Why it matters:
- Across America, large corporations including Amazon, Google, and Northwestern Mutual have launched accelerators to give minority entrepreneurs a launchpad for their startups.
- Many programs give participants cash awards as well as introductions to potential venture capital investors.
- It’s a growing movement as the focus on diversity heats up: Currently, less than 2% of the $31 billion in venture capital awarded has been allocated to startups with diverse founders, according to a report by Diversity VC.
Del Smith, Ph.D, knows the challenges minority entrepreneurs face in the U.S. when trying to turn a fledgling idea into a startup enterprise.
In early 2020, he and Tiffany Whitlow launched Acclinate, a company that runs a digital AI platform that educates people of color about health issues and helps Big Pharma diversify clinical trials by accessing minorities who have been underrepresented in medical research. It’s an important mission: While racial and ethnic minorities make up 40% of the U.S. population, a mere 2% of clinical trial participants are minorities, according to JAMA Medical News.
“As Black entrepreneurs, we didn’t have family or other connections to help us fund our early-stage venture,” Smith recalls. “I put up $80,000 of my own savings to do market analysis and come up with a business plan since we didn’t have business mentors to guide us.”
But the co-founders’ luck took a turn in March 2021 when they got accepted into the Google for Startups Black Founders Fund, a program for Black entrepreneurs launching tech companies. “We heard about the program from Goodie Nation, a networking organization for minority entrepreneurs, and learned about the support Google provides Black founders who are scaling their startups.”
During the four-month program, Smith, a former dean at Alabama Agricultural & Mechanical University, and co-founder Whitlow, a marketing and business formation expert, got a crash course in sales, marketing, product development, and team-building. Smith even met with Google CEO Sundar Pichai, who commented on the importance of Acclinate’s mission, and how it fits within Google’s health strategy.
They also received $100,000 of Google Cloud software credits and ad grants, which helped defer some of the costs involved in building the company’s AI platform and marketing its product.
After completing the program, the founders were awarded a nondilutive grant (which provides funding without giving up equity in return) of $100,000 from the Google for Startups Black Founders Fund, and were introduced to other potential investors. “Participating in the Google accelerator-type program and receiving the award helped us gain credibility,” says Smith.
The payoff was huge. Acclinate was able to raise $3.5 million in venture capital led by a group of VC firms including Overline in Atlanta and Bronze Valley in Birmingham, Alabama.
Today, the company has 25 employees and a roster of Fortune 500 clients including Johnson & Johnson
and Roche. Smith expects by year-end revenues will surpass $5 million.
[Read: Startups Turn to Venture Debt to Turbocharge Growth]
How accelerators work
Across America, big brands like Amazon, Google, and Northwestern Mutual have launched accelerators to give minority entrepreneurs, like the Acclinate founders, a launchpad for their startups. It’s a growing movement across the country as the focus on diversity heats up. Currently, less than 2% of the $31 billion held by venture capital funds has been allocated to startups with diverse leaders, according to a report by Diversity VC. These programs aim to help level the playing field for minority founders who face a unique set of challenges.
These startup accelerator programs that are springing up nationwide provide valuable mentorship, fundraising, and networking opportunities of which minority entrepreneurs have long been deprived.
“Recognizing the inequities in the startup community, Google decided to lean in and address this problem,” says Danny Navarro, Head of Marketing for Google for Startups.
Google: A ‘social reckoning’ accelerates Black and Latino founders funds
Capitalizing on the success of its Founders Academy, Google for Startups for Black Founders was launched in 2020 during the pandemic when racial tensions in the U.S. hit a fever pitch, he said. At the time, the failure rate among businesses with Black founders was three times greater than it was for their white counterparts, the U.S. Small Business Administration
reported. “It was a social reckoning,” Navarro said.
Based on the success of Google for Startups, the company expanded the Black Founders Fund to Brazil, Europe, and Africa, and last year launched its first Latino Founders Fund in the U.S.
Google’s program not only includes instruction and mentorship on the cadre of skills needed to start, run, and grow a successful business, it gives founders free access to mental health therapists and business coaches they can tap whenever they need to get advice on any challenge they encounter. A venture capitalist in residence at the accelerator teaches founders about how to pitch their business plans to investors, and how to develop a fundraising strategy. Mentors also introduce entrepreneurs to other venture capitalists and angel investors after finishing the program.
In addition, founders get $100,000 worth of Google Cloud credits they can use to set up a Google Cloud account.
As Navarro explains, Black, Latino, and other minority entrepreneurs face greater challenges than their white counterparts, and that’s why accelerator programs can turbocharge success. “Black and other minority founders have [limited] networks, they often lack access to capital from family and friends, and most don’t have relationships with venture capitalists and angel investors,” he told CO—. “They also have fewer mentors they can turn to. That’s what we are working to change.” So far, Google has supported 226 Latino and Black founders in the U.S. who have gone on to raise over $190 million in venture capital funding, he notes.
Ricardo Regalado, Founder and CEO of GetRoute.com, learned this firsthand. His three-year-old app provides commercial and residential cleaning companies a platform of tools to help run and grow their businesses.
“Only 0.7% of Latinos raise money in this country to start a business. I talked to over 120 venture capitalists and angel investors in order to raise $125,000 in seed money, but when the money ran out, I had to bootstrap the company because there was nowhere to turn.”
Luckily, an advisor suggested he apply to the Google Startups for Latino Founders Fund, and he was accepted in September 2021. Besides receiving a non-dilutive grant of $100,000, Google team members helped him with product development utilizing Google Maps for his routing service. They also introduced him to one of their partners called Goodie Nation, a nonprofit organization that provides fellowships, startup coaching, and networking opportunities for minority entrepreneurs, and the Latino Business Action Network at Stanford University, where professors gave him management advice on how to scale a startup business.
Today, GetRoute.com’s software platform is used by 400 companies in the U.S., Australia, Canada, and South America. The company – which now employs 13 people, 85% Latino — expects to have $250,000 in revenues by year-end as it expands its product line to include RoutePulse, a software platform that allows users to manage business functions ranging from billing and sales to marketing from anywhere.
[Read: 3 Big Picture Trends Set to Drive Business in 2023]
Black and other minority founders have [limited] networks, they often lack access to capital from family and friends, and most don’t have relationships with venture capitalists and angel investors. They also have fewer mentors they can turn to. That’s what we are working to change.
Danny Navarro, Head of Marketing for Google for Startups
Amazon: Aiming to ‘change the dynamic’ to help Black-owned businesses scale
Amazon is another mammoth corporation that decided to lend a helping hand to minority business owners hard hit during the pandemic. It launched its Black Business Accelerator (BBA) in 2021 after recognizing that Black-owned businesses were disproportionately impacted by the pandemic and are significantly underrepresented in retail. According to the U.S. Census Bureau in 2020, only 6% of U.S. retail businesses have a Black owner—even though Black Americans represent 14% of the U.S. adult population.
According to Danyel Surrency Jones, head of Amazon’s Black Business Accelerator (BBA), the company has pledged $150 million over four years to provide financial assistance alongside access to strategic business education and coaching, marketing, and advertising support to help Black-owned businesses grow and maximize the opportunities for selling their products in Amazon’s store. Amazon has also assembled a BBA Advisory Council of Black-owned business leaders that provides strategic guidance and direction for BBA.
The program is accessible to all certified Black-owned U.S. businesses with a Professional Seller account selling in Amazon’s store. Black-owned businesses can simply sign up for a Professional Seller account, obtain or submit a diversity certification from one of three organizations like the National Minority Supplier Development Council, and then enroll in the BBA. BBA participants can access services and grants to help jumpstart business growth and customer acquisition, such as free product imaging services and advertising credits.
“Eight out of 10 Black-owned businesses fail within 18 months, since they generate the least amount of revenue when they launch,” Surrency Jones told CO—. “We want to help change that dynamic by providing resources and knowledge to help them scale.”
To help them accomplish that goal on Amazon BBA, sellers who are Amazon-registered brand owners get up to $3,000 in promotional “click credits” to help increase the online discoverability of their products on Amazon after they become advertising ready, launch a sponsored products campaign, and join Fulfillment by Amazon.
Getting into the Amazon BBA program can be rocket fuel when trying to get a new retail venture off the ground. Andrea Thomas, CEO of Smelly Kids Company, a handcrafted bath and body products business, can attest to that. A former chef and stay-at-home mom, Thomas opened her online store on Amazon four years ago but didn’t see sales really boom until entering the one-year BBA program in June 2021.
“They taught us how to use all the tools Amazon has at our disposal and learn how to make a coupon, manage inventory, spot top sellers, do product imaging, and better market our company story on our Amazon storefront,” said Thomas, who notes sales have grown 300% on Amazon since she entered the program. By year-end, she expects revenues to hit $60,000.
Finding your perfect accelerator match: ‘Get legal advice before signing any agreement, and understand the terms’
While getting into an accelerator can be invaluable for a minority founder, it’s important to shop around and understand the mechanics of how a program works before applying, says Tiffanie Stanard, CEO and founder of Stimulus, a Philadelphia-based supply chain enterprise software company. “Get legal advice before signing any agreement, and understand the terms,” she says. “Some programs ask for a lot of equity for a little bit of money.”
To improve the odds of success, find one that knows your industry and suits your needs, otherwise you may be wasting a lot of time you could be using to build your business, Stanard, a former corporate vendor management executive, stresses. In her case, she participated in many accelerator programs run by Microsoft, Google for Startups, and Salesforce—all of which provided technical help and a combined total of $250,000 in software credits, which was a tremendous cost savings, she said. In addition, two provided non-dilutive capital.
Last year, she went through the Northwestern Mutual Black Founder Accelerator, a 90-day concierge-type program powered by gener8tor, a startup accelerator, where only five founders are selected and get individual coaching from Northwestern Mutual experts in the fields of procurement, data, and financing.
“In just two weeks, I met over 100 mentors and industry experts to help me grow during this journey,” says Stanard. “The fact that Northwestern Mutual focuses on such areas as data analytics was one reason its accelerator was a good fit for us.” Today, Stimulus has raised $3.5 million from top-tier investors and now sells its product to Fortune 500 companies.
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