The financial challenges facing black entrepreneurs are far reaching. The majority lack the relationships that would get them to either a Silicon Valley VC or a friendly bank loan officer. But Regulation Crowdfunding platforms hold the potential to break down barriers to funding black-founded startups, democratizing access to capital, supporting black livelihoods, decreasing economic inequalities, and supporting communities.

This relatively new source of funding — it debuted four years ago — allows startups and small businesses to raise up to $1,070,000 online per year from the general public, not just accredited investors.

I check in regularly with the various Regulation Crowdfunding platforms on their progress, and this year, their numbers show proportionate representation of Black-led businesses. According to Cencus.gov, as of 2019, 13% of the population was Black. According to George Cook, Co-founder/CEO crowdfunding platform Honeycomb, 11% of all their campaigns have been run by Black founders. And another platform, Seedinvest, has seen 12% of campaigns run by Black founders, according to Aaron Kellner Director of Ventures.

Black founders are also seeing relatively good success rates with their fundraises. According to Ben Blieden, co-founder/CFO of MainVest, 60% of companies with at least one African American founder have had successful raises on its platform, compared to the platform’s average of 63%. The success rate for black founders was 50% on Seedinvest, compared to a 69% average success rate on the platform overall.

Aaron Kellner at Seedinvest told me, “Minority founded/led companies raised on average of about $415K [per company] through the SeedInvest network. This success rate is slightly higher than the platform average overall.”

In a recent blog post, Elizabeth Yin at the Hustle Fund spelled out why VC has been unable to provide these same kinds of opportunities to underserved communities: “A power construct that should worry you, as an entrepreneur, that most people don’t know about: VC funds are only allowed to have 99 investors. There are a couple of exceptions. … But, for the most part, most VC funds can only have 99 investors.  Let’s do the math on that. If you want to raise a $100 million fund, that means that your average check size from an investor in your fund needs to be over $1 million. … The number of people or groups who can easily write a $1 million+ investment check is very few. Power in the investing world is concentrated in the hands of just a few people and that money generally continues to support existing funds and the founders they support who are typically White, Male, graduated from an Ivy League or MIT/Stanford, and worked at a top notch tech company liked Facebook or Google. This is why you don’t see new money or new ideas go into investing. Literally, change is prevented by the laws that are in place.

The principles of crowdfunding are based on egalitarian access to capital. Rather than having capital flow from the ivory tower of Silicon Valley, average Americans can fund a community business they believe in. Members of the crowd can jump in with as little as $10.

According to an article in the Washington Post, There is “a dearth of black investors in venture capital’s upper echelons — where leaders make investment decisions that shape the startup landscape.” This may explain why only 1% of venture capital dollars goes to black startup founders, according to a RateMyInvestor study. In addition, black entrepreneurs lack relationships with banks, which might also explain why black-owned businesses are being shut out of PPP loans, based on an NBC story. Net net, access to capital is a challenge for Black founders in the traditional capital markets.

This doesn’t appear to be the same in Regulation Crowdfunding, where community investors decide which entrepreneurs they want to back.

The good news with crowdfunding is that we don’t need to wait for Washington, DC or Silicon Valley to change. We can do it here and now and at a community level, with community investors in community businesses. In a recent press release, MainVest wrote, “We are able to put real investment dollars into local Black-owned businesses, which will then be repaid as a priority debt obligation against their future revenues. This allows small businesses to survive our current situation and gives people the ability to do good, while also getting a potential return on their investment. It also ensures that revenue created by black-owned businesses stays in the community, increasing the community’s strength, development, and diversity. Which is why it is up to us to support them now to ensure their long-term viability. ​In order to drive equality on a socioeconomic level, we need to take an active role in investing in entrepreneurs in underserved communities, especially when the systemic bias of institutional finance continues to be a barrier.”

If you are interested in supporting Black-owned businesses currently raising money online, here’s a sample list of active Black-founded campaigns: