As investment banking interns on Wall Street several years ago, Nathan Bennett Fleming and five of his Morehouse College fraternity brothers dreamed of finding a way to leverage the Internet to finance African-American startups.
Black entrepreneurs start businesses at a rate higher than non-minorities in the U.S., says Fleming, pointing to recent research, but many of their operations fail due to lack of sufficient funding. And though the annual buying power of African Americans is close to $1 trillion, minorities lack significant access to venture capital. The men wanted to build a dot.com that could match investors with business and nonprofit ideas that benefit their community.
In 2011, after earning a law degree from University of California, Berkeley and completing a graduate fellowship at Harvard’s Kennedy School, Fleming stumbled on an idea during a legal fellowship at the House Financial Services Committee in Washington. He was helping to draft the JOBS Act, which would legalize equity-based online funding. He realized that a crowdfunding portal could be the key to financing black innovators.
With his Omega Psi Phi brothers Elgin Tucker, Bola Adewumi, Kyle Yeldell, Christopher Hollins, and Aaron O’Brien, Fleming conceived BlackStartup in 2012. Their mission: “to allow black and non-black innovators to finance their ideas through small pledges collected from many funders.”
They agreed to vet business ideas, advocacy projects, or community projects from any field “as long as a positive link to our community is created.” They’d generate revenues from a 5 percent take on each successful campaign and small fees for entrepreneurial e-learning courses, mentoring, and consulting.
Funding to build their prototype came from a $20,000 grant from a venture-creation program at Yale University, where Tucker and Hollins were graduate students. Jim Boyle, director of the Yale Entrepreneurial Institute, says BlackStartup appealed to his board because it aims to provide more than just seed funding for great ideas. “They’re creating a bit of a lean startup and entrepreneur mentoring platform, with a community for educational and legal advice,” Boyle says.
Since a beta version of the site launched in May 2013, BlackStartup has won 1,700 Facebook fans, 900 registered members, and 500 blog followers. Fleming says he’s tracking 1,000 hits a day to the site and will be speaking about the project at the legislative summit of the Congressional Black Caucus next month.
Among projects that have already completed fundraising campaigns is a small business marketing agency founded by Spelman and Morehouse alumni, a mobile children’s party bus founded by an Ohio mom, an educational trip to Toronto for seven inner-city Philadelphia girls, and an engineering summer camp for a group of Mt. Vernon, NY, charter school students.
Still, Fleming says BlackStartup won’t make its official launch until this fall. “Too often people build companies without knowing what the customer needs. We want real feedback from customers before launching on a scaled level,” he says.
Fleming, who, at age 28 runs the platform part-time while working as the elected U.S. Representative for the District of Columbia and as an adjunct professor of law at the University of the District of Columbia, says certain megatrends make BlackStartup ripe for success.
For one, he says, black business ownership is booming. “In the five-year period up to 2008, business ownership in the general population grew 18 percent, while in the African American community it grew 60 percent,” he says. In addition, he notes, African Americans consume technology and social media such as cell phones and Twitter at higher rates than other demographic groups. And money raised on crowdfunding platforms is expected to grow 80 percent over the next two years.
“It seems like a really good time for a company like this,”Fleming says.