Black Tech Nation Ventures’ diversity thesis has not been deterred by the growing backlash to DEI

Black Tech Nation projects It launched in 2021 to address a funding gap for Black founders amid a wave of venture diversity initiatives following the killing of George Floyd in 2020. Three years later, amid a growing backlash against DEI and diversity-focused investments, the company’s mission may be more important now than it was. It was when I started.

The Pittsburgh-based venture firm has completed raising the first $50 million for its first fund to support pre-seed and seed-stage software startups led by founders who are Black, women, or members of the LGBTQ+ community, among other underrepresented groups. The company is backed by limited companies, including Alphabet, First National Bank and billionaire Mark Cuban.

Getting its first fund to its full $50 million goal was first a race and then a slog, David Motley, general partner at BTNV, told TechCrunch. He explained that the company had initial fundraising success in 2021, achieving its first close of $25 million that year. This has been helped greatly by the rise in the number of investors looking to put their money into diversification-focused funds, and favorable fundraising conditions especially for emerging managers. The company had initially planned to hold the final closing by Summer 2022 But those trends did not last. The second half of the fundraising was difficult as market conditions deteriorated and investors pulled back on the diversified investment goals they had set in 2020.

“The decline is real,” Motley said. “We have seen a rapid decline in funding to diverse founders and Black-led venture funds. We have seen the level of funding return to 2019 totals.

Although opposition to diversity is not an issue specific to the project — states like Oklahoma voted to defund DEI efforts at public colleges and the Supreme Court ruled affirmative action unconstitutional last June — the project has been affected. Fearless Fund, based in Atlanta, recently came under legal pressure from conservative activists who said its focus on grants and funding to diverse founders was discriminatory.

Companies like BTNV could find themselves caught up in the ripple effects of these recent events. But Motley said this change in the public narrative around DEI does not discourage the team but rather shows them why they should stick to their thesis.

“The industry was structured to do what it did historically, and 2021 and 2022 were in some ways an anomaly, and then you had a return to normalcy,” Motley said of the short-lived surge in support for diversity-focused venture capital funds. “You have money like ours that has come from this time frame and is now being put in place to show that this should not be a spur of the moment or just an initiative. These should be considered as investment opportunities.”

BTNV’s checks range from $250,000 to $1 million and focuses on enterprise software solutions in sectors including fintech, edtech, cleantech and others. The company invests throughout the United States and is looking for founders who reside outside coastal centers. The fund has now made 10 investments since its first close and has supported founders in cities including Cleveland, Indianapolis and Atlanta.

Motley said the fund hopes to make an impact beyond its $50 million in assets under management by leading a fundraising round in a startup by writing the largest check, and helping that startup find additional investors for the round. As a lead investor, BTNV hopes to introduce other venture capital firms to companies that might not have otherwise taken the opportunity, he said. On the flip side, he said underrepresented founders sometimes struggle to close rounds despite finding a lead investor.

The company will also collaborate with Black Tech Nation, a non-profit run by BTNV General Partner Kelauni Jasmyn that has created a digital network of Black tech professionals, when possible. While the two organizations are completely separate, despite sharing a name, Motley said he hopes the two organizations can collaborate on events, connect talent or that the company can find potential founders to support through the nonprofit’s network.

Despite the company’s thesis of supporting underrepresented founders, the primary goal of the first fund is to produce top-tier returns that give the company the right to raise subsequent funds, Motley said. Motley said the company is confident that seeking companies in these underserved markets will help it get there.

“The opportunity here is: to rise above the politics of the moment and really demonstrate that it’s in everyone’s interest to offer the best deals, the best founders, and the best venture funds,” Motley said. “It doesn’t matter what your political persuasion is. If we do this it will be better for everyone and for our country. This overrides any resistance one might encounter to advancing what we are advancing.”