This Week in Fintech: Black History Month (2/28)

This Week in Fintech: Black History Month (2/28)

Hello Fintech Friends,

We are excited to share our first Black History Month TWIF Special Edition Newsletter co-authored by Iynna Halilou, an investor at Moxxie Ventures, Member of Global Women in VC, and Wharton MBA Candidate and Michelle Dhansinghani, our Head of Community here at TWIF.

Today we’ll cover topics like the discrepancies that exist for Black folks in the VC ecosystem, Black fintech founders and investors, and our favorite deep dives by Black fintech content creators.

📖 Read of the Week

(Source)

“But now another reckoning looms. This time it's driven by a market slowdown rather than a social awakening, and it could upset gains made by Black investors, whom LPs tend to regard as emerging managers, rather than established players with consistent records of delivering payouts to fund backers.

As the past several years of hyper-growth of VC-backed company valuations cools off, some LPs are more likely to reduce their risk profile in alternative assets.”

Today only 4% of VC investors are Black and 3% of all Investment Partners are Black. Organizations like BLCK VC through their Black Venture Institute, which helps Black executives become investors, and Breaking Into Venture, a 9-week program to help young professionals move into the VC industry are creating the infrastructure to change the reality of this ecosystem.

We are slowly making progress to see more Black VC investors rise through the ranks at established firms and others taking matters into their own hands to launch funds. However, Black VCs continue to face significant challenges when it comes to raising funds and gaining credibility in an established “Old Boys’ Club”.  Due to the nature of the private equity industry, transparency into capital allocation is challenging because of the lack of reporting. However, to provide perspective of the uneven playing field, we are seeing that generally Black-led funds raise smaller funds $30.5 million versus $57 million, the average for first-time funds, due to a reliance on smaller LPs and difficulty in accessing capital.

Additionally Black founders continue to face challenges fundraising compared to white male founded companies. In 2021, Black founders in the U.S. raised about $4.2 billion in venture capital. While the number increased by almost 300% it still only makes up 1.3% of venture capital and only 0.34% of funding reached Black women founders.

Unsurprisingly though, these challenges are a reflection of social and systemic inequalities that Black communities have experienced over the years. For every dollar a White household earns in the US the average Black household earns only 50 cents and when comparing wealth, White families have 6.7 times more wealth than the average Black family.

In light of this economic discrepancy, we are seeing Black communities and consumers become more creative in the way they build and acquire capital. Central to this is this idea of ownership economy, which is any economic system where those who participate also hold an ownership or financial stake in it. People are no longer interested in only consuming, but they want to own assets, pass them down, and by doing so, build generational wealth.

Nowhere are we seeing this trend play out more strongly than with the emergence of cryptocurrency and decentralized finance (DeFi).

In a nutshell, DeFi refers to financial products that are available on a public network without any single authority or organizational oversight. Because there are no intermediaries (such as traditional banks) involved in transactions, it is particularly appealing to communities that have traditionally left behind in the economy, as intermediaries have traditionally acted as gatekeepers to Black capital formation in the US.

The stats are also telling: Black Americans are outpacing their White and Latinx peers in crypto investments (according to a recent Harris poll, 23% of Black Americans own cryptocurrency compared to 11% of white Americans and 17% for Hispanics).

I think we will see this grow even more outside of the US, such as in markets where there have historically been economic imbalances and a lack of infrastructure to facilitate financial transactions (e.g across Africa, crypto adoption has surge 1,200% over the last year, as fintech users increasingly favor digital coins in order to avoid bank and exchange restrictions).

📊 Stat of the Week

$8.7 billion.

That is how much the Global Fintech Blockchain market will be worth by 2026. This prediction should not come as a surprise to many: factors such as a growing ownership economy wherein consumers want to own and invest in assets like bitcoin, the rising need for cheaper, quicker, cross-border payment systems, especially in markets where banking infrastructures have not been digitized to the same extent (e.g sub-Saharan Africa), and the escalating requirement for comprehensive security systems have led to widespread adoption.


💻Spotlight on Black Fintech Founders and Investors

🚀 Founders

Powerhouse Tanya Van Court, founder and CEO of GoalSetter, a goal-based savings, gifting, and financial literacy platform for children and their families.

Abbey Wemimo, cofounder of Esusu, a credit building platform that recently reached unicorn status after closing a $130M series B round led by SoftBank.

Clara Wanjiku Odero, cofounder and CEO of Credrails, an open banking API for Africa, starting in Kenya and Nigeria and offering a variety of products from reconciliation to lending analytics. The team recently closed on a seed round led by Unicorn Growth Capital and with participation of SoftBank, Launch Africa, Samos Investments, and Precursor Ventures.

Eli Polanco, founder and CEO of Nivelo, developer of adaptive threat detection technology intended to manage credit and debit payment risk in real-time.

Ami Kumordzie, founder of Sika Health, a fintech company in the HSA and FSA embedded check out space.

🚀 Investors

📚 Deeper Reads

For a hot take on all things venture and culture in Africa: Musings of a Wannabe African VC by Atso Bentsi-Enchill

For a weekly deep-dive into the inner workings of African fintech, check out Samora Kariuki’s Frontier Fintech newsletter.

For reporting on tech across sub-Saharan Africa, Benjamin Dada of Stitch writes an update on his website.

For a primer on doing business successfully in Africa, the next big growth market (I’m not biased): Africa Business Revolution by Acha Leke, Mutsa Chironga, and George Desvaux.