Lotanna Ezeike is the 24 year old co-founder and CEO of XPO, an app which helps thousands of influencers and content creators receive paid invoices on time. The company launched in September 2019 with £30,000 that Ezeike had saved from his ex-banking job at Barclays. Their most recent raise of over $1,000,000 was heavily backed by Blue Y Capital (early Monzo investors) and reputable Angel investors such as Music Producer, Despa Robinson.
From the outside looking in, this is pretty impressive! But Ezeike told us exclusively, “We shared our pitch deck on Slide Bean which allows us to track the way investors engage with the deck. I noticed that when we had the XPO team slide towards the beginning, showing that we’re black, the drop-off rate was extremely high. When I moved that slide to the end, it was the complete opposite.”
Ezeike is not the only one with a similar story. Afrocenchix co-founder Rachael Twumasi-Corson described the fundraising experience as “horrible”. One VC even said to her, “Why are you going to Africa? Aren’t they all poor there?”.
These are the sort of experiences many black founders experience on a daily basis. In a report by Extend Ventures, it showed that between 2009 and 2019, 0.24 percent of venture capital investment went to Black entrepreneurs – a total of 38 entrepreneurs. Only one black woman, within the span of ten years, secured VC backing. For comparison, 76 percent of investment went to all white teams.
To understand why this happens, we must take things back to the past.
💡 Why are black founders at a disadvantage in business?
In June 1921, ‘Black Wall Street’, a predominantly black town in Tulsa, Oklahoma, was bombed down by a white mob. The reason why? They didn’t like the success black people were having after being freed from slavery. At this time, black people were being redlined, which meant that they couldn’t cover losses with insurance and they didn’t have the money to recover.
Whilst this may seem like a long time ago, it was only in 2020 that the National Community Reinvestment Coalition found a disparity in black and white loan applications. The study revealed a black applicant being turned away from opening an account with a bank. The same bank encouraged a white applicant, with a similar profile and credit history, to apply and offered to send PPP information.
Systemic racism and racial biases are the biggest contributors to this issue. A lot of black people do not start businesses because they lack the resources, tools and knowledge to even consider it a possibility. Entrepreneurship requires a special sort of hustle and determination, something a lot of people from immigrant backgrounds have. A study by Aston University showed that people from ethinc minority backgrounds and immigrants to the UK are twice as likely to be early-stage entrepreneurs.
But when you do not come from an entrepreneurial background, and financial literacy or strategic planning is not taught at home, the gap between thought and action widens. 48 percent of black and minority-owned business owners do not plan or expect to qualify for any government support schemes or grants. This leaves many businesses unsupported and underfunded.
💡 But what about Black Lives Matter, didn’t that help?
The BLM movement in 2020 saw a lot of black owned businesses benefit from the sudden attention following the tragic death of George Floyd. Ozohu Adoh, founder of Epara, told the BBC she saw her business grow rapidly. In just six weeks, the skincare brand launched with thirteen retailers.
However, despite the surge of sales, many businesses struggled to scale or maintain their success due to a lack of knowledge of systems, how to access funding and being prepared for the process of scaling. Not to mention that the peak of the BLM movement was in the height of the pandemic, where 41 percent of black businesses were forced to close down, compared to 20 percent of white-owned businesses.
💡 So, who should we be watching?
The pool of black businesses is wide, but unfortunately not visible. However, some that have made groundbreaking news recently include Oliver and Alexander Kent-Braham of Marshmallow, a digital-first car insurance provider. In September 2021, the twins became the UK’s second Black unicorn founders after raising an impressive $83m Series B including from Seedrs’ very own alumni, Passion Capital.
The Kent-Braham twins and their CTO David Goaté founded the company in 2017 after having a conversation with a friend who had just moved to the UK and was being hit with heavy car insurance quotes. After doing some digging, it was clear that the quotes were based on an outdated system, as well as the fact their friend was an immigrant, which typically boosts insurance quotes. The trio set out to “offer affordable car insurance to UK newcomers”, and now being FCA approved, they are able to sell insurance directly to consumers.
In July 2021, we had the pleasure of seeing Black Ballad successfully raise £338,580 from 1,391 investors on Seedrs, with an initial target of £250,000. Bola Awoniyi and Tobi Oredein, husband and wife duo, set out to create a lifestyle digital media company for black women in Britain. Black Ballad had dabbled in crowdfunding before, raising over £10,000 through pre-selling memberships. The subscription-based model now has over 1,000 paying members and 20,000 email subscribers. Oredein, whose background is in journalism, told Metro that journalism in the UK is an “overwhelmingly white, middle-class industry.” The aim for Black Ballad is to “tell the human experience through the eyes of Black British women”.
Yuty, a UK-based sustainable beauty brand, uses advanced AI technology and extensive data to match consumers with the right beauty products. According to Simi Lingren, the brains behind Yuty, they were the tenth black female-led business to receive VC funding in the UK. Lingren mentions on the Yuty site, “I founded Yuty because one-size fits all beauty doesn’t fit anyone. When things don’t work, we’re made to feel like it’s our fault, like we don’t fit in.”
Initially looking to raise £300,000 pre-seed, Yuty expanded its round to £500,000 to include additional investors. The round was led by Ada Ventures and included notable Angel investors such as Nicole Crentsil, a Ghanaian-British entrepreneur who is the CEO of Black Girl Fest, a platform dedicated to Black women, girls, and non-binary people.
The BYP Network was created in the autumn of 2016 after a culmination of the BLM movement and personal experiences of their founder, Kike Oniwinde. Simultaneously, the UK was experiencing the highest rates of knife crime at the time. The UK has always suffered with a lack of representation of ethnic minorities in the workplace, turning young children to predominantly look to the entertainment industry for inspiration. People Management reported that just 1.5 percent of senior roles within the private sector were held by black professionals. The entertainment industry isn’t solely to blame for knife crime, but its reach is wide, and if young black children hardly see themselves in senior positions, how do they know it’s possible?
By 2020, BYP Network had scaled to a 6-figure company with over 40,000 members. Their business provides services for both members and corporate partners such as Facebook, Soho House and Accenture. To date, they have over 60,000 social media followers, have hosted over 5,000 members at online and offline events, and processed 18,000 job applications through the BYP platform. In 2020, BYP decided to crowdfund on Seedrs with a target of £500,000. Having reached their target in days, they eventually finished the round with £896,947 from 1,204 investors, 178% overfunded.
Investors could clearly see the good work both BYP Network and Black Ballad are doing and the thousands of lives they’re impacting whether through career advancement, education or entertainment. We’re proud to be associated with these startups paving the way for an inclusive British generation ahead.
To browse live investment opportunities on Seedrs, visit here.
On Wednesday 27th October 2021, Seedrs will be hosting the first Black in Business event. You will hear from the following amazing Black founders who’ll inspire a crowd as they recount their entrepreneurial journey and how they’ve raised money to fund their startups; Lotanna Ezeike of XPO, Charlotte Williams of Seven Six Agency, Darren Tenkorang of TRIMIT and Mariam Jimoh or Oja. Followed by the opportunity for early-stage founders to pitch for a free crowdfunding raise on Seedrs, an exclusive lunch with our CEO, Jeff Kelisky, and more!
Purchase your ticket to the Black in Business event here.