industries hovers around 4% nationwide. It’s a stat indicating a growing “innovation gap”—compounded by insufficient liquidity and limited debt or equity funding. These and other persistent factors inhibit tech entrepreneurship from spreading widely throughout communities of color.

Growth Accelerators such as Minority Venture Partners Inc. (MVP) were launched to address this innovation lag, providing advanced entrepreneurial training and comprehensive startup support to minority and women-led firms. MVP is, however, a departure from traditional accelerators in that the program doesn’t make direct investments into its participants. Instead, the accelerator treats limited capital as a “given,” encouraging each team to ideate around their respective funding shortfall. This includes doubling down on “biz-dev” fundamentals, such as selling to big business or marketing to a niche. These efforts ultimately strengthen  each participant’s ability to secure OPM (“Other People’s Money”) from non-institutional sources.

If you’re an aspiring minority tech entrepreneur looking to similarly innovate past early funding constraints, consider MVP’s top three (3) strategies for sourcing requisite cash from customers, lenders, and investors:

Fish in a bigger pond.

MVP’s participants develop mobile, social, and digital tech innovations, but are often too young to attract institutional funding. These teams revisit their essential business model, which includes shifting from B2C to B2B customers. The strategic assumption is that the central technology they’ve created offers significant and equal value to corporate clientele. The result is larger receipts, higher margins, and reduced capital requirements for entering the market.

Time your ask.

Research suggests minority and women tech founders share common startup experiences. This includes, but is not limited to: bootstrapping, heavy use of credit, and frequent borrowing rounds from friends and family. Also, 80% of new businesses don’t qualify for bank loan products. Timing the ask means painting the right portrait, at the right time, and for the right audience—the lending institution. Before giving the bank your best pitch, build an asset portfolio that includes elements banks like to see: cash, receivables, and inventory (where applicable). You’ll ultimately improve your business profile as a good lending risk and gain leverage with competing micro-lenders offering friendlier borrowing terms.

Sell the future.

Angel investors and VC’s are always on the hunt for startups that project as home runs. Selling the future entails communicating the best financial picture of your business along with a reasonable timeline for investor ROI. TAM, or total addressable market, is also a big selling point appealing to investors. Many seek first-mover opportunities in industries having the size, outlook, and potential for lucrative upside.

As funding prospects go, customers, lenders, and investors possess unique drivers for parting with their hard-earned cash. Your job as an emerging minority tech founder is to find out what their “get” is and sell it effectively. Doing so can improve your ability to attract other people’s money (institutional or otherwise) and extend your startup’s lifespan.

 

OPM (Other People’s Money) Funding Strategies for Tech

funding

Learn how savvy minority tech entrepreneurs accelerate past early funding constraints; sourcing cash from customers, lenders, and investors

Minority business ownership in tech growth industries hovers around 4% nationwide. It’s a stat indicating a growing “innovation gap”—compounded by insufficient liquidity and limited debt or equity funding. These and other persistent factors inhibit tech entrepreneurship from spreading widely throughout communities of color.

Growth Accelerators such as Minority Venture Partners Inc. (MVP) were launched to address this innovation lag, providing advanced entrepreneurial training and comprehensive startup support to minority and women-led firms. MVP is, however, a departure from traditional accelerators in that the program doesn’t make direct investments into its participants. Instead, the accelerator treats limited capital as a “given,” encouraging each team to ideate around their respective funding shortfall. This includes doubling down on “biz-dev” fundamentals, such as selling to big business or marketing to a niche. These efforts ultimately strengthen  each participant’s ability to secure OPM (“Other People’s Money”) from non-institutional sources.

If you’re an aspiring minority tech entrepreneur looking to similarly innovate past early funding constraints, consider MVP’s top three (3) strategies for sourcing requisite cash from customers, lenders, and investors:

Fish in a bigger pond.

MVP’s participants develop mobile, social, and digital tech innovations, but are often too young to attract institutional funding. These teams revisit their essential business model, which includes shifting from B2C to B2B customers. The strategic assumption is that the central technology they’ve created offers significant and equal value to corporate clientele. The result is larger receipts, higher margins, and reduced capital requirements for entering the market.

Time your ask.

Research suggests minority and women tech founders share common startup experiences. This includes, but is not limited to: bootstrapping, heavy use of credit, and frequent borrowing rounds from friends and family. Also, 80% of new businesses don’t qualify for bank loan products. Timing the ask means painting the right portrait, at the right time, and for the right audience—the lending institution. Before giving the bank your best pitch, build an asset portfolio that includes elements banks like to see: cash, receivables, and inventory (where applicable). You’ll ultimately improve your business profile as a good lending risk and gain leverage with competing micro-lenders offering friendlier borrowing terms.

Sell the future.

Angel investors and VC’s are always on the hunt for startups that project as home runs. Selling the future entails communicating the best financial picture of your business along with a reasonable timeline for investor ROI. TAM, or total addressable market, is also a big selling point appealing to investors. Many seek first-mover opportunities in industries having the size, outlook, and potential for lucrative upside.

As funding prospects go, customers, lenders, and investors possess unique drivers for parting with their hard-earned cash. Your job as an emerging minority tech founder is to find out what their “get” is and sell it effectively. Doing so can improve your ability to attract other people’s money (institutional or otherwise) and extend your startup’s lifespan.

 

Best Accelerators For Minority Startups and Small Businesses To Get Funding

accelerators

Studies show the survival rate of companies that go through an accelerator are three times than that of companies that don’t. What’s more, research shows companies that completed an accelerator program grew faster than companies that didn’t.

People sometimes use the phrase “business accelerator” as another term for “business incubator.” Incubators fundamentally provide a physical office space and basic business services. However, most accelerators are characterized by an open application process: the selective acceptance of various entrepreneurs for short, fixed-length classes, with graduation and demo “pitch” days, as well as the provision of mentors and seed funding.

Elite tech accelerators—such as Y Combinator, Techstars, and 500 Startups—recently have kicked off diversity initiatives, like “open office hours” for diverse founders, mentorship programs, and investment commitments.

Accelerators Focusing on Minority Entrepreneurs

Dreamit Ventures has been diversity focused for years; it operates four seed accelerators in Philadelphia, New York City, Baltimore, and Austin, and has launched more than 200 companies that have raised $275 million at combined valuations of more than $1 billion. In 2011, Dreamit partnered with Comcast Ventures to launch Dreamit Access, which offers coaching, mentorship, seed funding, and access to opportunities, specifically for minority-led startups.

It was the NewME Accelerator that pioneered diversity in Silicon Valley. The residential technology startup accelerator has helped underrepresented founders collectively raise more than $20 million in venture capital funding. Since 2011, NewME has accelerated more than 300 startups through its 12-week program in San Francisco and its national three-day program in cities nationwide.

PowerMoves, a national initiative to increase the number of venture-backed, high-growth, high-tech companies led by entrepreneurs of color, opened an accelerator in Miami this February. PowerMoves began in 2014 as a program to position New Orleans as a hub for entrepreneurs of color. In just one year, it has nationally sourced 100 companies led by founders of color from 26 major cities across the country, and it has helped secure more than $17 million in capital commitments.

PowerMoves Miami offers year-round programming, including pitch competitions, boot camps, networking events, and fellowships. “With the help of the John S. and James L. Knight Foundation (a $1.2 million investment), we decided to launch a physical presence, not just a three-day convening in Miami,” says Janelle Alexander, Managing Director of PowerMoves Miami.

Black Enterprise’s 2016 Techpreneur of the Year nominee, Brian Brackeen, graduated from the NewME Accelerator’s second class in 2012. Brackeen is the Founder and CEO of Kairos, an innovative facial recognition company in Miami.

Brackeen is quick to point out that accelerators have evolved in recent years. “If you are in the fashion business, get into a fashion accelerator, because their network will be more helpful and carry more weight,” he advises other entrepreneurs.

“New York City, for instance, has several fashion and design labs, incubators, and accelerators. Look at how that program can add value. Who are the people in their network? At the end of the day, it’s all about people,” Brackeen says. “Seed money—$25,000 or $100,000—is important, but it’s about the relationships and introductions to people who can help grow your customer base and boost your revenue stream.”