New coalition to improve minority tech entrepreneurs' access to funding.
Intent on increasing access to capital for Hispanics and other minority entrepreneurs in the technology sector, a national coalition of businesses and organizations known as i-DealFlow will sponsor a venture capital fair November 2 in Atlanta.
For entrepreneurs seeking $1 million to $10 million from venture capitalists and angel investors, however, access won't come without effort. The coalition, which includes AOL Time Warner, the Wall Street Project, the U.S. Hispanic Chamber of Commerce (USHCC), and the Telecommunications Development Fund, has been accepting business plans from potential and existing technology companies since May. Participants will be invited to an entrepreneur "boot camp" on September 19 and 20, where the field will be reduced to those firms judged to have the strongest potential for success.
"We want to bring entrepreneurs together as a group and help them become best-in-class," says Russell Griffin, executive director of Minority Technology Entrepreneurs, a nonprofit organization and i-DealFlow coalition member. "The ones that measure up will be presented to our contacts."
The fall events can't come soon enough, say people throughout the venture capital industry. Mr. Griffin, for one, notes that minority entrepreneurs in technology fields often fail to land capital.
According to a study released last year by the Milken Institute and the Minority Business Development Agency (U.S. Department of Commerce), minority firms receive just 2 percent of all private equity investments and 3 percent of all SBA Small Business Investment Company (SBIC) investment funds – even though they are growing at six times the rate of all U.S. businesses. The report goes on to say that sales per employee grow twice as quickly for minority businesses as for Fortune 500 companies, increasing at a clip of 16.5 percent compared to 7.9 percent for the nation's largest firms.
Entrepreneur-turned-venture-capitalist Manny Fernandez agrees that Hispanics historically have had fewer opportunities to raise capital, but he's optimistic that future access will depend more on merit than anything else.
"From the venture point of view, I honestly believe that obtaining capital has more to do with the individual and the business idea than the race or gender of the person," says Mr. Fernandez, managing director of Miami's SI Ventures, a VC firm specializing in information technology and communications infrastructure companies that enable e-businesses.
Geography plays a role in Hispanics' access to capital, according to Mr. Fernandez. Regions whose Hispanic populations are large, educated, and successful – such as Florida – tend to provide more access to funding than regions with different demographic profiles, he says.
Still, he insists it all comes down to a well-defined idea. "In general, we see a lack of great business plans," Mr. Fernandez says. "In the context of technology, I think the Internet hype diminished the focus on quality business plans. Now that the hype is dying down, capital providers are looking where they looked before – at hard technology companies that can take some kind of technology to the next level and create real value."
"Entrepreneurs should know their ideas well enough to crystallize them in a 30-second pitch," agrees Charles Ross, a principal with the Telecommunications Development Fund. "There is so much material out there on what venture capital firms need. It's amazing how few entrepreneurs go the extra mile to understand how we operate."
For companies that do obtain financial support, the benefits can be considerable. According to the Milken Institute study, "The average venture-backed company employs nearly 100 workers within five years and creates almost twice as many jobs as its non-venture-backed peers. Venture-backed firms experience at least a 40 percent job growth each year."
"These events in Atlanta will lay the foundation for minority companies to have vehicles to tap into venture capital," USHCC president George Herrera says of the i-DealFlow coalition. "Then we want to take this show on the road and open up opportunities for minorities in other parts of the country. I think we're on the verge of seeing an explosion in Hispanic entrepreneurial success."
Learn more about …
-- i-DealFlow at www.i-dealflow.org
-- Minority Technology Entrepreneurs at www.miteonline.org
-- Telecommunications Development Fund at www.tdfund.com
-- SB Partners Capital Fund at www.sbpartners.com
-- SI Ventures at www.siventures.com
-- The Milken Institute's minority business capital access report at www.milkeninstitute.org
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