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TechTown Detroit recently announced the kickoff of its new Startup Fund to help Detroit-based Black tech founders to get their companies off the ground and thrive.
Donations to the startup fund are currently being accepted to provide grants of up to $10,000 to Detroit-based Black tech founders to help their companies off to a good start, according to a press release.
The TechTown Startup Fund is designed to cover the financial gap many tech businesses experience at the earliest stages between idea validation and tangible products. Without funding that often comes in the form of cash injections from friends and family or bank loans, many business owners are forced to give up on their dreams and walk away from their businesses. This Fund supports these growing businesses across what is known as the startup valley of death.
“Black business owners often face critical and nearly insurmountable financial obstacles when starting or expanding their businesses. We find this especially true in the technology sector where Black entrepreneurs are still fighting for their seat at the table,” said Ned Staebler, president, and CEO of TechTown Detroit. “These grants are one way to help bridge the funding gap for our clients.”
The racial funding gap is stark. Federal Reserve numbers show that more than 80 percent of White business owners receive at least a percentage of the funding they request from a bank, while only 66 percent of BIPOC (Black, Indigenous, or people of color) business owners can say the same. When BIPOC-owned firms do get funding, the amounts tend to be about $30,000 less than comparable White-owned businesses, while their interest rates are about 1.4 percent higher.
The TechTown Startup Fund will provide much-needed funds to support highly-qualified Black-owned alumni of TechTown’s tech entrepreneurship programs and Capital Access Program (launching late spring) that are struggling to find capital. Applicants will target grants to meet a specific milestone that will take their company to the next level and unlock more traditional funding sources. The milestone could be the creation of a prototype or revenue-generating minimum viable product.
“Many of our Black-owned, local tech businesses are on the verge of significant progress,” said Marlo Rencher, director of technology-based programs for TechTown.
“Especially after the challenges of the past 12 months, we need to take concrete actions to ensure we proactively build a tech ecosystem that truly represents Detroit. We’ve already engaged in this type of work at TechTown with clients like Livegistics, but this fund will formalize the process and open it to the community for crowdsourcing.”
Rencher told the Michigan Chronicle during a follow-up interview that the tech ecosystem works differently than a lot of other businesses because oftentimes tech companies need capital before their revenue and profitability streams start to come in.
“In terms of wealth, a lot of Black folks who are … starting a company might not have access to that quick easy capital (others might have),” she said. “That wealth gap makes it difficult for people … to scale to success.”
Livegistics solves logistics problems for heavy civil and demolition construction businesses by providing a digital platform that makes it easier for multiple companies working on the same project to track their progress.
With TechTown’s support, founder Justin Turk was able to access the startup funding he needed for their technology compliance and security audit. This Black-owned, Detroit-based company is now able to scale and partner on major contracts with a Fortune 500 company. Without it, Turk would have been forced to make hard decisions, the press release added.
Dawn Batts, a capital strategist at TechTown, said that if a tech company doesn’t have a rich uncle, aunt, or cousin, TechTown is helping bridge that gap.
“Our intent to help people understand when and where those funding sources are … as you are building your business,” Batts said.
“It is imperative that we step up and support these businesses, so they can create jobs and drive our economic recovery,” said Staebler. “Whatever individuals can give —whether that is $5, $500 or $5,000 — will go a long way toward supporting a project that benefits us all.”
To contribute to the TechTown Startup Fund, visit techtowndetroit.org.
Applications for the TechTown Startup Fund will be available for eligible businesses beginning in August. Updated information will be shared at techtowndetroit.org.