New Jersey Launches Seed Fund for Black and Latinx Startups

In a recent development, New Jersey Governor Phil Murphy has proposed a $10 million allocation within the state budget. This funding is earmarked for the creation of a seed fund specifically designed to support startups founded by individuals of Black and Latinx heritage, as exclusively reported by TechCrunch.

The Black and Latinx Seed Fund will be managed and distributed through the New Economic Development Authority (NJEDA). This represents a focused effort to bolster entrepreneurship within these communities.

Addressing Systemic Inequities

NJEDA CEO Tim Sullivan stated that research undertaken by the state indicates New Jersey is pioneering this type of fund nationwide.

He further explained that this initiative is a “direct response to the systemic racial inequities in access to capital faced by Black and brown entrepreneurs.” The aim is to actively address and mitigate the existing “racial wealth gap.”

Sullivan emphasized that Governor Murphy’s economic strategy centers on building both a stronger and more equitable New Jersey, alongside a more inclusive economy. The state is also committed to “reclaiming New Jersey’s historical leadership in innovation and entrepreneurship.”

The Funding Landscape for Minority Founders

It is widely acknowledged that venture capital funding directed towards Black and Latinx founders remains significantly low.

Data from Crunchbase revealed that, as of August 31 of last year, these founders had secured $2.3 billion in funding. This represented only 2.6% of the total $87.3 billion invested in all founders up to that point in 2020.

Furthermore, Digitalundivided’s ProjectDiane 2020 report highlighted that Black and Latinx women founders received a mere $1.7 billion out of the $276.7 billion in venture capital invested between 2018 and 2019.

In the aftermath of the events surrounding George Floyd’s murder and the rise of the Black Lives Matter movement, an increasing number of venture funds have begun to announce initiatives aimed at broadening the scope of founders they support.

Reclaiming New Jersey’s Innovative Spirit

Sullivan recalled New Jersey’s historical prominence as a hub for innovation, citing figures like Thomas Edison and institutions such as Bell Labs and Sarnoff Labs. “Before there was a Silicon Valley, we were the place that fueled 20th-century American entrepreneurial growth,” he stated.

He acknowledged a degree of lost ground, noting that while New Jersey remains a significant center for innovation, other regions – including those in the West, Austin, and Boston – have intensified their efforts. The state is determined to regain its “unquestioned leadership position” in these areas.

Under Governor Murphy’s direction, the state aspires to cultivate “the most diverse and inclusive innovation ecosystem in America.”

Sullivan added that achieving this goal is challenging, given “centuries of systemic discrimination and racism,” as well as specific barriers to funding and early-stage investment. He previously served as chief of staff to the head of Global Investment Banking at Barclays Capital.

Community Input in Initiative Design

Zakiya Smith Ellis, chief policy advisor to Governor Murphy, explained that the initiative was developed through extensive consultations with Black and Latinx business investors.

“This was developed with the input of those who would directly benefit from this program,” Smith Ellis told TechCrunch. “The community directly impacted the design and development of this proposal.” She noted that a common concern expressed was the lack of readily available financial support from family and friends.

A legislative vote on the proposal is scheduled for July 1.

Similar Initiatives Across the Nation

While governmental programs of this nature are relatively uncommon, numerous organizations are dedicated to funding diverse founders.

In February, a coalition of national and Chicago-based organizations launched TechRise, a program designed to support early-stage Black and Latinx tech entrepreneurs. This initiative, a collaboration between P33, Verizon, and 1871, aims to “narrow the wealth gap in Chicago, generate thousands of tech-related jobs, and provide $5 million in grant funding,” according to the Chicago Sun Times. (Note: Verizon is the parent company of TechCrunch).

Detroit-based ID Ventures reports investing in minority and women-led companies at a rate four times the national average.

The organization’s website states, “By providing opportunities to underrepresented entrepreneurs, we can ensure representation, respect our state’s diversity, and create a startup community unlike any other.”

DivInc, based in Austin, is a nonprofit pre-accelerator offering 12-week programs for underrepresented tech founders. Founded in 2016 by former Dell executive Preston James, the organization focuses on “empowering people of color and women entrepreneurs and helping them build successful high-growth businesses by providing access to education, mentorship, and vital networks.”