Would more black investors mean more money for black entrepreneurs?

03 Jun Would more black investors mean more money for black entrepreneurs?

Jeffery Beckham Jr. has had a good streak of investments in businesses and community projects.

His Black Box Creative digital design service touts celebrity clients and he’s working to set up a new Bronzeville business development center.

Now he’s looking to invest in other startups.

“I run across a lot of great ideas and have been asked to invest in some quite a few times, but I didn’t have an idea of the proper way to evaluate companies and structure the deal,” he said.

Beckham was among about 40 people who took part in a daylong investor education program for aspiring African-American venture capitalists and entrepreneurs, held by the Angel Resource Institute.

The Chicago Urban League hosted the event, which was led by angel investor Bob Okabe, co-founder of the Prairie Angels and managing director of RPX Group.

It’s an attempt to fix a big imbalance — data show that African-Americans are seriously underrepresented in the investment community. Less than 1 percent of venture capital-backed internet companies were founded by African-Americans, according to a 2010 report by CB Insights.

The Urban League workshop fit into the organization’s mission to aid in development of black-owned businesses, said Cate Costa, the organization’s director of entrepreneurship.

Its goal is to raise the percentage of black and Latino angel investors and venture capitalists; they each represent about 4 percent.

The hope is that the increase would mean more money for minority-owned startups. Black and Latino investors are more likely to come across new ideas in their communities and invest in them than the white males who dominate investment, Costa said.

About 80 percent of angel investments happen within a two-hour drive of an investor’s home, Okabe said, citing the National Venture Capital Association.

Angel investors last year funded about 70,000 companies with about $25 billion, according to the Center for Venture Research at the University of New Hampshire. That’s compared with the $50 billion venture capitalists injected into about 3,000 companies, Okabe said, citing the National Venture Capital Association.

Angels generally have an affection for entrepreneurs, and typically invest because they want to make money, have fun and give back to the community, he said.

That’s true of many people who have approached the Urban League, Costa said — they’ve fielded requests for a while from people wanting to learn how to invest in startups.

“We’ve had people who are high net-worth individuals who’ve said, ‘I’d like to invest, but I don’t know what I’m doing, so I’ll stick to real estate where I’m more comfortable.’ And, of course, entertainers are always asking us.”

So much of investing is about relationships, she said.

“You’re more likely to invest in people you like and are comfortable with and are more like you,” Costa said. “That’s not about being black.”

That makes sense, said Pritzker Group Venture Capital associate Ablorde Ashigbi. He’s booked to lead a similar event for minority investors planned for June 7 at 1871 — the Black in Tech investor series panel.

“A broader set of investors would be more willing to stand behind a broader set of entrepreneurs,” he said. “A lot of opportunities come to us through people that we know, including those outside of our day-to-day business lives whose judgment we trust.”

Having diverse investors helps investment communities connect with different types of entrepreneurs, Ashigbi said.

“When you see someone across the table who looks like you, there’s probably a little bit more rapport between the people on the different sides,” he said.

Sharon McDade, a founder of the Hyde Park Angels, said she hopes programs like the Urban League’s will spur new investment.

“We want people to go out there and be a part of the thriving ecosystem.” McDade said. “We can’t sit on the sidelines.”

Too many investors, McDade said, are passing up opportunities close to home that could help create jobs locally, she said.

“People sometimes invest in big firms. They don’t even know these people,” she said. “But there might be a woman sitting in the pew behind you and she’s got this great idea and she knows the product and the competition. Help get her in Wal-Mart.”

Cheryl V. Jackson is a freelance writer.

Twitter @cherylvjackson

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